The best stocks to buy for October are each very different animals. On the surface, there’s nothing stringing them together. Some pay dividends, some don’t; some are growth stocks and others value picks; some are…
On the surface, there’s nothing stringing them together. Some pay dividends, some don’t; some are growth stocks and others value picks; some are world-famous and immensely valuable while others remain diamonds in the rough.
Still, these five disparate companies from four different sectors do have one thing in common: each is well-run and undervalued. Those are two important characteristics for investors hoping to protect their downside in a jubilant autumn market hitting all-time highs.
Sure, Facebook has been one of the least popular FANG stocks this year, but that’s precisely why it looks like one of the best stocks to buy right now.
Patient investors have a rare opportunity to buy one of the most dominant names in tech at a valuation rarely seen for FB. Currently trading around 26 times earnings and 20 times forward earnings, Facebook stock’s multiple is barely above its all-time low of 25.2.
Over the last two years, Facebook’s average price-earnings ratio is 35. So even if earnings were stagnant (they’re actually expected to rise 33 percent in 2018), a return to a below-average multiple of 30 would still imply 25 percent upside.
As the saying goes, the best time to buy stocks is when there’s blood in the streets, and this may be about as bloody as Facebook‘s streets get.
If you’re going to spread out your bets, you may as well make it a mix of high-quality businesses in different industries.
There’s no doubt that UVE, a small-cap property insurer, couldn’t be more different from Facebook, the 2.2 billion-member social network. That said, both companies make the cut as some of October’s best stocks to buy due to their cheap valuations relative to future prospects.
With solid revenue growth in the low double-digits, and 2019 earnings per share (EPS) expected to be 50 percent higher than 2017 EPS figures, a P/E ratio around 13 doesn’t sound too bad.
The remarkable thing is that UVE’s valuation still looks so attractive, despite the stock being up roughly 80 percent year-to-date as the market took notice of the discrepancy between share prices and intrinsic value.
Every stock on October’s buy list boasts a solid, smooth-running company behind it, and Illinois Tool Works is no exception.
A time-tested industrial products and equipment company, ITW has been providing the sort of back-end machinery, parts and tools that keep the economy humming since its inception over 100 years ago. Its wide-ranging operations include the production of automotive parts, food equipment, welding equipment, polymers, fastening systems and other products that are used in the production of microelectronics.
One often underappreciated bullish indicator for stocks is insider purchases, which in aggregate have been shown to signal outperformance. Just a few months ago, one of ITW’s directors made a meaningful purchase at just under $141 per share.
Prior to that, the last time there was any insider buying was about a year ago in late October 2017, when the stock was at $156. Within three months the stock hit $179, a solid 15 percent short-term gain. Insiders certainly seem to have a feel for when shares of their own company look like one of the best stocks to buy.
ITW shares should also please income investors, with the stock being one of just 52 ” dividend aristocrats” that have raised their dividend annually for at least 25 years. Not only is that incredibly hard to do, but ITW’s 2.8 percent yield isn’t too shabby, either.
As the legendary Fidelity portfolio manager Peter Lynch famously noted, it can be pretty tricky to try to “catch a falling knife,” or buy a stock that’s been steadily falling.
If investors prefer to wait for a bounce before hopping in NXPI, there’s nothing wrong with that strategy. That said, shares of the beaten-down chip manufacturer are incredibly cheap today as is, so there’s already a decent margin of error built in.
NXP Semiconductors, whose acquisition by Qualcomm ( QCOM) was nixed by Chinese regulators in July, makes electronic chips that help power all sorts of high-growth areas like connected cars, the internet of things and mobile payments.
Since the merger imploded, NXPI has been devoutly returning money to shareholders, announcing a $5 billion share buyback that by year end may reduce its share count by as much as 20 percent, as well as the company’s first-ever dividend.
Trading at 10 times forward earnings and a price-to-earnings-growth ratio of 0.83 (anything below 1 is considered quite attractive), NXPI, which reports earnings Oct. 25, is easily one of this month’s best stocks to buy.
In contrast to the last pick, BDX has one of the more beautiful long- and short-term stock charts you can find. A $70 billion medical instruments and supplies company based in Franklin Lakes, New Jersey, shares are up over 20 percent in 2018 and over 30 percent in the last year.
From syringes and antiseptic products to diagnostic assays and cell analysis kits, Becton, Dickinson and Company is a simple and relatively low-risk way to bet on the continued growth of the health care industry in general — without needing to hope for more astronomical drug prices to pad your gains.
Founded in 1897, BDX also pays a modest 1.1 percent dividend. Long-term shareholders have been amply rewarded; like ITW, BDX is also a so-called “dividend aristocrat,” having increased its quarterly dividend every year like clockwork for the last 46 years.