July was the best month for the stock market so far in 2022. Major indexes recovered a sizable portion of their year-to-date losses. Despite another large Federal Reserve interest rate hike, traders are seeing hope on the horizon. Inflation may be starting to show signs of peaking, and economic figures aren’t as bad as the headline gross domestic product (GDP) numbers might indicate.
With the big rally, investors would be forgiven for thinking that they already missed out on the best bargains of the 2022 bear market. However, these five stocks to buy for August all traded down or flat for the month of July and thus offer the opportunity to catch up with the market going forward:
— Verizon Communications Inc. (ticker: VZ)
— Raytheon Technologies Corp. (RTX)
— Shell PLC (SHEL)
— Toronto-Dominion Bank (TD)
— Anheuser-Busch InBev SA (BUD)
Verizon Communications Inc. (VZ)
Telecom operators had a rough July. AT&T Inc. (T) warned that some of its customers were not paying their bills on time, among other problems. Verizon’s earnings report wasn’t as bad as AT&T’s, but it didn’t satisfy investors either. Awaited benefits from 5G rollout have been slow to materialize, and any tail wind from the stay-at-home quarantine days is long gone. However, nothing has changed in the bigger picture. People still need to pay their phone bills; smartphones are as essential of a utility as anything nowadays.
Despite that, Verizon stock is cheaper than ever. Shares are now selling for about 9 times projected forward earnings. And the dividend yield has crept up to 5.5%. In this market, that’s a standout bargain.
Raytheon Technologies Corp. (RTX)
With inflation and recession fears dominating the headlines this summer, the situation in Ukraine has fallen off many investors’ radars. That’s reflected in defense stocks, which have cooled off after a big run in the spring. However, the long-term outlook hasn’t changed much. The conflict in Eastern Europe drags on, which has necessitated more military equipment orders from Raytheon and other suppliers to replenish supplies.
Meanwhile, tensions continue to mount around Taiwan. Countries ranging from Japan to various European nations have committed to spending more on their defense departments going forward. The long-term outlook for defense contractors is bright, and short-term results aren’t bad either. Raytheon’s second-quarter earnings topped expectations and the company reiterated its full-year 2022 guidance. At less than 20 times forward earnings, Raytheon remains a reasonably priced blue-chip stock
Shell PLC (SHEL)
Energy giant Shell reported a phenomenal earnings report in July. Second quarter earnings surged to $11.5 billion from $5.5 billion in the same period of 2021. Despite the recent sell-off in energy stocks, underlying fundamentals remain exceptionally strong. Shell in particular has also done a good job of building out its renewables and carbon-free businesses. This puts it in position to potentially benefit from the new climate bill that legislators tentatively agreed upon at the end of July. Traders are focused on short-term moves in the price of oil. However, Shell’s longer-term outlook is tremendous. And it’s sharing the wealth with investors. The company spent $7.4 billion on dividends and share repurchases in the last quarter alone.
Toronto-Dominion Bank (TD)
Toronto-Dominion is one of Canada’s largest banks, ranking within the top three Canadian franchises in most major banking categories. It also has a substantial American business, and derives roughly a third of its revenues from the United States. Its U.S. franchise will increase in size following the pending acquisition of First Horizon Corp. (FHN), a sizable Tennessee-based bank.
Shares of the Canadian banks have been under pressure due to growing concerns about a downturn in the Canadian housing market. However, numerous analysts have been predicting a big bust in Canada for the past decade; it’s proven far more resilient than the skeptics had expected. Also, as mentioned, TD has a large U.S. business to fall back on as well. In any case, TD stock is selling for just 11 times forward earnings. In addition to the stock being a value, shares offer a 4.2% dividend yield as well.
Anheuser-Busch InBev SA (BUD)
The beer industry has had an uneven recovery as the economy has reopened following COVID-19. Some markets, such as the United States, have seen a strong recovery in on-premise beer sales at bars and restaurants. But volumes remain depressed in many European and Asian markets. The World Cup, which kicks off in November, however, may be the catalyst to get beer consumption back to normal levels. The company’s second-quarter results were fairly strong, with revenues growing at a double-digit clip. However, AB InBev’s price hikes weren’t enough to raise profit margins given continuing supply chain and inflationary issues. Once things settle down on the inflation front, however, AB InBev will be set for success. The company has been dealing with its debt load and shares are reasonably priced at just 17 times forward earnings.
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Update 08/02/22: This story was published at an earlier date and has been updated with new information.