2 Surefire Stocks to Buy in December

On Nov. 26 the VIX volatility index spiked 54%, the fourth-largest single-day gain in the last three decades. But if you own stocks, especially growth stocks, you're probably well aware of the recent market volatility. Myriad factors have investors on edge, from the omicron variant of the coronavirus to soaring inflation rates.

That's why now looks like a good time to buy a few low-risk stocks. Of course, no worthwhile investment is completely risk-free, but companies with solid competitive positions and strong prospects for future growth can bring a little stability to your portfolio. PayPal (PYPL +0.66%) and Lowe's (LOW 3.09%) meet those criteria, and both have market-beating potential over the next five years.

Here's what you should know.

Image source: Getty Images.

1. PayPal

PayPal is a well-known brand in the fintech space. Its platform connects 33 million merchants with 383 million consumers, democratizing access to financial services. In fact, PayPal is the world's most popular digital wallet, accepted by 75% of the largest 1,500 businesses. And strong network effects reinforce that competitive advantage, because each new consumer creates value for every merchant, and vice versa.

PayPal's management team is also executing a smart growth strategy. Last year, the company expanded its in-store presence with the launch of QR code payments, the Venmo credit card, and PayPal Zettle, a platform that helps small businesses manage sales, inventory, and payments across physical and digital storefronts.

In 2021, PayPal launched its personalized mobile app, featuring shopping tools and deals, bill pay, and (coming next year) high-yield savings accounts. The company also announced a partnership with Amazon. Starting in 2022, Venmo's 80 million users will be able to use the digital wallet to make payments on Amazon's marketplace, the largest e-commerce platform in North America.

Collectively, PayPal's strong competitive position and ambitious growth strategy have powered impressive financial results.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

And usage continues to grow. During the third quarter, active accounts rose 15% to 416 million, and the number of transactions per active account grew 10% to 44.2. In other words, PayPal is not only growing its user base, but also engaging those users more. That bodes well for the fintech company and its shareholders.

Going forward, PayPal should benefit as digital payments become more popular. The number of digital wallet users is expected to double by 2025, reaching 4.4 billion. That alone puts the company in front of a massive market opportunity. And when considered alongside PayPal's trusted brand name and massive user base, this stock looks like a relatively safe long-term investment.

2. Lowe's

Lowe's is the world's second-largest home improvement retailer. Its business caters to the needs of both do-it-yourself consumers and professionals, offering a wide range of products both in their stores and online. The company also has a robust supply chain comprising dozens of distribution centers, delivery terminals, and fulfillment centers, all of which help Lowe's control costs and create a great customer experience (by keeping stores well-stocked and providing speedy delivery).

Lowe's scale gives it a significant edge over most competitors, especially in the highly fragmented home improvement industry. Of course, the same can be said of its biggest rival Home Depot, but Lowe's has grown free cash flow more quickly over the last three years. More importantly, this $900 billion market is big enough for several winners, and with just 10% market share (and less than half of Home Depot's market cap), Lowe's still has plenty of room to grow its business.

To that end, management announced the Total Home growth strategy last year. This initiative aims to make Lowe's a comprehensive provider of all products and services needed for home improvement and repair.  In particular, the company is focused on building its relationship with professional customers and growing its e-commerce business. To do that, Lowe's is revamping the online experience and expanding product selection in categories like appliances, kitchen and bath, and decor.

Historically, Lowe's has delivered impressive financial results on a consistent basis, but the Total Home strategy could accelerate top-line growth in the coming years. In fact, during the third quarter, sales in its pro business rose 16% and e-commerce sales surged 25%.

Source: YCharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Since 2001, slowing growth in America's housing industry has created a shortage to the tune of 6.8 million units, according the National Association of Realtors. The pandemic made that situation even worse as many newly minted remote workers decided to move, adding more demand to an already supply constrained industry. Fortunately, construction is trending upward. New housing starts are expected to rise 14% in 2021 and 6% in 2022.

As the second-largest home improvement retailer, Lowe's is well-positioned to capitalize on that trend. And more broadly, the company's strong competitive position and massive market opportunity make it a relatively low-risk investment. That's why you should consider buying this stock.