3 Stocks YOU’RE Buying for August 2021
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Find out what investors have come up for their next bets in the stock market and what I decided to buy for our August 2021 stocks.
Hey Bow Tie Nation, Joseph Hogue here with something completely different for our August 2021 portfolio update, something I’ve never done on the channel before!
Now I’m always getting ideas for stocks to buy from you out there in the Nation, from the comments and in our Facebook group, but for the first time I’m letting you directly decide which stocks we add to the portfolio!
So I asked in our Facebook group, what’s the THEME you’re watching for the rest of the year and three stocks you’d buy for August, which stocks will outperform the rest of the year!
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In this video, we’ll do a quick review of the portfolio, show you which stocks have jumped higher and what we’ve learned from the losers. I’ll then dig into the stocks you’re watching, analyze those and reveal the three stocks I’m buying for August 2021!
I’ll leave a link to Stockcard in the video description. Click through and then go to Portfolios in the top menu, you’ll find the Bow Tie Nation portfolio in this Stock Picks section. It’s free to follow and you’ll get email notifications whenever I buy or sell from the portfolio.
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A Quick Update on Our Stock Portfolio
Let’s do a quick update to the portfolio but I want to get in on the stocks you’re watching for August. The portfolio is up 27% so far, beating the stock market index by just over 12%, and that’s down from outperforming by 25% at one point but still a solid return for seven months.
And our biggest wins have been in three sectors, really getting a boost from stocks in the energy, financials and healthcare parts of the market. We were up 163% before closing out our position in Diamondback Energy and up more than 55% in both Wells Fargo and Citigroup. We’re up 42% in shares of CVS Health and I still think that one has some strong upside left.
And now some of the recent performance is because those reflation sectors; the energy stocks, banks and healthcare started coming back down, but I still believe these are three of the best sectors to be in. Especially if you already have a lot of tech stocks, adding stocks to your portfolio from these three sectors is going to really help smooth out your risk because it’s been a tale of two markets lately, right? Either tech is up and the reflation trade is down or these sectors are holding up while tech plunges.
On the other hand, where we’ve had our biggest misses with the portfolio is in the reopening stocks like Cinemark Holdings and Madison Square Gardens, down 28% and 15% since adding them in March. As well as small cap miner Nexa Resources and trucking company U.S. Xpress.
Now that whole reopening theme has stagnated since March. The stocks just rose so far from last year that they now need proof of that rebound in earnings and I think we still see that over the next few months. Shares of U.S. Xpress are a little more frustrating because it’s a solid company on growing sales so I think it’s just a matter of time there as well.
And that 27% return is pretty good but I wanted to reach out to you out there in the Nation to add some growth to the portfolio, see which stocks you’re watching for the rest of the year.
So let’s take a look at some of your ideas and then I’ll reveal the three stocks we’re adding to the portfolio for August.
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Some Great Ideas We Had from our Facebook Community
David doesn’t offer a theme or stocks but says he wants 10%-plus dividend yields and high growth potential…
And I want to shit solid-gold turds but we both know that’s not going to happen.
I understand what you want here; a good dividend yield and price appreciation but you have to understand there’s a tradeoff between the cash a company returns to shareholders and how much it reinvests for growth. If a company is paying out a 10% yield, it’s probably saving little or nothing for that growth. And if it is in a high-growth industry, that failure to reinvest is going to mean it falls behind the competition.
So you can have one or the other, either a really high dividend yield with little growth or a high-growth stock but not much in cash return.
Now you can get solid dividends and price appreciation but, please, PLEASE don’t go chasing high yields exclusively. Look at the total return of the stock, so dividend yield and price growth. And here I’d say you’re best off looking for between four- to maybe five- or six-percent yields in real estate stocks. In this theme, I like Medical Properties Trust, ticker MPW, for a 5.4% yield and EPR Properties, ticker EPR which pays a 5.7% dividend.
Derek wants to look at hospitality stocks that pay reliable dividends, so looking for the cash payout on the stocks recovering as things get back to normal.
And here I would expand this out to all those reopening stocks so maybe including different segments of the travel stocks, but for reliable dividends you really need to be paying attention to the balance sheet on these. A lot of those companies just loaded themselves with debt to survive last year and that’s going to weigh on cash flow going forward.
So once you find a good dividend stock you want to go to the balance sheet, and we’ll use LCI Industries, ticker LCII, here as an example. The company is a parts supplier into the RV market.
And here you want to look for things like the current ratio, which are the short-term assets divided by short-term liabilities, that’s a good measure of near-term liquidity. You also want to look at the debt-to-equity ratio, which is how much of the company is owned by lenders and how much is owned by investors. These two will give you a sense of how sustainable the company’s debt position is and the safety in those dividend cash flows.
LCI pays a 2.5% yield and to that I might also add Travel and Leisure, ticker TNL, which pays a 2.1% dividend.
Sean is looking at the mortgage space longer-term but for shorter-term ideas he’s looking at stocks in the semiconductors and mentions Intel and Vishay Intertechnology, ticker VSH.
And while some analysts think we might work through those semiconductor shortages within the next year, from the surging demand for chips in everything from cars to household products, I think this is going to be an issue for years to come. That means parts suppliers like Vishay will book increasingly higher revenues so let’s put that one on the table to look at later.
Here Matthew is looking at single-family REITs on the idea that home prices have jumped and priced a lot of people out of the market, forcing them to rent instead of buy. And I would add the apartment REITs as beneficiaries to this as well though I’m a little worried about the affect of the moratorium on evictions and foreclosures as those came off last week.
Shares of American Homes 4 Rent, ticker AMH, are up 96% in the last five years, really jumping over the last year. AvalonBay Communities, ticker AVB, in the apartment space has also done well with a 2.8% dividend and producing a 57% total return in five years, but I want to wait a few months to see how the business reacts to the end of those eviction moratoriums, to see what management says maybe in the third-quarter earnings reports before I jump into these. I think that way, you still get the longer-term potential in that housing market pricing but take some of the near-term risk out.
Trevor is looking at the cybersecurity theme and this is something we’ve been talking about on the channel, that ever-present need for online security. He’s got a few of the leaders here; Palo Alto Networks, ticker PANW, Crowdstrike and ZScaler, ticker ZS, which I recommended in January of last year, now up 450% in the last 18 months.
It is definitely a theme you want to be in over the next decade and beyond. All the stocks here have jumped higher over the past year so I’m a little worried about valuation right now. For example, Palo Alto is about the cheapest of the group and even that trades for 10-times sales. I do still own shares of Zscaler in my own portfolio but might wait for a better entry point before adding more.
John brings up an interesting theme in the food companies on the idea that everyone is going to be back to tailgating and concerts soon. And I could see this working out for food service companies on that return to workplace cafeterias as well so maybe stocks like Sysco Corporation, ticker SYY, or Performance Food Group, ticker PFGC.
3 August 2021 Stocks to Add to Our Stock Portfolio
Some great ideas here and thank you to everyone that responded in our Facebook group. For the first stock we’re buying, Vishay Intertechnology, ticker VSH, on that theme in semiconductor demand.
Vishay produces a broad line of semiconductor and passive electronic components, all of which should see rising demand as the Internet of Things, 5G and tech revolution unfolds.
The company grew revenue by 24% last quarter and Vishay is a net cash company with $781 million in balance sheet cash against just $556 million in debt, so lots of financial flexibility for acquisitions or growth.
The average analyst target of $25 a share puts it back near the April high and almost 20% from here but like all these, this is a long-term growth stock.
Sysco Corporation, ticker SYY, could also do well in the back-to-work recovery and pays a 2.6% dividend yield.
The shares here have pulled back about 15% from the May high but could bounce back up by the end of the year if employers are able to get people back to the office. Revenue is still a little shaky but the company has a strong cash position and a history of growing the dividend with a growth rate of 8.6% annually over the last five years.
This is another one where the average analyst target of $86.90 a share puts it back towards that recent high and 18% from the current price. The company is the leader in food distribution to cafeterias and the food-way-from-home industry so should continue to benefit as everyone gets out more.
Next here is a theme I’ve been following and Kelly Services, ticker KELYA, the $856 million staffing firm.
I’ve been recommending shares of Robert Half International since March on the idea that, as employers struggle to fill open positions, they’ll have to turn to staffing firms more and more over the next year. Shares of RHI jumped 10% on the 23rd when it reported earnings and I think some of these other staffing firms could be next.
Shares are down 18% from the May high despite expectations for revenue to jump 13% this year to $5.1 billion. This is another net cash positive company with $239 million in cash versus just $83 million in debt so some good stability here as well.
The average analyst target of $30 a share puts this one 41% from the current price and I think it’s soon you get that pop on earnings.
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