On the last day of June, which marked the end of the second quarter, positive European headlines drove the S&P 500 up 2.5%. This last-minute rally popped the major indices through their respective 50-day moving average lines, giving the bulls hope that enough buyers would emerge to keep the rally going.
But recent history does not support buyers who invest solely on the vagaries of European economic politics. Instead, investors should focus on U.S. markets for guidance, and the technical picture tells us that, for both the near and intermediate term, the bulls are not out of the woods.
Currently, stocks are somewhat overbought and due for a minor correction, but for the summer, they appear range-bound to roughly the lows and highs of June. Longer term, the bull is still in charge, so wise investors should respond to weakness as a buying opportunity.
This month’s emphasis is on stocks that should do well despite near-term market concerns. Here are your top stocks to buy for July:
Top Stock to Buy #1 – Automatic Data Processing (ADP)
Automatic Data Processing (NASDAQ:ADP) is one of the world’s largest independent computing services companies. It is also the largest provider of payroll outsourcing services and offers tax filing and benefits administration.
The company has a buyback program in force and earnings are expected to increase to $2.75 in 2012, up from $2.52 in 2011, and analysts estimate that ADP will earn $3.01 in FY 2013 (ended in June).
Technically the stock recently broke above its 200-day and 50-day moving averages on high volume. On June 29, it popped through a long-term resistance line with a breakaway gap — a very bullish event. Note the high accumulation and the stochastic buy. The target for ADP is $63.
Top Stock to Buy #2 – Crown Castle International Corp. (CCI)
Crown Castle International Corp. (NYSE:CCI) owns, operates and leases wireless infrastructure, including towers and antenna systems. Its towers are well positioned in the wireless market with 71% in the top 100 markets.
Earnings have been on a tear, increasing from a loss of $1.16 in 2010 to a profit of 52 cents in 2011 and 92 cents in 2012, and analysts are estimating $1.40 in 2013. Analysts’ price target is $67.
Technically the stock is in a strong bull channel following a break from a consolidation rectangle in January. Late in June, it flashed a new stochastic buy signal and has been under heavy accumulation since March. Our buy under price is $56 with a target of $70.
Top Stock to Buy #3 – ONEOK Inc. (OKE)
ONEOK Inc. (NYSE:OKE) is an integrated energy company that markets, transports, stores and trades natural gas liquids. Its distribution segment is the largest gas utility in Kansas and Oklahoma, and the third largest in Texas.
Earnings have increased each of the past six years, and estimates are that it will report $2.06 in 2013, up from $1.76 in 2012. OKE has a dividend yield of almost 3%.
The stock broke upward from a double-top in October at $37 to almost $45. Since then, it has been consolidating in a bull channel with support at its 200-day moving average at just over $40. Its stochastic is close to issuing a buy signal, and accumulation in June was high. Buy at the market for a target of $50.
Top Stock to Buy #4 – The Toro Company (TTC)
The Toro Company (NYSE:TTC) is a household name when it comes to small engine equipment. But it also designs, manufactures and markets turf maintenance equipment, irrigation systems, and landscaping, lighting and snow removal products.
Earnings are expected to reach $2.52 in FY 2013 (ended Oct. 31) versus $2.17 in FY 2012. It has a dividend yield of a little over 1%.
Technically Toro broke from a classic cup-and-handle formation in February. In late June, the stochastic issued a buy signal, and it has been under heavy accumulation for the past six months. Buy TTC at the market with a target of $45-plus. Toro had a 2/1 split effective July 2.
Top Stock to Buy #5 – United Natural Foods (UNFI)
United Natural Foods (NASDAQ:UNFI) is a distributor of natural, organic and specialty foods and non-food products in the United States and Canada. Earnings have increased dramatically over the past four years, and the company is estimated to earn $2.25 in FY 2013 (ended July 31) versus $1.95 in FY 2012.
The stock is technically strong following a break from a cup-and-handle in January and the establishment of a strong bull channel. A golden cross was triggered in February, and in June, it was under heavy accumulation. Our buy under price is $52 with a target of $60. But point-and-figure analysis produces a target of over $80.
Top Stock to Buy #6 – Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals (NASDAQ:VRTX) is a biopharmaceutical company that concentrates on the development of drugs designed for the treatment of a wide range of diseases, led by hepatitis C and cystic fibrosis. The company is expected to earn $2.55 in 2012, up from 14 cents in 2011, and analysts estimate $2.62 in 2013. Analysts recently increased their consensus target price to $70 from $64.
This is a very volatile stock, and it declined recently when a June 28 report indicated that one of its key cystic fibrosis drugs did not live up to expectations. However, the company has been the subject of takeover discussions, and the drug in question is about to undergo Phase III trials after a revised opinion.
The Street reiterated its buy recommendation on July 2. Targets range from $67 to $100. But be careful to only buy this volatile stock at a limit price. Technically the target for VRTX is $75.