After the first seven months of 2021, there’s been a lot to like for long-term investors. That’s because stock markets, at least in the US, are reaching new highs.
The S&P 500 Index has returned an impressive 18% so far in 2021 while the tech-focused Nasdaq-100 has underperformed but still managed to post a 16.5% gain year-to-date.
Perhaps the big news story of July was China’s crackdown on its technology giants and other areas the government deems a threat.
That resulted in a violent sell-off and question marks over where future potential gains from the massive market might come from.
Given this, it was unsurprising to see that Hong Kong’s Hang Seng Index lost around 10% in July alone. So far this year, the Hong Kong stock market is down around 2%.
With that, here are five stocks that long-term investors can consider buying in August for the rest of 2021 and beyond.
1. Etsy
Artisanal crafts e-commerce firm Etsy Inc (NASDAQ: ETSY) had a phenomenal 2020, when its shares rose nearly 300%. The company’s “anti-Amazon” offering has seen it attract a bevy of both buyers and sellers.
However, so far in 2021 Etsy shares are up only 9.5%, underperforming the S&P 500. More recently, Etsy shares fell hard after its latest second-quarter earnings showed revenue “only” rose 23% year-on-year to US$529 million.
However, as the US economy starts to reopen, a slowdown was to be expected. For longer term investors, two exciting acquisitions – of second-hand clothing resale site Depop and Brazil-based Elo7 – illustrate why Etsy still has such a long growth runway ahead of it.
Interestingly, 41% of its total gross merchandise sales (GMS) of US$3 billion in its latest quarter came from international markets – up from just 32% in the same quarter of last year.
With a combined total addressable market (TAM) estimated to be US$1.7 trillion across all its brands, and a market cap of just under US$24 billion, Etsy still looks as compelling as ever.
2. Lululemon
While Lululemon Athletica Inc (NASDAQ: LULU) has grown to become the “go-to” yoga wear and athleisure brand, the company is still looking to break into new markets.
Shares of Lululemon are up only 13.9% so far in 2021 and yet it had an impressive first-quarter fiscal year (FY) 2021.
Revenue during the period was up 88% year-on-year to US$1.2 billion while earnings per share (EPS) of US$1.11 was up over five-fold from the year-ago period.
Its e-commerce revenue continued to grow strongly, hitting US$545.1 million during the quarter – up 55% year-on-year.
Lululemon also expanded into the menswear and shoes segments during the Covid-19 pandemic, as well as spending US$500 million to acquire interactive fitness company Mirror.
With multiple growth drivers, and economies starting to open up again after Covid-19, Lululemon looks like a stock investors can try on for size.
3. Autodesk
For anyone involved in the construction and design space then Autodesk Inc (NASDAQ: ADSK) is a well-known entity.
The company, which develops software products for sectors ranging from architecture to engineering and construction, is famous for computer-aided design (CAD).
In Autodesk’s first-quarter FY 2022 results, the company reported revenue of US$989 million, a year-on-year increase of 12%. Meanwhile, free cash flow during the period was an impressive US$316 million.
Given the company generates the bulk of its revenue from a subscription service, its revenue pipeline is highly visible and predictable.
Even better, geographically, revenue is fairly evenly split between the Americas, EMEA and Asia-Pacific meaning diversification is strong.
For investors, Autodesk shares are up only 11.6% so far in 2021 and it looks like the company will be a key long-term beneficiary of any meaningful infrastructure spend that will come out of President Joe Biden’s latest infrastructure bill.
4. Prologis
A real estate investment trust (REIT) that dominates the logistics space, Prologis Inc (NYSE: PLD) has quietly become one of the world’s largest listed REITs, by market cap.
Primarily owning logistics space, it has ridden on the unstoppable wave of e-commerce growth globally but particularly in the US.
Net earnings per diluted share of US$0.81 in the second quarter of 2021 for Prologis was a significant improvement from the US$0.54 it posted in the same quarter of 2020.
Prologis raised its 2021 quarterly dividend per share (DPS) by nearly 9% to US$0.63 and at its current price of US$129, shares are offering investors a dividend yield of 2%.
With the continued rise of e-commerce this decade, Prologis is well-positioned to benefit long-term shareholders.
5. Pinterest
Pinterest Inc (NYSE: PINS) has come to encapsulate the “right way” of doing social media. Effectively, users “pin” ideas that they love to personal boards.
This has allowed Pinterest to appeal not only to advertisers but also retail firms that want to place their products on Pinterest.
Integrating shopping so that Pinterest’s 454 million global monthly active users (MAUs) can potentially purchase their best ideas via the app is a lucrative proposition.
Pinterest shares fell 20% following its latest second-quarter 2021 earnings report (and are down 15.9% so far in 2021), although this was mainly on the back of falling MAUs internationally and in the US.
However, management noted that the fall in MAUs was mainly down to reopening and that the attrition as seen in desktop users (which aren’t as lucrative to the company anyway).
With an average revenue per user (ARPU) globally of US$1.32, compared to Facebook Inc’s (NASDAQ: FB) over-US$10, the growth runway for Pinterest is still there.
Looking for discounts
As long-term investors, even though stock markets might be hitting new all-time highs, there will always be some bargains to be had amid all the noise.
That’s because we should focus on the health of the business and not concern ourselves too much with where we think the market may go. No one knows that.
For investors willing to be patient and look – years – ahead then the five stocks above offer unique but compelling long-term opportunities.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Etsy Inc and Pinterest Inc.
