Market volatility is on the rise. July was an unsettling month for U.S. equities as investors started to lock in some profits on leading growth and technology names. This earnings season has been a minefield, with many companies seeing unprecedented big swings following their earnings reports. The fast-approaching U.S. presidential election could further add to the market’s uncertainty.
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The good news is that these jitters have helped create some compelling buying opportunities across various sectors of the market. All five of these stocks to buy for August have significantly unperformed the market recently and should be poised for significant rallies once they work their way through current short-term operational issues and macroeconomic headwinds.
Here are five of the best stocks to buy now:
— Edwards Lifesciences Corp. (ticker: EW)
— Mobileye Global Inc. (MBLY)
— Yum China Holdings Inc. (YUMC)
— United Parcel Service Inc. (UPS)
— Dollar General Corp. (DG)
Edwards Lifesciences Corp. (EW)
Edwards Lifesciences is a medical devices company focused primarily on products for treating heart disease. Its product segments include: transcatheter aortic valve replacement, transcatheter mitral and tricuspid therapies, surgical structural heart, and critical care. Edwards shares plunged 30% following a recent downbeat earnings report. While the company actually beat earnings estimates, it cut its outlook for transcatheter aortic valve growth for 2024. Overall, Edwards is now forecasting a midpoint of $1.6 billion in revenue next quarter, versus prior consensus of $1.62 billion.
While this is a modestly negative development, the market’s reaction has been dramatically overblown. Morningstar’s Debbie Wang trimmed her fair value estimate slightly, from $86 to $84 per share, due to the earnings report. By contrast, the stock dropped from $90 to the mid-$60s, showing the discrepancy between the company’s actual earnings outlook and the market’s panicky reaction. The $84 fair value estimate implies 32% upside from the stock’s close at $63.64 on July 30.
Mobileye Global Inc. (MBLY)
Mobileye is a technology company that develops driver assistance solutions. Its tools help enable autonomous driving while also offering collision avoidance systems, navigation assistance and other such items. Intel Corp. (INTC) acquired Mobileye in 2017, but offered shares back to the public once again in 2022. Mobileye has enjoyed a strong revenue trajectory, growing revenues from $879 million in 2019 to $2.1 billion in 2023. However, with the auto industry’s deceleration in 2024, Mobileye has seen a similar slowdown, as revenues are set to slide to about $1.9 billion this year.
But the dip should be temporary. In fact, analysts see revenues surging to $2.6 billion in 2025, which would make for a tremendous 37% year-over-year growth rate. Additionally, the company is already profitable and expected to double its earnings per share in 2025. MBLY stock has lost nearly half its value over the past year, making for a significant buy-the-dip opportunity.
Yum China Holdings Inc. (YUMC)
Yum China is a fast food company that operates various brands within the People’s Republic of China. It has the rights for Yum Brands Inc. (YUM) stores including KFC, Taco Bell and Pizza Hut, along a variety of other restaurant concepts specific to the Chinese market. It’s no secret that the Chinese economy has been in a slump over the past few years, and investors have unceremoniously dumped their holdings in Chinese consumer companies. Yum China in particular has seen its stock price lose half its value over the past 12 months. That seems like a case of throwing out the baby with the bath water.
Yum China was able to grow its revenue in 2023, despite the harsh operating environment, and analysts expect revenue to rise another 6% this year. Analysts also see the company being on pace to post high-single-digits earnings per share growth this year. The stock is selling at just 14 times forward earnings, and shares could enjoy a hearty rebound once sentiment around Chinese equities starts to improve.
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United Parcel Service Inc. (UPS)
United Parcel Service is one of the world’s largest logistics companies. Its fleet includes more than 500 planes and 100,000 vehicles it uses to deliver more than 20 million packages per day on average. Over the years, UPS has benefited from the structural expansion of its addressable market as online shopping has continued to grow. While there are some competitive fears from Amazon.com Inc.’s (AMZN) logistics efforts, overall it appears that e-commerce continues to offer additional opportunities for UPS going forward.
Shares have skidded lower over the past year, though, as earnings have become temporarily depressed. Management has acknowledged higher labor costs tied to its new union contract, but it believes the company will return to a more favorable position in the back half of the year. UPS stock’s dividend yield is now up to 5.1%, making it an attractive income option as well.
Dollar General Corp. (DG)
Dollar General is one of America’s largest retailers, with more than 20,000 locations around the country. The firm has a powerful business moat due to its store location strategy. Specifically, it builds smaller stores in rural communities that have limited access to national big-box retailers. Dollar General focuses on budget-conscious shoppers and offers a strong value proposition, especially amid the recent inflationary wave. The company ran into problems over the past year as it struggled to keep some stores well-staffed and maintained during the recent labor shortage. It also warned that its core shopping demographic has faced increasing financial hardships recently, which has temporarily limited Dollar General’s earnings.
That said, a broader economic downturn would likely lead to more opportunities for Dollar General as other consumers would start shopping there to stretch their dollars further. With the stock’s recent underperformance, shares now go for less than 18 times earnings.
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5 of the Best Stocks to Buy Now originally appeared on usnews.com
Update 07/31/24: This story was previously published at an earlier date and has been updated with new information.
