We’re at the mid-way point of 2021 and it’s been a roller-coaster six months for investors in the US stock market.
Incredibly, stock markets have continued to hit new highs although the tech-heavy Nasdaq did sell off sharply in late February and early March.
Despite all the talk about inflation and interest rates, the S&P 500 is up 16.1% so far in 2021 while the Nasdaq-100 has also advanced – posting gains of 14.7% year-to-date.
Meanwhile, over in Hong Kong, the Hang Seng Index has seen a more tumultuous six month as a crackdown on China’s “Big Tech” firms means the benchmark has only risen 4.9% so far in 2021.
As long-term investors, we should always be on the lookout for “value” where it might exist so here are the top five buys in July that any investor can consider adding to their portfolio.
1. Tencent
Although China’s social media and gaming giant Tencent Holdings Ltd (SEHK: 700) seems to have fallen foul of regulators, like fellow tech behemoth Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988), there’s been one key difference.
While Alibaba has an outspoken former founder in Jack Ma – who seemingly cost Ant Group a lucrative IPO – Tencent has a media-shy CEO-founder in Pony Ma.
Beyond that, Tencent’s business continues to fire on all cylinders. In its latest first-quarter 2021 earnings, revenue rose 25% year-on-year to RMB 135.3 billion (US$20.9 billion) while net profit also jumped by 22% year-on-year to RMB 33.1 billion.
Particularly impressive was Tencent’s Fintech and Business Services division – which includes its dominant WePay payments arm – with its revenue soaring 47% year-on-year to RMB 39 billion.
With Tencent’s share price basically flat so far in 2021, and down about 25% from its all-time high earlier this year, this Chinese growth machine is trading at a discount.
2. Peloton
Although Peloton Inc (NASDAQ: PTON) became synonymous with the “work-from-home” (or rather “work-out-from-home) theme, the company is showing signs that it has staying power beyond the pandemic.
In its latest earnings release, the exercise equipment and connected fitness specialist reported revenue that grew at an explosive 141% year-on-year to US$1.26 billion and saw strong expansion across a number of key metrics (see below).
Source: Peloton Q3 FY 2021 shareholder newsletter
Traditionally associated with exercise bikes and treadmills, the firm is branching out into new fitness areas such as “Peloton Barre” while it also announced plans to expand into Australia.
Engagement with its connected subscription service looks positive given “Connected Fitness Subscription Workouts” grew 239% year-on-year to 149.5 million.
With shares down 15% year-to-date, Peloton could turn out to look cheap in five years’ time.
3. Airbnb
The travel and lodging marketplace Airbnb Inc (NASDAQ: ABNB) is a verb in its own right given how closely associated it is with travel, not only in the US but globally too.
While Airbnb went public in only December of last year, its core business has clearly been hit hard by the Covid-19 pandemic.
But given the world is starting to open up after mass vaccinations, Airbnb is also well-positioned to benefit as travel also resumes.
In fact, in its latest quarter revenue rose by 5% year-on-year to US$887 million while gross booking value (GBV) shot up by 52% year-on-year to US$10.3 billion.
Airbnb shares are up 10% year-to-date but at US$153 they still remain about 30% off its all-time high of close to US$220.
4. Brookfield Renewable Partners
Canada-based renewable power generator Brookfield Renewable Partners LP (NYSE: BEP) has seen its shares fall around 13% so far in 2021.
Yet, while investors may have cooled on the “clean energy” theme, over the long term the transition to renewable energy isn’t going anywhere.
If anything, it will just get stronger. That’s where Brookfield Renewable Partners comes into play, as it has renewable power-generating assets in 26 markets across 16 countries around the world.
With around 21 gigawatts (GW) of operating assets and an even bigger development pipeline of 27 GW, Brookfield Renewable has US$59 billion in total power assets.
Owning long-duration contracts with utility providers, which provides revenue visibility, Brookfield Renewable also pays a dividend which currently yields 3.3%.
5. The Trade Desk
The Trade Desk (NASDAQ: TTD), the data-driven digital advertising platform firm, had an incredible 2020 as advertisers shifted even more of their total budgets to online ads.
That saw The Trade Desk shares soar by 200%. Since reaching a high in mid-December 2020, though, its stock price is down by about 20%.
The company’s latest results were still stellar, with revenue in its first quarter of 2021 up 37% year-on-year to US$219.8 million.
Having announced a launch in the exciting market of India, which is going digital fast, The Trade Desk’s future looks as bright as ever for this media buying platform.
Look longer term
The stock market is a great place to find inefficiencies. A perfectly “efficient” market is just a theoretical, and esoteric, economic concept.
In reality, the stock market will always throw up opportunities for those of us who like to think long term and beyond what’s happening in the “here and now”.
Given that, the five stocks above are all riding on huge long-term trends that should see them benefit over the next decade.
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares in Brookfield Renewable Partners LP.
