Best Growth Stocks to Buy for Dec. 19

Zacks highlights three Zacks Rank #1 picks: Allstate (ALL), Great Lakes Dredge & Dock (GLDD) and Alarm.com (ALRM), each showing recent upward revisions to current-year earnings estimates (ALL +22.7% over 60 days; GLDD +6.9%; ALRM +5.5%). Zacks notes attractive PEG ratios versus industry peers (ALL 0.39 vs 1.73; GLDD 1.01 vs 2.99; ALRM 1.65 vs 2.85) and growth scores (GLDD A; ALL and ALRM B), flagging these names as valuation- and estimate-driven candidates for investors seeking growth-oriented long ideas.

Analysis

Market structure: Allstate (ALL), Great Lakes Dredge & Dock (GLDD) and Alarm.com (ALRM) are beneficiaries of idiosyncratic demand drivers — higher interest-rate environments and reserve releases (insurance), stepped-up federal/state dredging and port maintenance (dredging), and recurring IoT subscription growth (IoT/security). Direct losers: low-yield fixed-income holders (bond prices), smaller regional insurers with weak underwriting, and commodity-exposed OEMs if dredging pricing tightens. Cross-asset: rising rates that help ALL’s investment income pressure broad bond prices and lift financials; GLDD raises fuel/steel demand modestly; ALRM has minimal FX exposure but raises tech-sector volatility correlations.

Risk assessment: Tail risks include a major CAT year or large reserve deficiency for ALL, cancellation or funding delays for GLDD tied to budgets, and higher churn/cyber losses for ALRM; each could erase 20–40% of upside in 1–2 quarters. Near-term (days–weeks): earnings/estimate revisions; short-term (3–12 months): infrastructure awards, Fed moves; long-term (1–3 years): reinsurance cycles and IoT ARPU saturation. Hidden dependency: ALL’s EPS momentum is levered to investment yield and reserve development more than core premium growth.

Trade implications: Favor selective longs with hedges — value-style exposure to ALL (low PEG 0.39) and cyclical exposure to GLDD (backlog-sensitive) while keeping ALRM as a selective growth/options trade. Use pair trades to neutralize market beta (long ALL vs short a broad P&C ETF) and use defined-risk options (6–12 month calls or call spreads on GLDD/ALL; short-term covered calls on ALRM if owned). Entry on pullbacks of 8–15%, profit targets 30–50% within 6–12 months, stop-losses at 12–18%.

Contrarian angles: Consensus upgrades may underweight reserve durability at ALL and overestimate sustainable ARPU gains at ALRM; GLDD’s current valuation can miss a multi-quarter slowdown if federal funding slips. Reaction may be underdone for ALL (value + macro tailwind) but overdone for GLDD if backlog is front-loaded. Watch 2–3 quarter cadence: sustained ARPU or new contract announcements are necessary to justify re-rating.

Key Decisions for Investors

• Establish a 2–3% long position in ALL with a 6–12 month horizon; add to position on any >10% pullback; hedge tail-risk by buying 3–6 month OTM puts ~10% below entry, capping downside to ~1.5% portfolio risk.
• Initiate a 1.5–2% tactical long in GLDD (9–18 months) sized via 6–9 month 20–30% OTM call spreads to limit premium; scale in if a federal/state contract award is announced within 90 days; take profits at +40% or if backlog growth stalls two straight quarters.
• For ALRM, avoid large outright longs today; instead allocate 0.5–1% to 6–9 month 25% OTM calls (asymmetric upside) or sell 1–2 month covered calls if already long; only move to larger long exposure after two consecutive quarters of ARPU improvement >3% YoY or churn decline.
• Execute a pair trade: long ALL (2%) vs short a P&C ETF or peer basket (-1.5%) to neutralize market beta; unwind if ALL underperforms peers by >8% over a 60-day window or after a material reserve miss.
• Reduce 1–2% exposure to pure-play construction equipment names and reallocate to GLDD only after a confirmed contract/funding award (documented within 90 days); reassess if fuel costs rise >15% YoY or if federal funding language is removed.