In this article, we will be taking a look at the 12 best bargain stocks to buy in August. To skip our detailed analysis of current market dynamics, you can go directly to see the 5 Best Bargain Stocks To Buy in August.
Fitch Downgrades US Debt – AAA to AA+
On August 2, Fitch Ratings downgraded the US credit rating from a long-held AAA to AA+ while holding a Stable Outlook. The downgrade came in light of the country’s “expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last to decades,” according to Fitch. In light of this downgrade, US markets have been down for the day. The S&P 500 fell by 65.64 basis points, or 1.44%, the Dow Jones Industrial Average fell by 355.50 basis points, or 1%, while the Nasdaq Composite index fell by 316.56 basis points, or 2.22%, on August 2. While some are worried that this is signaling the end to the extended stock rally seen in the markets so far this year, others don’t seem to be all too worried about the downgrade.
On August 2, CNBC’s Closing Bell showed a snippet from an earlier conversation with Jamie Dimon, Chairman and CEO of JPMorgan Chase. According to Dimon, the Fitch downgrade “doesn’t really matter that much.” He also noted that while there are several countries now that are higher-rated than the US, these countries continue to live under the “American military enterprise,” highlighting that the US still retains its international dominance. Additionally, Liz Young, the head of investment at SoFi, also noted at CNBC’s Closing Bell that this downgrade isn’t a surprise, but it’s also not a big deal for the US at present. The country very narrowly avoided a default two months ago, and the state of the markets and the economy continues to be volatile.
Is A Pause In The Rally A Good Thing?
However, this should not worry investors too much. According to Young, the pause in the stock market rally after the downgrade and the ensuing market pullback may even be healthy for the market in the long run. Finally, Josh Brown, the CEO, and co-founder of Ritholtz Wealth Management, also noted during the closing bell that before the downgrade, the average gains for the top 20 S&P 500 stocks stood at around 83%, and these same stocks have fallen by about 3% on average after the Fitch downgrade. Brown believes that investors should consider this an opportunity to find stocks to go long on rather than pulling out of these companies entirely.
Most of the stocks that have been on the rise in the S&P 500 so far this year include tech stocks, primarily, followed by other sectors such as consumer staples and healthcare, among more. Sectors like these that have largely been performing well in 2023 can serve as excellent investment opportunities at present since top-tier stocks in these areas are currently down. Investors can thus add these names to their portfolios at a bargain if they act fast and act smart. Companies like Philip Morris International Inc. (NYSE:PM), The Kraft Heinz Company (NASDAQ:KHC), and AutoZone, Inc. (NYSE:AZO), among several others, are considered to be some of the best bargain stocks in the market today, according to analysts. However, other stocks that have particularly begun falling in light of the Fitch downgrade may also be worth taking a look at right now. They may well be considered to be some of the best cheap stock options to buy today. Since the S&P 500’s top performers were the ones that took the biggest hits after the downgrade, picking them up now may also ensure that investors get some of the best stocks to buy and hold for 20 years or more. Considering the above, we have compiled a list of some good bargain stock options for investors heading into August.
Image by Sergei Tokmakov Terms.Law from Pixabay
Our Methodology
To select the stocks for our list, we used a stock screener to first find stocks with P/E ratios below 20. We then picked stocks with high upside potentials according to analysts. They are ranked based on this metric, from the lowest to the highest upside potential. We also mentioned the number of hedge funds holding stakes in each stock, using Insider Monkey’s hedge fund data for the first quarter.
Best Bargain Stocks to Buy in August
12. Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge Fund Holders: 61
Upside Potential as of August 2: 4.62%
Average Price Target: $55.46
Cisco Systems, Inc. (NASDAQ:CSCO) is an information technology company based in San Jose, California. The company designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and IT industry.
On July 19, Samik Chatterjee, an analyst at JPMorgan, upgraded shares of Cisco Systems, Inc. (NASDAQ:CSCO) from Neutral to Overweight. The analyst also raised the firm’s price target on the stock from $55 to $62.
There were 61 hedge funds holding stakes in Cisco Systems, Inc. (NASDAQ:CSCO) at the end of the first quarter, with a total stake value of $2.5 billion.
Like Philip Morris International Inc. (NYSE:PM), The Kraft Heinz Company (NASDAQ:KHC), and AutoZone, Inc. (NYSE:AZO), Cisco Systems, Inc. (NASDAQ:CSCO) is a highly popular bargain stock you can buy in August.
11. PG&E Corporation (NYSE:PCG)
Number of Hedge Fund Holders: 52
Upside Potential as of August 2: 8.54%
Average Price Target: $19
Shahriar Pourreza, an analyst at Guggenheim, maintains a Buy rating on shares of PG&E Corporation (NYSE:PCG) as of July 7. The analyst also placed a $21 price target on the stock.
PG&E Corporation (NYSE:PCG) is a utility company based in Oakland, California. The company engages in the sale and delivery of electricity and natural gas in northern and central California.
PG&E Corporation (NYSE:PCG) was seen in the 13F holdings of 52 hedge funds in the first quarter. Their total stake value in the company was $2.9 billion.
Third Point Management mentioned PG&E Corporation (NYSE:PCG) in its first-quarter 2023 investor letter:
“Our strategy is to preserve liquidity and buying power to take advantage of markets when they “break”. While overall indices remain elevated, we are finding more chances to provide liquidity across all three asset classes in which we invest – credit, structured credit, and equity – opportunities which have been key drivers of performance for the fund. Our portfolio is balanced across industries with a focus on event-driven names including companies involved in spin-offs, significant cost-cutting, or other types of under-appreciated business transformation. PG&E Corporation (NYSE:PCG), which is still our largest position, continues to deliver strong performance, down 50bps in the first quarter but up 6.2% for the year to date after the Fire Victims Trust sold another 60 million shares in a block trade.”
10. FleetCor Technologies, Inc. (NYSE:FLT)
Number of Hedge Fund Holders: 31
Upside Potential as of August 2: 9.48%
Average Price Target: $267.82
Holding 1,186 shares in the company, Watershed Asset Management was the largest shareholder in FleetCor Technologies, Inc. (NYSE:FLT) at the end of the first quarter.
FleetCor Technologies, Inc. (NYSE:FLT) is a business payments company helping businesses spend less money by enabling them to manage their expense-related purchasing and vendor payments processes. It is based in Atlanta, Georgia.
A Buy rating was maintained on shares of FleetCor Technologies, Inc. (NYSE:FLT) by Andrew Jeffrey, an analyst at Truist Securities, on July 19. He also raised his price target on the stock from $245 to $295.
We saw 31 hedge funds holding stakes in FleetCor Technologies, Inc. (NYSE:FLT) in the first quarter, with a total stake value of $1.7 billion.
Here’s what Carillon Tower Advisers said about FleetCor Technologies, Inc. (NYSE:FLT) in its third-quarter 2022 investor letter:
“FLEETCOR Technologies, Inc. (NYSE:FLT) provides digital payment solutions for businesses to control purchases and make payments effectively and efficiently. Despite reporting strong results as well as raising forward guidance, the stock underperformed largely due to the pullback in crude oil prices, which pressured revenues in the company’s fuel card business.”
9. Humana Inc. (NYSE:HUM)
Number of Hedge Fund Holders: 68
Upside Potential as of August 2: 9.78%
Average Price Target: $533.45
Our hedge fund data for the first quarter shows 68 hedge funds long Humana Inc. (NYSE:HUM), with a total stake value of $3.8 billion.
Humana Inc. (NYSE:HUM) is a healthcare company based in Louisville, Kentucky. It offers medical and supplemental benefit plans to its customers.
Morgan Stanley analyst Michael Ha reiterated an Overweight rating on shares of Humana Inc. (NYSE:HUM) on July 14. The analyst also maintained a price target of $637 on the shares.
Baron Funds said the following about Humana Inc. (NYSE:HUM) in its second-quarter 2023 investor letter:
“These positive effects were somewhat offset by adverse stock selection in managed health care, where the Fund’s investments in health insurance leaders Humana Inc. (NYSE:HUM) and Elevance Health, Inc. were a modest drag on performance. Humana and Elevance Health were down during the quarter because of commentary from UnitedHealth Group Incorporated management indicating that medical cost trends were running at the high end of their guidance driven by higher levels of outpatient medical activity, particularly among Medicare patients. We think UnitedHealth, Humana, and Elevance will be able to manage through an uptick in medical cost trends, but we modestly reduced our positions in Humana and Elevance due to the potential impact on earnings.
We continue to own UnitedHealth, Humana Inc., and Elevance Health, Inc. because we believe these companies will be able to manage through this period without a material earnings impact, but we did modestly reduce our positions in Humana and Elevance Health.”
8. The Charles Schwab Corporation (NYSE:SCHW)
Number of Hedge Fund Holders: 87
Upside Potential as of August 2: 12.35%
Average Price Target: $73.41
As of July 24, Patrick Moley, an analyst at Piper Sandler, holds an Overweight rating on shares of The Charles Schwab Corporation (NYSE:SCHW). The analyst also raised his price target on the stock from $77 to $86.
The Charles Schwab Corporation (NYSE:SCHW) was seen in the portfolios of 87 hedge funds in the first quarter. Their total stake value in the company was $3.9 billion.
Based in Westlake, Texas, The Charles Schwab Corporation (NYSE:SCHW) operates as a savings and loan holding company providing wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. It operates through its Investor Services and Advisor Services segments.
Hosking Partners was the largest shareholder in The Charles Schwab Corporation (NYSE:SCHW) at the end of the first quarter, holding 664,892 shares in the company.
This is what Oakmark Funds said about The Charles Schwab Corporation (NYSE:SCHW) in its second-quarter 2023 investor letter:
“Two financial industry companies led the six-month detractors’ list, however. The Charles Schwab Corporation (NYSE:SCHW) and Bank of America both reported material mark-to-market unrealized losses in their marketable securities holdings, an outcome of the increase in interest rates early in the year.”
7. AutoZone, Inc. (NYSE:AZO)
Number of Hedge Fund Holders: 50
Upside Potential as of August 2: 14.36%
Average Price Target: $2,819.64
AutoZone, Inc. (NYSE:AZO) is an automotive retail company that retails and distributed automotive replacement parts and accessories. The company is based in Memphis, Tennessee.
AutoZone, Inc. (NYSE:AZO) had 50 hedge funds long its stock in the first quarter, with a total stake value of $1.3 billion.
Daniel Imbro, an analyst at Stephens & Co., reiterated an Overweight rating on shares of AutoZone, Inc. (NYSE:AZO) on June 27. The analyst also maintains a price target of $2,800 on the stock.
RGA Investment Advisors said this about AutoZone, Inc. (NYSE:AZO) in its fourth-quarter 2022 investor letter:
“Below is a chart of Alphabet’s (NASDAQ:GOOG) P/E ratio plotted against AutoZone, Inc. (NYSE:AZO). Any number of examples between large cap tech companies and more mature companies could illustrate this very same point, but we find this specific case most interesting because of its history.
Note that in late 2014/early 2015 these multiples crossed one another. The relative harmony between Alphabet and Autozone lasted for just shy of a year at that time, before Alphabet’s shares surged and Autozone’s shares slumped. This relationship need not matter for markets, though we think there is some signal for investors. Autozone today trades at the highest multiples of its recent history, while Alphabet trades at its lowest. Meanwhile, despite growth estimates dropping considerably at Alphabet and appreciating modestly at Autozone, Alphabet will outgrow Autozone by a wide margin over the next five years…” (Click here to read the full text)
6. Juniper Networks, Inc. (NYSE:JNPR)
Number of Hedge Fund Holders: 33
Upside Potential as of August 2: 17.18%
Average Price Target: $33.08
Watershed Asset Management was the most prominent shareholder in Juniper Networks, Inc. (NYSE:JNPR) at the end of the first quarter, holding 9,055 shares in the company.
As of July 28, Simon Leopold, an analyst at Raymond James, maintains an Outperform rating on shares of Juniper Networks, Inc. (NYSE:JNPR). The analyst also placed a price target of $35 on the stock.
Juniper Networks, Inc. (NYSE:JNPR) is an information technology company based in Sunnyvale, California. The company designs, develops, and sells network products and services globally.
In total, 33 hedge funds held stakes in Juniper Networks, Inc. (NYSE:JNPR) in the first quarter. Their total stake value in the company was $448 million.
Like Philip Morris International Inc. (NYSE:PM), The Kraft Heinz Company (NASDAQ:KHC), and AutoZone, Inc. (NYSE:AZO), Juniper Networks, Inc. (NYSE:JNPR) is a cheap stock with upside potential to buy in August.
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Disclosure: None. 12 Best Bargain Stocks To Buy in August is originally published on Insider Monkey.