According to Warren Buffett, great investment opportunities don’t come around often. But with August imminent, I think there’s an unusually good chance to buy shares at unusually low prices.
After a turbulent month in the stock market, two stand out to me. Both are big firms I think have excellent long-term prospects, but some recent issues are making them unusually cheap.
Diageo
Diageo (LSE:DGE) shares took a big drop after the firm reported earnings, but I’m not entirely sure why. Sales fell 1% and profits fell 5%, but this is largely in line with what I was expecting.
The company reported revenue declines in Latin America and the Caribbean, Africa, and the US. But to my mind, these highlighted existing risks with the stock, rather than revealing new ones.
The big issue in Latin America and the Caribbean has been consumers trading down as spending power deteriorates. But this has been well-documented, causing the stock to fall since November.
In Africa, the main issue was a decline in the Nigerian naira relative to other currencies. But that shouldn’t be a surprise either – Airtel Africa shareholders could have seen this one coming.
Similarly, Goldman Sachs indicated earlier in the month that data from US wholesalers indicated Diageo’s products were faltering there. And the latest report largely confirms this.
As a result, the report didn’t give me any fresh causes for concern about Diageo shares. And since I thought the stock was good value before, I’m looking to keep buying it here.
McDonald’s
McDonald’s (NYSE:MCD) also reported some disappointing-looking results earlier this week. But the stock market liked the look of things and pushed the stock up 5%.
I think the market’s right on this one. Global sales fell 1% and earnings per share were down around 11%, but I see this as a short-term blip for a company in a strong long-term position.
In terms of what’s causing the decline, GLP-1 drugs and consumers trading up are both reasons I’ve heard suggested. Both of these are risks, but I don’t think either of is the reason sales are down.
A core part of the company’s customer base is teenagers, especially in the US. According to the Piper Sandler Teen Survey, US youngsters have less spending power than they did a year ago.
As far as I can tell, there’s no evidence this demographic is changing to healthier products and I don’t think they’re all on anti-obesity medication. They just have less disposable cash available.
It therefore looks to me as though McDonald’s still has its dominant market position intact. That’s why I’m looking to buy the stock while it’s down 12% since the start of the year.
Opportunistic investing
It’s rare to find shares like Diageo and McDonald’s trading at bargain prices. The reason is investors generally know these are companies with durable competitive advantages.
I think both stocks look like opportunities at the moment. That’s why I’m looking to add both to my portfolio in August.
The post My top 2 shares to buy in August appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
More reading
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How to turn a £20k ISA into a £343 monthly second income
Stephen Wright has positions in Diageo Plc. The Motley Fool UK has recommended Airtel Africa Plc and Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
