The second half of the year isn’t exactly off to a sizzling start. Then again, July usually isn’t necessarily a barn-burner, with the S&P 500 averaging only a 0.9% gain.
It’s not bad, but certainly not game-changing, as investors have their mind on other things this time of year (like ball games, vacations and, this year, arguing with people on the other side of the political aisle). Things don’t usually perk up again until September, and really, October, as stocks gear up for the typical year-end rally.
Yet, there are always buy-worthy names for those who look hard enough. Either through special situations or cyclical trends, a handful of stocks manage to buck the lethargy and make forward progress in the midst of the dog days of summer.
With that as the backdrop, here’s a rundown of the top stocks to buy in July. Some are familiar, while others aren’t. In all 10 cases though, there’s something uniquely special right here and right now.
Blue-Chip Stocks to Buy: Weyerhaeuser (WY)
Weyerhaeuser (NYSE:WY) isn’t going to win any value awards, even if earnings recoup as expected next year. The forward-looking P/E of 24 is well above the norm. Yet, this timber company may be on the verge of catching a psychological tailwind.
With just a quick glance at the headlines, it looks and feels like the construction market is slowing down. That may be a misleading message though. With Q2’s GDP growth rate projected on the order of 4% and unemployment at multiyear lows — while home inventories remain painfully thin — some observers are calling for a construction explosion in the latter half of this year.
Blue-Chip Stocks to Buy: Cognizant Technology Solutions (CTSH)
Cognizant Technology Solutions (NASDAQ:CTSH) is, as the name suggests, an information technology consulting and services outfit.
It’s a great time to be in the business. The advent of cloud computing and artificial intelligence opens the door to all sorts of opportunities. Problem is, not all companies know how to take their information technology arms to the proverbial next level. Cognizant helps make that happen.
The proof of the pudding is in the numbers. This year’s sales are projected to grow nearly 10%, and then improve to the tune of 9% next year. That’s not earth-shattering, but the bottom line is growing much better than the top line is. Per-share profits are modeled to grow 19% this year, and another 14% in 2019.
Blue-Chip Stocks to Buy: Humana (HUM)
One would think with all the uncertainty surrounding the entire healthcare market, Humana (NYSE:HUM) would be fighting a losing battle. In reality though, we’re seeing quite the opposite. The health insurer has actually figured out how to remain anchored in the choppy storm, picking the right businesses to be in and steering clear of the less fruitful ones.
The clincher: In the wake of the employee-healthcare solution created between Amazon.com (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) and JPMorgan Chase (NYSE:JPM), Humana is increasingly interested in building similar solutions. A couple of weeks ago it established a partnership with Walgreens Boots Alliance (NASDAQ:WBA), and just this week it acquired a hospital and clinic network called Kindred for $4.1 billion.
That’s the shape of things to come, and Humana realizes it needs to be a pace-setter in that regard.
Blue-Chip Stocks to Buy: Boston Scientific Corporation (BSX)
Being a reliable industry leader doesn’t inherently make that company’s stock a buy, but it sure doesn’t hurt. And, there’s no doubt about it … Boston Scientific Corporation (NYSE:BSX) is one of the leading names in the medical equipment arena. It sells a little of everything, setting the stage for consistent results, and consistent growth. Revenue is only expected to grow by single-digits this year and next, but like Cognizant Technology Solutions, earnings are growing a lot faster than sales are.
Bonus: Boston Scientific may be a buyout target as well.
Stryker Corporation (NYSE:SYK) denies it’s interested, but two weeks ago, that was the rumor in circulation. Such ideas surface, however, largely because there’s some semblance of truth to it. If not Stryker, and not now, then perhaps another suitor, and soon.
Blue-Chip Stocks to Buy: Exelon (EXC)
It’s more of a sector play than a company-specific opportunity. But, among the budding rallies within the utilities sector, Exelon Corporation (NYSE:EXC) is arguably the most compelling.
EXC shares have had a pretty good year, gaining 19% from its 2018 lows despite a rough patch for most other utility names.
Despite its outsized relative gain, the dividend yield is still a better-than-average 3.2%. Yet, if the market finally does start to unravel and dish out an overdue correction, not all names are subject to that pullback. In search of safety, investors are apt to seek out defensive names. Utilities, and Exelon in particular, should be among the first places they look.
Even if not though, EXC is doing well in its own right.
Blue-Chip Stocks to Buy: Seagate Technology (STX)
You know the company. Seagate Technology (NASDAQ:STX) makes hard disk drives for computers and servers. Though the advent of solid state drives has put its position as a market leader under pressure, investors — like companies and consumers — are slowly but surely realizing that traditional disk drives still have their place.
BlueFin Research Partners analysts John Donovan and Paul Peterson recently wrote of Seagate Technology:
“While the PC segment has been plagued by relatively anemic demand, HDD suppliers Western Digital (WDC) and Seagate (STX) remain our favorites due to strength outside of the PC space. WDC and STX topped estimates in the March quarter as expected, as momentum from nearline continued to strengthen. We see both companies trending ahead of guidance once again in the June quarter.”
BlueFin clearly likes Seagate rival Western Digital Corp (NASDAQ:WDC) as well.
However, STX shares have shown a little more relative strength over the course of the past few months.
Blue-Chip Stocks to Buy: Alphabet (GOOG, GOOGL)
It’s undeniably the most recognizable name on our list of 10 blue chip stocks to buy this month, almost to the point of being cliche. But, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) — the parent of search engine giant Google — has more than earned the honor.
Did you know that at no point since the year 2000 has Alphabet’s trailing-12-month revenue fallen? Ditto for operating income.
The headlines and rhetoric haven’t always suggested this was the case; Alphabet has been a company that investors as well as the professional stock-pickers have liked to use as a punching bag every now and then. The company itself, however, always seems to find a way to keep moving forward in spite of the critics.
Blue-Chip Stocks to Buy: DXC Technology (DXC)
From the best-known to the least well-known … DXC Technology (NYSE:DXC) is likely a name most investors aren’t familiar with. Yet, there’s a good chance that those some investors, as consumers, have benefited from the work that DXC does.
DXC Technology is a “digital transformation” company. In the same vein as Cognizant Technology Solutions, it helps organizations modernize their technology departments. It’s a bit more focused and purpose-specific, though there’s no denying the two outfits overlap on some fronts.
Whatever the case, the numbers don’t lie. After a turbulent past few months, experts think the company is on the right track. They’re modeling per-share profit growth of 11% for next year, translating into a forward-looking P/E of only 9.1.
Blue-Chip Stocks to Buy: National-Oilwell Varco (NOV)
Being one of the top-performing stocks within the oilfield services market can be a double-edged sword. Though leadership draws the attention of buyers, it also invites profit-taking.
That’s largely what has happened (and is happening) to National-Oilwell Varco (NYSE:NOV). Up more than 18% year-to-date and up nearly 30% for the last year, it has been an exciting name to own. But, it also currently sports more “sell” ratings than any of its peers.
This is a case, however, where a stock is well positioned to climb a wall of worry. Oil prices have been amazingly resilient, with most drillers remaining disciplined and not overproducing. Though the EIA believes the price of brent crude will peel back a little and end up averaging $71 per barrel, and then slide to an average of around $68 next year, that’s still more than strong enough to keep these names profitable. The bigger the name, the better.
Blue-Chip Stocks to Buy: Republic Services (RSG)
Last but not least on our look at the top 10 blue-chip stocks to buy in July, add waste management outfit Republic Services (NYSE:RSG) to your watchlist.
Yes, it’s boring, but don’t be fooled. There’s reliable money in the business … and more growth than you might think. The pros are calling for a 26% improvement in earnings this year, followed by 10% growth next year. As CEO Donald Slager explained it just a few days ago, “Garbage is good. People like the stability of our cash flow and the predictability of what we do with that cash flow.”
Better still, that bottom line might end up growing more than currently expected, with the company mulling the acquisition of smaller and independent waste-collection players and creating some synergy through size. It has earmarked about $100 million for such deals to get done this year alone.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
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