Company / Analytics

Analytics, 06 July 2022

Best stocks to buy in July

The first year of the year has been brutal to global markets. Except for Energy, Staples, and Healthcare, all other stocks have seen massive declines. Investors are therefore looking into either of two kinds of stocks; Safe stocks and bargain stocks that will likely see massive gains on recovery in the near future.

For stock market investors who think of safety, dividend stocks will become increasingly attractive. With the Fed’s 75 basis point interest rate hike, those investors are going to be taking a more defensive position. Dividends provide a cushion against losses, which is a point investors will be paying attention to.

For more aggressive investors, they will be looking for bargain stocks that are down due to the current bearish conditions. Though it’s tough to recognize the opportunity at the moment, bear market cycles offer a compelling entry point to some of the best bargain stocks to buy.

Dividend stocks

Colgate Palmolive (CL)

Stability is one of the primary reasons investors consider Colgate Palmolive (NYSE: CL) stock in any economic environment. It simply has the stats to back up the notion that it is a stable equity. One prime example: Its dividend hasn’t been reduced since 1964. Further, that dividend yields a respectable 2.5% and in real-world terms equates to 46.99 cents for each share owned.

Those factors alone are likely to pique investor interest in July as inflation figures and future Fed rate hikes will drive fear higher. In short, safety is coming back around and the markets will continue to risk off.

And Colgate Palmolive stock projects safety and reliability in volatile times. It carries a 5-year beta of 0.55, meaning it is much less likely to move downward and when it does, that move won’t be as pronounced or as fast.

Coca-Cola (KO)

Investors are going to move into Coca-Cola (NYSE: KO) stock this month and next for a number of reasons. Its dividend policy is certainly one of those reasons, having last been reduced in 1964.

In short, it’s dependable and isn’t going anywhere. It yields nearly 3%, which is relatively high, and there’s no chance management will allow that dividend to be anything but strong, especially in the coming months.

Further, KO stock has proven itself a strong performer in an otherwise difficult 2022. While the S&P 500 is off by 23% year-to-date, Coca-Cola remains slightly up. That’s a testament to its ability to avoid broad downturns and defines it as a defensive stock. Investors who need any more persuading should consider its 5-year beta of 0.59.

Kinder Morgan (KMI)

An investment in Kinder Morgan (NYSE: KMI) stock is a bet on an increase in the volume of energy transport in the U.S. The company operates 83,000 miles of pipeline throughout North America and 141 terminals that handle oil, gas, renewable fuels, and vegetable oils.

Betting on that increase entitles shareholders to a very strong dividend yielding 6.6%. So, while investors will need to tolerate the highs and lows associated with energy investing, Kinder Morgan rewards such patience. In fact, management is clearly focused on rewarding shareholders through its dividend policy. The company has increased its annual dividend for the past 5 years and most recently by 3% in Q1.

Investors should consider Kinder Morgan while it is under $18 as its price target and dividend suggest strong returns at that price. (Nasdaq)

Bargain stocks

Borr Drilling (BORR)

Delivering high-quality drilling operations in hydrocarbon basins around the world, you would ordinarily expect Borr Drilling (NYSE: BORR) to perform well given Russia’s invasion of Ukraine and it has. On a year-to-date (YTD) basis, BORR stock is up nearly 75%. However, in the trailing month, shares have dropped almost 45%.

What’s the cause of Borr Drilling’s sudden change of fortune? Mainly, the hydrocarbon sector faces near-term headwinds of rising interest rates and increased supply. Recently, the federal government released significant supplies from the U.S. strategic petroleum reserve. This action helped cool off what has been a blisteringly hot market.

Although the immediate circumstances don’t bode well for BORR stock, the longer-term narrative is a net positive for Borr Drilling. (Investorplace)

Callon Petroleum (CPE)

As an independent oil and natural gas company focused on the acquisition, exploration, and development of high-quality assets in the leading oil plays of West and South Texas, Callon Petroleum (NYSE: CPE) enjoyed for the most part a solid first half of the year. Unfortunately, the trailing month has not been too kind for CPE stock, which saw the stock drop 38%.

Again, the culprit can be tied to the near-term headwinds impacting Borr Drilling above and other hydrocarbon-related companies. With the Federal Reserve committed to raising interest rates to combat soaring inflation, the easy money policy may shift to a hard money policy; as in, hard-to-get money. The subsequent pressure on households and the broader economy presents a negative picture for Callon.

Nevertheless, CPE stock may be one of the best bargain stocks to buy in July because of the geopolitical paradigm shift. Even green-friendly Democrats must realize that we need to start tapping into our own resources. Therefore, patient investors of Callon Petroleum could be rewarded down the line.

U.S. Silica (SLCA)

Presumably, U.S. Silica (NYSE: SLCA) doesn’t get much attention as an energy-related company because it’s not what you would call a direct player in the upstream segment of the oil and gas industry. However, this lack of constant media spotlights is what helps make SLCA stock one of the best bargain stocks to buy in July. In my opinion, it’s a hidden gem.

It goes without saying that U.S. Silica specializes in its namesake asset. Well, large quantities of silica sand are used during hydraulic fracturing or more commonly referred to as fracking. To be fair, fracking is a controversial subject because of its negative impact, as many environmental advocates have pointed out. I’m not here to suggest that fracking is a wonderful activity for the planet. But because of the circumstance in Eastern Europe, energy independence has again risen to the forefront of our political discourse. Invariably, fracking will have to be considered as a geopolitical tool, perhaps benefitting SLCA stock as one of the best bargain stocks to buy. (Investorplace)

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