Even though most gains in the stock market this year were concentrated in the AI and tech sector, it is undeniable that 2023 has so far been a great year for investors who like chasing the hottest stocks. The vast majority of stocks are either in an uptrend or trading sideways right now. So, if you are a momentum investor, it might be a good time to consider snapping up some of the hottest stocks.
Naturally, it is still important to consider the risk-reward ratios for each prospective portfolio addition. I could simply list the top stocks with the best year-to-date gains this year, but it may not be a smart idea to jump into them. Many such stocks currently offer low upside potential with significant downside risk.
Some may say that’s being hung up on historical prices, but I think it is a smart idea to avoid such names, especially when the market is nearing an inflection point. I will only make exceptions here for well-established businesses that can grow their way out of any near-term declines.
With that said, let’s look into the three hottest stocks investors should consider buying in August.
Royal Caribbean Cruises (RCL)
If you are looking for a great post-pandemic play on the travel boom, you might want to consider Royal Caribbean Cruises (NYSE:RCL). While many speculate that the travel boom is starting to fade, the financials of companies in certain sectors say otherwise. Royal Caribbean Cruises, for example, has delivered tremendous growth, seeing its stock price surge 122% on a year-to-date basis. I think there’s plenty of room for this stock to climb higher from here.
The company reported a strong second quarter, beating analysts’ expectations on both earnings and revenue. The company posted earnings per share of $1.82, which was much higher than the consensus estimate of a loss of $1.54 per share. Revenue came in at $3.52 billion, which also beat expectations by $110 million. Additionally, Royal Caribbean saw a significant improvement in its bookings, with “post-cruise repeat booking rates nearly double 2019 levels.”
Therefore, I believe that Royal Caribbean Cruises is well-positioned to benefit from the pent-up demand for travel and leisure activities. This is certainly among the hottest stocks to buy, in my view.
Another stock that has been steadily creeping higher (surging 48% year-to-date) is Teekay (NYSE:TK). This company operates a fleet of crude oil tankers that transport oil across the world. The company has been benefiting from increased demand for oil transportation amid increased geopolitical tensions between Ukraine and Russia.
As you may know, Russia is one of the largest exporters of oil and gas to Europe. Thus, with this war has resulted in the country facing sanctions for almost two years, there’s been a material disruption in gas supplies, and a corresponding surge in gas prices in Europe. As a result, many European countries have been turning to alternative sources of energy, such as oil and liquefied natural gas ().
This is where Teekay comes in. The company has been able to capitalize on the higher demand for oil transportation and a higher spot rates for tankers. The company reported a strong second quarter, with a net income of $40 million, up 663% year-over-year, while its revenue increased by 41% year-over-year to $395.4 million.
Now, some may consider TK stock as far too speculative, due to its precarious catalysts. However, I don’t think so. Sure, investors focusing on TK stock at these levels may be considered opportunistic. But regardless of the outcome in the Russia/Ukraine war, I think this transportation stock is one to buy for the long-term.
Overall, I think that TK is one of the hottest stocks to buy right now, especially as the company trades at a forward price-earnings ratio of just over 4-times, and the demand for oil remains strong.
Booking Holdings (BKNG)
Now that we’re back on shore, let’s talk about one of the hottest stocks in the travel sector – Booking Holdings (NASDAQ:BKNG). As I mentioned with Royal Caribbean Cruises, the travel boom still has some legs. This is evident in Booking Holdings’ recent earnings surprise.
The company reported a stellar second quarter, beating analysts’ expectations on both earnings and revenue. The company posted non-GAAP earnings of $37.60 per share, which was 30% higher than the consensus estimate of $29 per share. Revenue came in at $5.5 billion, which was 27% higher than the expected $4.3 billion. The company also saw a significant improvement in its gross bookings, which increased by 16% year-over-year to $39.7 billion.
What really makes Booking Holdings one of the hottest stocks to buy right now is its ability to leverage its scale, network effects, and data to create a superior customer experience and a competitive moat. Analysts believe the company’s earnings per share will grow at a 45.3% year-over-year clip this year, and hover around 18% annually for the next two years. Even then, the stock trades at a reasonable forward price-earnings ratio of 22.4-times.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.