The 7 best stocks to buy for August 2022
After having had its best month since November 2020, it will be difficult for the S&P500 in August to match the 9.1% make it notched in July. The best stocks to buy in August may be some of the best performers in July.
How long will the summer rally last?
“We think the rally will last until later in the summer, but as stock prices rebound and it becomes increasingly clear that we are headed for a more typical recession (e.g. a recession with higher unemployment and nominal GDP falling close to zero or negative), markets will again experience another sell-off,” Chris Zaccarelli, chief investment officer for Alliance of Independent AdvisorsTold CNBC.
So what are the best stocks to buy in August?
I have seven S&P 500 stocks from seven sectors. Each stock must have gained at least 10% in the past month and is trading at a reasonable price-to-sales ratio.
|BBWI||Bath and body care||$37.36|
Best Stock to Buy: Nucor (NUE)
I’ve admired the North Carolina steel producer for some time. In March I recommended Nucor (NYSE:NUDE) as well as nine others S&P 500 stocks to buy. I also recommended NUE in September 2021. I thought it was stock that was down but not sold out.
While the past year has been a roller coaster ride for Nucor shareholders, the outcome has been very positive. It is up 33% against -5.9% for the index. Over the past month, NUE has risen 29%, almost 4 times the return of the S&P 500.
One of the reasons for July’s large gain was the company’s record results in Q2 2022that Nucor announced on July 21. Its net profit was $2.56 billion in the quarter, $460 million higher than the first quarter of 2022 and $1.05 billion higher than a year earlier.
It currently has a P/S ratio of 0.88, about the same as its five-year average. Nucor remains a great long-term buy.
disney (NYSE:SAY) barely qualified for this article, with DIS stock gaining 10.4% in July. But he qualified and now Disney shares could be ready to take off.
Asset allocation specialist Chantico Global believes that Disney would make a smart buy if there was a mild recession and not a more prolonged economic downturn.
“The parks are already starting to normalize in terms of numbers, they are growing like gangbusters. They raised their prices without any response to demand, which means Disney has incredible pricing power,” Chantico Global CEO Gina Sanchez said in late July.
She’s also high on Disney+, which reported 87.6 million subscribers at the end of the second quarter, 28% more than a year earlier, with 7.9 million added during the quarter.
Despite July’s nice gain, DIS stock is still down more than 30%. Barring a major recession, it should be able to recoup some more of its losses in the coming months.
Best stocks to buy: Bath & Body Works (BBWI)
Bath and body care (NYSE:BBWI) rebounded well in July with a gain of 27.5%. However, it is still down 46% since the start of the year.
On July 20, the company cut off guidance for the second quarter and the year as inflation weighed on sales. Going into fiscal 2022, he expected low-single-digit sales growth. He now sees a drop in the mid to high numbers. It also forecasts earnings per share to be 20 cents lower in 2022.
Between consumers cutting back on spending and turning to more experiential products and services, Bath & Body Works is bracing for a drop in demand. However, it’s important to remember that it faces comparable sales in 2021 that have broken records due to Covid-19. A return to more normal shopping habits was expected.
Acting CEO Sarah Nash, Retail business recently reported, said the company was performing well above its pre-pandemic levels, an indication that Bath & Body Works should be able to weather this economic storm.
Trading at 1.3 times sales, BBWI stock is still cheap despite July’s significant gain. I wouldn’t be surprised if the momentum continued into August.
Costco (NASDAQ:COST) gained 11.4% in July. As a result, it was down just 5% for the year, about a third of the S&P 500’s loss.
Costco has always been one of my favorite stocks. As of 2012, I was recommend COST stock. More recently, I claimed that Costco remains one of the best buy and hold stocks you may have in your wallet. This is a must have stock. Now more than ever.
The key to Costco’s business model is its membership fees. If you have looked at any of his financial statements, you will see that the membership fees for a given period are very similar to his net income. In Q3 2022his contributions were about 73% of his net income of $3.98 billion for the first nine months.
The income from the contributions allows it to pass on the savings made by the suppliers to its customers. As long as its membership base grows, all is well at Costco headquarters. As of May 8, Costco had 64.4 million paying members, up from 60.6 million a year earlier. That’s a 6.3% year-over-year increase. In Costco’s business model, that’s a lot.
Best stocks to buy: Chevron (CVX)
Chevron (NYSE:CLC) outperformed Exxon Mobil (NYSE:XOM) in July – 11.8% vs. 10.7% – but since the start of 2022, it lags XOM by more than 15% despite its July gains.
However, there is no doubt that Chevron’s business is booming. The energy giant reported strong second-quarter results on July 29, which included $68.8 billion in revenue, $9.5 billion above analysts’ estimates. In the end, it earned $5.82 per share in the second quarter of 2022, 72 cents above consensus and well above $1.71 a year earlier.
The company’s return on capital employed (ROCE) in the second quarter was 26%. It hasn’t been this high since 2008. Thanks to its strong cash flow in the first six months of the year, Chevron was able to pay down more debt, reducing its debt-to-equity ratio by 380 basis points to 14.6%.
Chevron’s trailing 12-month free cash flow through the end of the second quarter is $29.7 billion. Based on its market cap of $321.8 billion, it has an FCF yield of 9.2%. I consider anything above 8% to be in value territory.
On July 20, analysts at JPMorgan increased their target price for Generac Holdings (NYSE:GNRC) to $461 from $455 while maintaining an overweight rating on GNRC shares. Of the 23 analysts covering GNRC stock, 19 rate it as a buy. None rate it as a sell or an underweight. The median target price is $365, which is 48% higher than its current price.
In the first quarter of 2022, its sales were $1.14 billion, up 41% from a year earlier. Its residential products, which account for 68% of revenue, rose 43% in the quarter to $777 million. For all of 2022, Generac forecasts sales growth of 36% to 40% over last year.
Bottom line, its adjusted net income was $135 million, down 12% from $153 million a year earlier. Rising input costs were responsible for lower gross margins in the quarter. He expects gross margins to improve in the second half, leading to net margins of 13% to 14% in 2022.
Despite rising more than 23% in July, Generac’s FCF yield is high at 8.2% [TTM FCF $140 million divided by $17.1 billion market cap].
Best stocks to buy: Molina Healthcare (MOH)
During the company’s second quarter 2022 conference call, Molina Health (NYSE:MS) CEO Joe Zubretsky has announced that he is definitely moving to a remote work environment. As part of this permanent move, it is reducing its real estate footprint by approximately two-thirds. This decision reduced its general and administrative expenses in the years to come.
Molina Healthcare provides Medicaid and Medicare health care plans to low-income individuals through state insurance marketplaces. At the end of June, he had 5.1 million members, 9% more than in June 2021.
The company continues to implement a turnaround strategy that includes the acquisition of smaller healthcare plans. In 2017 he had a $512 million loss. In the first six months of 2022, it made adjusted earnings of $554 million, a turnaround of more than $1 billion at the bottom line. This year, he expects revenues of $17.60 per share. In 2023, Molina expects to earn over $20.
In May, I suggested investors consider Molina as a blue chip stocks to buy For the safety. It has since increased by 4%. More importantly, it rose 15.8% in July after reporting second-quarter 2022 results that beat revenue and profit estimates. August should see more gains.
As of the date of publication, Will Ashworth had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.