Stocks climbed in August, with the S&P 500 up about 2.6% on the month through Aug. 27. Despite a surge in COVID-19 cases in the U.S. with the rise of the Delta variant — the seven-day rolling average of new cases exceeded 156,000 late in the month, its highest level since January — markets nonetheless applauded a recovering economy.
Late in the month, Federal Reserve Chairman Jerome Powell said the central bank could start tapering asset purchases later in 2021, assuming the labor market continues to recover. At the same time, he reassured the public and markets that the Fed will not preemptively raise rates.
With all these factors in mind, here are five of the best stocks to buy for September:
— Fiverr International Ltd. (ticker: FVRR)
— Taiwan Semiconductor Manufacturing Co. (TSM)
— Amazon.com Inc. (AMZN)
— Bank of America Corp. (BAC)
— FedEx Corp. (FDX)
[Sign up for stock news with our Invested newsletter.]Fiverr International Ltd. (FVRR)
In July, the U.S. economy added 943,000 jobs — the highest monthly amount in almost a year. That said, labor markets are still tight, with companies struggling to find workers to fill vacant positions. The trend of workers leaving jobs to pursue better opportunities has even led some to term this period “the Great Resignation.”
Enter Fiverr, a marketplace connecting freelancers to employers. Specializing largely in digital service providers, the site is a go-to for folks with skills in digital marketing, design, sound mixing, writing and editing, coding, and much more.
At a $6.6 billion market cap, FVRR is easily the smallest company on this list, and it is the biggest growth play, with revenue surging 60% last quarter. As such, it’s also the riskiest on this list, likely worth considering only by long-term growth investors with a strong stomach.
After Fiverr’s most recent earnings report in early August, shares fell due to a weakening outlook for the remainder of the year, as folks reacquaint themselves with society and get out of the house more. It could be the perfect entry point for a long-term position.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
As the world’s largest chip manufacturer, TSM is a different animal than Fiverr: At $550 billion, the company is worth nearly 100 times the gig economy startup.
That scale is part of what makes TSM one of the best stocks to buy for September. According to recent reporting from The Wall Street Journal, the chip foundry plans to leverage its gargantuan size to raise prices by about 10% for high-end chips and 20% for less advanced semiconductors.
Manufacturing chips is a technical, capital-intensive business, so many tech companies will simply design their own chips and farm out the manufacturing to giants like TSM. Apple Inc. ( AAPL) famously does this, and it is one of Taiwan Semiconductor Manufacturing’s biggest customers.
Given the global chip shortage, TSM is responding to the market, and shareholders have a chance to benefit. At 31 times earnings, the stock isn’t trading at an extreme discount, but it’s fair considering the company’s dominance. TSM also carries a 1.5% dividend yield.
Amazon.com Inc. (AMZN)
Another giant in its industry, Amazon is one of the few trillion-dollar companies on the planet. Now under the leadership of CEO Andy Jassy, the former head of cash cow Amazon Web Services, or AWS, the company hasn’t done much in the market this year, trending only 2.8% higher as of Aug. 27.
Like Fiverr, Amazon made the list of the best stocks to buy for September in part because of a recent post-earnings drop that has shares trading at attractive levels. While earnings per share beat expectations, revenue failed to meet Wall Street’s forecast for just the first time in the last three years.
While Amazon sees some of the pandemic-fueled momentum in its business slowing, the company just strung together its third-straight $100 billion quarter. It’s a behemoth, and its never-ending focus on the long term should continue to benefit shareholders for years. The company is in the midst of a multiyear investment phase aimed at boosting its warehouse square footage.
Plus, Amazon’s “growth slowdown” still has the company putting up numbers that competitors are undoubtedly jealous of: AWS revenue grew 37% last quarter, while “other” revenue, which includes advertising sales, jumped 87%.
Bank of America Corp. (BAC)
Even after a 40% rally so far in 2021, Charlotte, North Carolina-based Bank of America looks like a compelling buy, trading for just 14 times earnings. At a market capitalization of $350 billion, the bank is one of the safest financial stocks, offering a decent 2% dividend that it uses just 24% of its profits to pay out, leaving ample room to continue paying shareholders in adverse circumstances or raise the payout if the economy continues to improve.
If interest rates do rise — and they must eventually if the economy and inflation continue to heat up — the financial sector will benefit, and there’s nothing wrong with owning best-in-class businesses like Bank of America. Just ask the greatest investor of all time, Warren Buffett, whose Berkshire Hathaway Inc.‘s ( BRK.B, BRK.A) second-largest stock holding is BAC.
FedEx Corp. (FDX)
The surge in e-commerce demand from the pandemic has been great for FedEx’s business. The stock, meanwhile, has underperformed its larger, most direct competitor, United Parcel Service Inc. ( UPS), in 2021.
The prudent investor will take note of several things that stand out for FedEx. First, at about a $70 billion market cap, FedEx has more room to grow than the $167 billion UPS. Second, the valuation for FDX is far more favorable than UPS, trading at about 14 times earnings to the 28 price-earnings ratio of UPS. If you compare the price-sales ratio, the metric is also roughly halved, at 0.85 to the 1.81 of UPS. And while FedEx’s dividend is just 1.1% to UPS’s 2.1%, FDX has far more room to grow its dividend payout, using just 13% of its profits to pay that stipend to shareholders, compared to a 58% payout ratio for UPS.
The bottom line? FedEx reported record fourth-quarter and fiscal 2021 results, beat on earnings and revenue expectations last quarter, and has room to grow. The e-commerce trend may have seen peak acceleration in the throes of the pandemic last year, but digital commerce is here to stay, and FedEx should be a beneficiary. Its relative cheapness compared to its rival makes it all the more attractive.
