The US stock market started August in the red as some investors questioned if the July rebound could be sustained following its best month since 2020.
With the strong recovery, some investors probably think that they have missed out on the best bargains of the 2022 bear market.
However, as long-term investors, I think investors need to have a few powerhouse, safe stocks in their portfolio, especially during this uncertain economic environment.
With that in mind, here are my five top stocks to buy in August.
1. Coca-Cola
The Coca-Cola Company (NYSE: KO) has just reported its Q2 FY2022 earnings, which beat expectations as the beverage giant’s sales at restaurants, cinemas and other venues recovered from the pandemic.
Coca-Cola’s revenue increased 12% from a year ago on higher pricing and an increase in global case volume. This was driven by recovery in its away-from-home business.
To put that into context, the beverage giant generated about half of its revenue from its away-from-home business, such as soda purchases at cinemas and restaurants.
Adjusted revenue came in at US$11.3 billion as compared to consensus estimates of US$10.56 billion.
Meanwhile, Coca-Cola’s adjusted earnings per share (EPS) was reported at 70 US cents, which beat estimates of 67 US cents.
I have written about Coca-Cola being the “Dividend King” stock to own back in March and its share price has increased by 5.4% since then, despite the stock market volatility.
While Coca-Cola’s valuation is on the high side with a forward price-to-earnings (PE) ratio of 28.4 times, it offers safety with its forward dividend yield of 2.7% and 59 consecutive years of dividend growth.
2. Disney
With the reopening of the economy continuing to pick up momentum, I believe that The Walt Disney Co (NYSE: DIS) should be in every investor’s portfolio.
Over the last two years, the Mickey Mouse company has been severely affected by the pandemic, especially in its theme park business.
On top of that, Disney had to deal with political conflicts in Florida earlier this year and now, soaring inflation and concerns on a recession have put a dent in the company’s share price.
That aside, investors with longer time horizons should consider ignoring the short-term noise and focus on the underlying fundamentals of the company.
Reports of strong guest levels across Disney’s theme parks, along with its new growth catalyst in streaming services, could boost earnings.
Disney will be reporting its Q3 FY2022 earnings on 10 August and its Disney’s Parks, Experiences and Products segment should capture the bulk of the summer travel season.
Aside from that, the focus will be on its streaming services. At this point, Disney+ growth has remained solid with the addition of an extra 7.1 million subscribers over the past year in the US and Canada.
The momentum on the international front is also worth to taking note of given its 39% year-on-year (yoy) growth.
With its legacy catalogue and blockbuster franchises, including “Marvel”, classic animations and “Star Wars” originals such as “The Book of Boba Fett” and “Obi-Wan Kenobi”, this will likely keep fans engaged.
Another positive development is the increase in its subscription rate for the ESPN+ service, from US$6.99 to US$9.99. Subscriber growth for ESPN+ has also been impressive at 62% yoy to 22.3 million.
Downside risk is also low as its share price is trading not far off its 52-week low of US$90.60.
3. Apple
Investors who are not convinced on buying a turnaround story at Disney could look at Apple Inc (NASDAQ: AAPL), which continues to beat estimates and break records.
The iPhone maker reported its best June quarterly revenue figure ever, with 2% growth to US$83 billion.
The revenue of US$83 billion also beat estimates of US$82.8 billion while EPS that amounted to US$1.20 a share also beat projections of US$1.16 a share.
The better-than-expected earnings came despite the supply chain constraints that hurt its Mac division.
Management also guided that they expect to see accelerated growth in the Q4 FY2022. This is as demand from consumers remains encouraging.
The growth in its services sectors and market talk of a venture into the development of self-driving cars will also create some excitement in the stock market.
4. Visa
Another company that has reported a strong Q3 FY2022 is Visa Inc (NYSE: V).
I wrote about the company back in May and Visa was also featured among our top stocks to buy in May.
Since then, Visa’s share price is up by more than 3%.
In the Group’s latest Q3 FY2022 earnings, Visa posted revenue of US$7.28 billion, which beat estimates of US$7.07 billion.
Meanwhile, EPS of US$1.98 also beat estimates of US$1.75 a share.
The strong performance during the quarter was mainly due to strong consumer spending and consumers’ en masse return to travel after the pandemic.
Visa’ CFO, Vasant Prabhu, stated this in the company’s earnings call:
“We’re seeing no evidence of a pullback in consumer spending. We keep looking for it, because we’ve heard some other people say it, and we’re not seeing any evidence of that.
If anything, affluent spending has been on the rise and is one of the reasons why we’ve seen some of the robust growth we saw this quarter.”
While investors were afraid that rising inflation could hurt Visa, the company’s business model allows them to charge higher fees and boost its top line.
A recession could hurt discretionary spending but given its large transaction volume, strong and international presence, Visa has a strong moat over its competitors. This could easily allow the company to grow bigger.
5. Microsoft
Finally, there’s Microsoft Corporation (NASDAQ: MSFT). The tech giant’s Q4 FY2022 earnings were affected by both the stronger US dollar and near-term headwinds, such as the production shutdowns in China and the Russia-Ukraine war.
However, the software giant continued with its impressive growth in its Azure cloud-computing services.
I wrote about why Microsoft’s share price rallied after it reported its earnings in Q4 FY2022 and one of the key factors is the strong outlook for FY2023.
While earnings were affected in Q4 FY2022, it also showed a strong and resilient business model in its Productivity and Business Process segment.
Investors looking to tap into the structural shift towards the digital economy should buy into Microsoft as its business supports the transition towards the digital and cloud economy.
While a recession could hurt its More Personal Computing (MPC) business segment, its cloud-computing business is likely to continue to grow at a strong double-digit rate at around 40%.
Continue to build a diversified portfolio
It could be tempting to time the market and gain the upper hand during market swings.
However, long-term investors should focus on building a diversified portfolio that consists of powerhouse brands with sustainable business models.
The uncertainty in the stock market makes it easier for investors to buy into strong brand names such as Coca-Cola, Disney, Apple, Visa and Microsoft – all at rational valuations.
This portfolio has a diversified range of companies that offer dividend safety, growth potential and stability.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
