With the stock market meltdowns of 2020 now in the distant past, 2021 has been a fantastic year for investors. Major stock markets around the world are up, including the FTSE 100 which has achieved double-digit growth year-to-date.
Despite this impressive growth, the FTSE is still trailing the S&P 500 over the same time period, and there are still plenty of opportunities internationally right now. It can be hard to know what to buy though when everything seems to be rising. As we look ahead to the second half of the year, which stocks look like ‘buys’ this August?
Top 5 Stocks To Snap Up In August
1. The Walt Disney Company
I doubt anyone reading this anywhere in the world hasn’t heard of Disney. What this means is that Disney possesses one of the most valuable commodities out there; a globally recognizable brand that suggests quality and reliability to all. Disney has diversified revenues streams from their entertainment parks as well as their studios and other ancillary businesses, and this always looks good to investors hungry for growth.
However, all of this is old information – what makes Disney a great share to buy right now is the massive upside potential coming from Disney+. It’s fair to say that Disney’s much anticipated entrance into the streaming entertainment market has been even more successful than anyone could have expected.
Disney+ is signing up new subscribers at a ferocious rate, and top-quality new content like the Mandalorian in combination with Disney’s huge back-catalogue looks sure to keep this trend going. Launched in November 2019, Disney+ already has more than 104 million subscribers as of June 2021.
This is especially impressive when you consider that this is up from 86.8 million in December 2020, and just 60.5 million in early August 2020. Netflix and others beware! Disney+ is growing fast and looks like an amazing share to consider buying this August based on its good fundamentals and growth potential.
It might look contradictory, but the argument above also leads us to the conclusion that Netflix may also be a buy right now. Hear me out on this! Netflix, just like Disney, also benefits from being a household name around the world.
Netflix’s original claim to fame was that it was the first to give consumers the ability to stream entertainment, rather than have to buy it in an older format or subscribe to cable services.
As with the rest of the home entertainment stocks, Netflix has had an incredible time during the pandemic. Locked down consumers were left with few other options, and subscribers, revenue, and earnings all soared. However, early 2021 hasn’t been as strong for Netflix, partly due to the arrival of new rivals like Disney+.
This has put some downwards pressure on the share price, and as such makes the stock look relatively attractive right now.
In fact, these declines have brought Netflix’s stock valuation to what many analysts now believe to be a discount. Right now, there is a good argument to be made that Netflix’s share price still has plenty of room left to revalue upwards.
This is especially true as consumer habits formed over the last year and a half of the pandemic are unlikely to be unwound anytime soon.
Netflix has entwined itself with the home-lives of millions of consumers, and the entrance of new competition simply means Netflix has to raise their game in terms of content development. In short, there is room for more than one winner in the home entertainment market, and it’s always worth betting on the pioneer with the longest track record of success.
These are just some of the reasons why analysts love the stock. Of the 36 analysts covering Netflix, 27 rate it a Buy, six rate it a Hold, and only four rate it a Sell. The average price target of $619 represents the potential for nearly 15% gains over the next year.
3. Activision Blizzard
Continuing the theme of the previous two picks, next up we have another stock who has been boosted by the pandemic. Activision Blizzard has managed to grow both its revenue and its margins due to rising gaming demand, and is already up 36.17% YTD.
The route to success in home gaming is the numbers game of how many users can be signed up, and here Activision is well ahead of the rest of the pack.
The increase in demand has been driven by the innovative model Activision has used to hook in a steady stream of new users. By deploying so-called ‘free-to-play’ offerings across mobile, PC, and console the company has been able to add over 100 million new players in a little over a year to their Call of Duty franchise alone.
With a 3-year earnings growth rate of +196.28%, it isn’t hard to see the appeal of this approach. Activision are now following up on this dramatic success by replicating this free-to-play structure across its other franchises.
The aim is to reach 1 billion users over the coming years, and if Activision can even get anywhere near close to this then the stock is set to outperform the general market over a medium-term time frame. They already have a very healthy 400 million current users, and this number has already been sufficient to power the company to higher revenues gained from live services.
4. Lloyds Banking Group
UK banking giant Lloyds certainly stands out in comparison to the shares discussed above! As a relatively ‘traditional’ company with a business model that in essence hasn’t changed for decades or even centuries, it might be harder to see the reasons why this stock might be a Buy right now.
However, there are several clear arguments to be made for adding Lloyds stock to your portfolio today. Firstly, Lloyds shares recently hit a two-month low, and as value investors know there are always reasons to consider added good companies to your portfolio when they are trading at a discount to where they were a short while beforehand.
Essentially, concerns over global growth not returning to pre-pandemic levels quite as quickly as had been forecast send global bank stocks lower in early July, and this means bank stocks look like good buys at their current prices.
Secondly, Lloyds is a famously good dividend payer, so the recent decision by the Bank of England to allow dividend payments to resume reminds investors of why they initially fell in love with Lloyds stock.
Finally, the diversification strategy Lloyds has pursued over recent years seems to be paying off. Lloyds bought MBNA in 2016 for £1.9 billion.
This allowed it to increase its share of the UK credit card market to around a quarter, and moreover the bank secured significant cost savings in the process. Later in in 2018, Lloyds and Schroders announced a new joint venture in which Lloyds took a 50.1 per cent stake in the holding company of Schroders’ UK wealth management business.
This has made Lloyds a much more resilient financial brand than it was before. Lloyds should be in a good position to gain from the re-opening and return to growth expected in the second half of 2021.
Last up a stock that looks cheap right now but is set to have good prospects ahead. L’Oréal have achieved the seemingly impossible – they manage to simultaneously be an international luxury brand whilst also hoovering up growing market-share in developed and emerging markets.
Added to this they are currently at the front of the race to set the cosmetics industry on a more sustainable and eco-friendly footing. As such, there isn’t much to dislike when inspecting L’Oréal right now.
With a market cap of $256 billion, for comparison this is slightly larger than Coca-Cola, the French cosmetics group is truly a giant of the global cosmetics and consumer goods sectors. L’Oréal sells perfumes, shampoos, and skin products under its own brand and owns about 40 other brands, including Kiehl’s, Ralph Lauren and Giorgio Armani.
Already dominant in the US, UK and European markets, L’Oréal has seen enormous growth in China over the past few years, and this is what makes analysts think this stock still has much further to go. Although the pandemic has made it hard to track or monitor this progress in rising sales, the last full year before the disruption began was 2019, and this year saw sales rising 35%.
L’Oreal are combining this grow with an ethical outlook so popular with modern consumers, and are reviewing everything from how much plastic they use in their packaging, to how their products are manufactured, all in an attempt to keep at the forefront of the new trend for eco-friendly products that consumers will pay a premium for.
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