Historical data from 1928 to 2021 indicates that September has traditionally been the worst month for the markets. On average, the markets have declined by 1% in the month. However, that average is moderated by the fact that there have been 42 up-months during the study period. In down months, the average negative return for the S&P 500 Index has been 4.6%. So, clearly September is a month to be cautious around. But I would not go to the extreme of pulling money out of the markets. Rather, I would go overweight on low-beta Robinhood stocks.
In addition to the challenging month ahead, there are other factors that could be potential catalysts for a market correction. For example, delta variant cases are on the rise, making another lockdown more and more likely. Therefore, it makes sense to consider some Robinhood stocks that can outperform during a lockdown scenario.
It’s also worth noting that the Federal Reserve has indicated that rate hikes might come sooner than expected. So, the fear of relative liquidity tightening is another piece that’s making the markets edgy.
Considering these factors, I would remain invested in specific themes that include defensive stocks. Further, companies that can benefit from another lockdown could trend higher, even if the broad markets are weak. So, with that in mind, let’s talk about seven Robinhood stocks to buy for September.
- Robinhood (NASDAQ:HOOD)
- Astrazeneca (NASDAQ:AZN)
- Target (NYSE:TGT)
- Zoom (NASDAQ:ZM)
- Pepsico (NASDAQ:PEP)
- Newmont (NYSE:NEM)
- Nio (NYSE:NIO)
Robinhood Stocks to Buy: Robinhood (HOOD)
Starting with the platform itself, I believe that HOOD stock is an attractive buy among Robinhood stocks. For one, it was recently reported that millennials are quitting their jobs to become cryptocurrency day traders. Plus, with the delta variant on the rise, people are preferring to work from home in the first place. That should be positive for Robinhood as the company provides a convenient avenue to trade in stocks, crypto, gold and exchange traded funds (ETFs) from the comfort of a couch.
For the second quarter of 2021, this company reported monthly active users (MAUs) of 21.3 million, a significant improvement from 10.2 million in Q2 2020. This is a clear indication of Robinhood’s growth trajectory. It also underscores the fact that people are looking at trading as a source of income more and more.
Another important point to note about HOOD, though, is that cryptocurrency revenue increased to $233 million in Q2 2021, as compared to $5 million in the prior-year period. With Bitcoin (CCC:BTC-USD) trending higher again, this robust growth in crypto revenue will likely sustain.
On the flip side, Robinhood reported a decline to 16% for its adjusted EBITDA margin. However, as active users swell and assets under custody surge, the company is positioned for healthier margins and cash flow upside in the coming years.
For now, HOOD stock has declined from as high as $85 to current levels around $49. This seems like a good opportunity to accumulate. The company even has a robust cash buffer to pursue aggressive growth and platform development.
Next up on this list of Robinhood stocks is AZN. One recent study conducted by the University of Oxford and the Office for National Statistics (ONS) in the U.K. has indicated the following:
“Two doses of Pfizer-BioNTech have greater initial effectiveness against new COVID-19 infections, but this declines faster compared with two doses of Oxford-AstraZeneca.”
This is positive news for AZN stock. However, there are other reasons to include this pick on a list of buys for September. Right now, AZN stock has a low beta and offers a dividend yield of 1.54%. Further, the stock has trended higher by only around 3% in the last 12 months. So, a breakout on the upside seems likely, considering the valuations.
It’s worth noting that, for the first half of 2021, this company reported revenue growth of 18% on a year-over-year (YOY) basis. Even excluding the impact of the Covid-19 vaccine, revenue growth was 9%. The company also has a deep late-stage pipeline of drugs. Currently, AZN has 22 Phase 3 medicines in the works. That should ensure its revenue growth remains robust in the coming years.
Finally, Astrazeneca is also well diversified from a regional perspective. For the first half of the year, the company reported revenue growth of 21% from emerging markets (EM). Excluding China, growth in EM was 36%. Overall, with healthy cash flows and visibility for growth, AZN stock is worth holding.
Robinhood Stocks to Buy: Target (TGT)
The U.S. economy is significantly overweight on the consumption theme. So, with the holiday season approaching, it’s a good time to be invested in this theme.
TGT stock has been in an uptrend, with returns of around 41% year-to-date (YTD). However, there seems to be more upside potential. The stock still trades at an attractive forward price-to-earnings (P/E) ratio of 19.34, according to Seeking Alpha.
Talking about the company’s growth, Target reported comparable sales growth of 8.9% for Q2 2021. For the same period, its comparable digital sales growth was 10%.
Target has been focusing on ramping-up its omni-channel sales capabilities. With concerns related to the delta variant, it’s likely that digital sales will remain robust. Plus, Target has also been investing in relatively smaller stores (49,999 square feet or less). As the company’s presence expands, this should help boost its pick-up and same-day delivery services.
Finally, TGT reported healthy cash flows of $3.4 billion for the first six months of the year. This should ensure that its dividend growth is sustained. The company has also boosted its share repurchase program.
Overall, TGT stock is among the more attractive Robinhood stocks to buy in September. This defensive stock will likely protect portfolios against capital erosion.
The recent delta variant of Covid-19 is the key reason to consider buying ZM stock as one of the Robinhood stocks for September. That’s because, as delta variant cases rise, there’s a likelihood of another lockdown. And even without another lockdown, people will probably see an extended period of working from home again.
In fact, recent news indicates that companies are already extending their office return dates into 2022. Further, according to a Gartner report, one-third of workers worldwide will work remotely by next year. Therefore, even after the pandemic is over, working from home is pretty much here to stay.
This is good news for Zoom, with the company maintaining a healthy growth trajectory. For Q1 2022, ZM reported YOY revenue growth of 191% to $956.2 million. For the same period, the company also reported healthy operating cash flow of $533 million.
With a robust cash buffer of $4.7 billion, Zoom has been on an acquisition spree, looking to expand its capabilities. For example, its recent move to acquire Kites Gmbh should help the company provide multi-language translation capabilities to users.
From a price perspective, this pick of the Robinhood stocks has been sideways through the year. However, ZM stock should trend higher as its healthy growth sustains.
Robinhood Stocks to Buy: Pepsico (PEP)
Next up, I would definitely consider PEP stock as one of the top Robinhood stocks to buy in September. Why? Well, one key reason is the fact that the stock has a low beta of 0.61. Additionally, with an annualized dividend of $4.30, the stock is attractive for income investors.
It’s also worth noting that PEP stock currently trades at a forward P/E of 24.89. This is attractive, considering the company reported earnings per share (EPS) growth of 37% YTD for the first half of 2021.
On top of this, I believe that Pepsico is positioned for healthy long-term growth as well. Currently, the company derives 72% of revenue from developed markets (Page 5). That means developing and emerging-market revenue is a small percentage of the total. With a strong cash buffer to invest in more international markets, Pepsico is therefore poised to see sustained earnings growth.
Right now, PEP has a long-term organic revenue growth target of 5% (mid-range). Additionally, the target is to improve operating margins by 20 to 30 basis points on an annual basis. Clearly, there is visibility for sustained EBITDA margin and cash flow upside here. This will likely translate into dividend growth in the coming years.
Lastly, though, it’s also worth noting that Pepsico spent $10.6 billion on mergers and acquisition between 2018 and 2020. Considering its financial flexibility, acquisitions should continue to be an additional growth trigger for the company.
Recently, NEM stock corrected from as high as $75.30 to current levels around the $56 to $57 mark. I believe that this correction is now a good accumulation opportunity.
The reason for NEM stock’s downside of late is a correction in gold. However, it’s worth noting that inflation is accelerating. Further, we will likely see a market correction in September. With funds swiftly moving from one asset class to another, then, precious metals should see renewed upside.
Another reason to like Newmont is that the company has a strong asset base. Currently, NEM has 94 million ounces (M0z) in gold reserves and 101 Moz of gold resources. Newmont expects sustained production into the 2040s with its current resource base.
Furthermore, Newmont also expects to reduce all-in-sustaining-cost (ASIC) in the range of $800 to $900 an ounce by 2025. Therefore, EBITDA margin expansion and cash flow upside is likely in the coming years.
From a financial perspective, this company reported liquidity of $7.6 billion and a net-debt-to-adjusted-EBITDA ratio of 0.2 times. With healthy free cash flows, Newmont is positioned to invest in growth projects and potential acquisitions.
All told, I believe that the bull market for precious metals is far from over. Even with a rate hike in 2022, real interest rates will remain negative for an extended period. So, for investors bullish on gold, this pick of the Robinhood stocks is worth holding long-term.
Robinhood Stocks to Buy: Nio (NIO)
Last up on this list of Robinhood stocks is NIO stock. Recently, China-based stocks have been in a downtrend due to regulatory headwinds. However, this downtrend gives investors the opportunity to accumulate some quality names.
Nio is one of the better picks right now when it comes to the electric vehicle (EV) industry. Importantly, the Chinese government has been pushing for faster adoption of new-energy vehicles. So, it’s unlikely that the EV sector will be impacted heavily by the government’s recent regulations.
So far, this stock has trended lower by 21% YTD. But it seems that the worst of this downside is now over, with the company continuing to report strong numbers.
For Q2, Nio reported delivery of 21,896 vehicles. For the same period, its revenue was also $1.3 billion, which was higher by about 127% YOY. All in all, with sustained expansion in vehicle level margin, the company is moving in the right direction.
Nio also has three product launches in 2022. These should ensure further growth in vehicle deliveries. Additionally, the company has plans for expansion into Europe. Clearly, these positive catalysts make NIO stock worth holding.
As of Q2, the company reported cash and equivalents of $7.5 billion. This gives it ample flexibility to further invest in manufacturing expansion and product innovation.
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On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.