Now that most of the mega-cap technology names have reported their earnings, many investors are trying to determine what’s next for the market. Will we see money rotate out of FAANG stocks and into some of the beaten-up value and cyclical names?
Are we going to see some volatility given that most of the strongest earnings reports have been sold? Only time will tell, but it certainly makes sense for investors to start putting together a shopping list of quality names to add in August to stay ready for any of the scenarios to come.
The summer months are typically low volume, but that doesn’t mean there aren’t going to be nice buying opportunities to take advantage of. Several areas of the market stand out at this time, which is why we’ve put together a brief overview of the top 3 stocks to buy for August. Keep reading on to learn more.
1. Lennar Corporation
The homebuilders are beginning to look like they are ready for the next leg up, and Lennar Corporation is certainly one of the strongest names in the group. It’s one of the largest publicly traded U.S. homebuilders and constructs homes for first-time, move-up, and active adult buyers in 21 states across the country.
While the momentum in the real estate market will eventually slow down to a more normal pace, the fact that there is low home supply and attractive mortgage rates makes Lennar Corporation (NYSE:LEN) a strong pick at this time.
The company also announced back in Q1 that it will spin off some non-core parts of its business in order to become a pure-play homebuilder and financial services company, which should be viewed as a positive as it should allow the company to only focus on its strengths. Lennar reported strong Q2 earnings back in June including net earnings of $831.4 million, up 61% year-over-year. Investors should also be attracted to the company’s big backlog, which stood at 24,741 homes, up 56% year-over-year, as of Q2.
2. Advanced Micro Devices
This semiconductor stock has been on fire after delivering resoundingly positive Q2 results and could be in store for even more gains in August after breaking through the $100 per share mark for the first time ever. It’s a company that supplies microprocessors and graphics semiconductors that are used in computers and other commercial and consumer applications. Investors should be intrigued with Advanced Micro Devices' (NASDAQ:AMD) growth in the CPU data center space, where it is taking market share from competitor Intel (NASDAQ:INTC) at this time.
The company is also expected to acquire Xilinx (NASDAQ:XLNX), which is the number one provider of adaptive computing solutions, later this year. If the deal does go through, it would increase AMD’s total addressable market to $110 billion and immediately be accretive to the company’s margins, EPS, and free cash flow generation.
With Q2 revenue growth of 99% year-over-year to $3.8 billion, Q2 EPS growth of 346% year-over-year, and a boosted full-year revenue-growth guidance, AMD is a stock that is poised for a strong August and beyond. Adding shares of this semi-stock on dips could be a very rewarding strategy next month.
3. Steel Dynamics
Another area of the market that has been seeing some buying activity lately is steel stocks, which had a big run to start the year and could be in for more gains in August. Steel Dynamics (NASDAQ:STLD) is a quality name in the industry given its financial strength and diversified mix of products, and if we see more positive updates regarding President Joseph Biden’s infrastructure bill, investors can anticipate additional upside for the stock.
Steel Dynamics is one of the largest steel producers and metal recyclers in the United States and generates lots of its revenue from construction customers, which means it is poised to benefit from a continued economic recovery and any government infrastructure spending that results from the bill.
The stock just reclaimed all of the major short-term moving averages and could be on its way to new highs in August, especially if we see some rotation from tech stocks into cyclical stocks.
It’s also worth noting that Steel Dynamics has exposure to automobile and heavy equipment manufacturing, which are both industries that are on the uptick after a rough year in which the pandemic disrupted business. In Q2, the company delivered record net sales of $4.5 billion along with record steel and fabrication shipments, which tells us that steel demand is quite high at this time.