3 July Stocks to Buy AGAIN! Doubling Up!

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This could be your second chance to buy the best stocks of the year. Take a look at these July stocks I'm buying and why.

Hey Bow Tie Nation, Joseph Hogue with the Let’s Talk Money channel and an update to our 2021 portfolio with three stocks I’m buying for July! And it’s a really timely video because I’ll be showing you how to look through your portfolio to find the best stocks to buy that you already own!

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Peter Lynch quote

There’s a great quote by Peter Lynch that goes, the best stock to buy is the one you already own. And it’s so true. Investors get caught up in always trying to find the next hot stock when it might already be in your portfolio. These are the stocks you’ve already done the research on, you already know you like the company so why not start there!9

And for our stocks to buy in July, I think the market is giving us a second chance here. We started building a position in energy stocks and financials in November, before the rebound, and the portfolio jumped immediately. Last month we were sitting at a 37% return, beating the market by more than 26% on the year.

portfolio tracker - july stocks to buy

But lately the sectors that led the recovery; the financials, materials and energy have sold off. You see it here on the sector tracker at SectorSPDR.com, shares of financials have plunged 4.4% over the last month. Industrials, materials…stocks in those cyclical sectors we were betting on have underperformed.

And you see what it’s done to the portfolio, now up just 31% as we head into July, still beating the market but only by 20%.

Why This Can Be Your Second Chance to Buy the Best Stocks of the Year

In this video, I’ll explain why that part of the market is selling off and why I think it might be your second chance to get into some of the best stocks of the year. We’ll look through the portfolio and I’ll show you the three stocks I’m buying in July to take advantage of that dip.

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Now the market actually hasn’t been that bad over the past month with the S&P 500, the blue bar here, up 2.2% and the tech-heavy Nasdaq up over five percent. Even the old-school Dow stocks are only down a percent.

But looking back at the sector level, there was the deeper selloff in financials, materials and industrials where we had some of our stocks.

And it’s because the market really gave up on two key drivers of those sectors, interest rates and inflation. Even though we’ve seen inflation jump by the most in decades, the consumer price index surged 5% last month to a point it’s only been once before in the past 30 years, the market has shrugged off inflation numbers and sent interest rates lower.

And it’s hit some of our biggest winners. Citigroup was as high as $80 a share but has dropped 13% since early June. Wells Fargo is down 7% over the period. Others like Clorox have continued to selloff as pricing pressures for commodities hit consumer staples companies.

But I think this could be a second opportunity to buy some great stocks at a discount. With the economy expected to grow around 7% this year, there is no godly reason why interest rates will stay low. With the Fed pumping trillions into the system, increasing the money supply by 26% last year, there is no way we aren’t going to see higher inflation. That is going to boost a lot of these stocks once again and I think it could happen very soon.

So I’m highlighting three stocks from the portfolio, three stocks to buy in July on this rebound theme and why I like each one.

3 July Stocks to Buy for a Second Chance

Our first stock to buy in July is one I think will surprise the market the most, $180 billion mega-bank Wells Fargo, ticker WFC.

Shares are still up 51% from when we added the stock late December but have come down recently in that financials sector selloff.

To understand why this happened, you just have to look at interest rates. Wells Fargo reported a cost of deposits of just 0.03% in the first quarter, that’s how much it paid on deposits…it’s funding source for loans. Now for a while, it looked like interest rates were going up and the bank would make more money on those long-term loans on cars and mortgages…but then rates crumbled and the stock came down.

But again, there is no reason to think interest rates will stay this low and Wells is one of the best positioned to benefit from those rising loan costs. The auto loan segment has jumped on higher car prices and could be the big surprise in second quarter results. Credit card volume has slowed but could also pick up during the summer reopening.

And another reason I still like the bank stocks, the reason we bought shares late last year. All the banks moved massive amounts of money to cash reserves to cover potential loan defaults. You see that in the left graph here, Wells Fargo set aside $4 billion in the first quarter and almost $10 billion in the second quarter for credit losses. But with all the stimulus money, those credit losses never happened and the bank is now sitting on over $7 billion in additional reserves compared to 2019…cash it can now put back on the income statement for higher earnings.

The bank is also coming out from under a lot of the restrictions placed on it after the 2016 scandal, especially the asset cap set by the Fed that prohibits the bank from growing its business. Coming out from all this allows the bank to start growing again and I think that translates into a dividend increase later this year.

The average analyst target of $47.69 a share is only about 10% higher but I think this one gets back up to $50 a share, especially when a dividend increase is announced and as the company gets out from under the asset cap.

DCA or Dollar-Cost Averaging Strategy in Investing

We’ve still got two more stocks to highlight but this is a good time for a warning here, anytime you’re buying stocks you already own. Nation, I love the idea of dollar-cost averaging whether a stock price is higher or lower but there is a huge risk here you need to know about.

Dollar-cost averaging is just buying more of a stock at different prices. Usually people think of this in terms of when a stock falls after you buy it but it works the other way too. So if you buy a stock at $100 a share, let’s say you buy one share, and then it falls to $80 each. Now if you buy another share, you’ve invested $180 total and your average cost is $90 each. So instead of the shares having to get back to $100 for you to make a return, it only needs to come up that 12% to $90 each.

And again, I do this with my stocks on the way up as well as lower, just buying more shares every month or so and building a position over time.

But the danger here is something you might not even realize until it’s too late. You might keep buying a stock as it falls; you bought at $100 then $80 and buy some more at $60 and $50…all with the hope that eventually the stock will recover and you’ll make money.

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But when a stock crashes and you keep putting more into it, you could end up with thirty- or forty-percent or more of your entire portfolio in this one stock. If the company goes bankrupt or just never recovers, your portfolio is toast.

So use dollar cost averaging, buy more of the stocks you own, but never have more than five or ten percent of your portfolio in a single stock.

We added Madison Square Garden Sports, ticker MSGS, in March ahead of the reopening and it hasn’t been as quick to rebound with a 10% loss over the past three months.

Besides the marquee events center, the company also owns the New York Knicks, the Rangers hockey team, two development league teams and an esports franchise. New York has reopened and we’re seeing fans return to the sports they missed last year.

And while a lot of the consumer retail and reopening stocks have boomed higher, MSGS is still 28% below its pre-pandemic peak. Sales are expected to $792 million next year over the next four quarters, nearly triple the last year’s sales, and the company should return to profitability.

We all want to get back to the movies and arenas and now with most of the U.S. reopen, I think those summer sales surprise to the upside. Households have an estimated $2.4 trillion in savings built up through the pandemic and we’re ready to spend it.

And this is a closely held stock with insiders and institutions holding 92% of the shares so it probably won’t take much to move the shares higher, if retail investors start buying the shares, I think you see this one go to $200 each and higher.

Probably the biggest disappointment in the portfolio, Clorox, ticker CLX, is down 13% since adding it to the portfolio in January and underperforming the market by 24%.

And back in January, I even said I was hesitant to add it to the portfolio because it’s not the kind of stock that’s going to zoom higher but I think there are a lot of good reasons to own Clorox.

This is a company that pays a 2.7% dividend, twice the average yield of 1.3% on the market, and that’s produced a 10.9% annualized return over the last two decades. That is a solid return and consistent cash flow.

And while I think inflation becomes much more of a problem than investors imagine right now, shares of Clorox have already taken the hit. Shares are down 27% from the peak in August of last year on worries about sales growth and higher input costs but the company makes those must-buy items and should be able to pass along most of those costs to the consumer.

Earnings are expected at $7.13 a share over the next four quarters but management has beaten expectations by an average of 14% over the last year. I think you get closer to $7.75 a share in earnings which puts the price at about 22-times on a PE basis.

This is pretty much the ultimate safety play, a solid value on a quality long-term consumer staple company. The average analyst price target of $190 a share is about 8.5% higher than the current price plus that dividend gets you to a double-digit return.

Which of these July stocks are you buying?

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