5 Best Long-Term Stocks to Buy in July 2021
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We are now in the second half of 2021 and US stock markets look set to continue their momentum despite concerns over rising inflation, rate hikes, geopolitical tensions, and higher valuations. Despite all these risks, there are some stocks that you can buy and hold for the long term.
Over the long term, equities turn out to be the best asset. No wonder, Warren Buffett, who made all his wealth through investing, has almost all his assets tied up in stocks. Let’s look at the five best long-term stocks that you can buy in July 2021.
1. Berkshire Hathaway (NYSE: BRK.B)
Berkshire Hathaway is a conglomerate with interests in industries ranging from aircraft components, candies, insurance, railroads, and energy. The company also has a big portfolio of publicly traded securities and has Apple as the biggest holding. Berkshire Hathaway is the second-largest shareholder of Apple.
Why Berkshire Hathaway is a good long-term stock
While investing for the long term, the objective should be to get returns that are better than the markets. This is what Berkshire Hathaway has done over the long term. In its over five-decade history, Berkshire Hathaway has outperformed the S&P 500 by a wide margin. While it underperformed the S&P 500 by a wide margin in 2019 and 2020, it has outperformed this year amid the rebound in beaten-down value stocks. If you are looking at a good stock to buy for the long term, Berkshire Hathaway would fit the bill.
Berkshire Hathaway stock looks undervalued
Looking at the charts, Berkshire Hathaway has fallen below the 50-day SMA (simple moving average). However, it trades above the 100-day and 200-day SMA. The 14-day RSI (relative strength index) of 48.8 is also a neutral indicator and reflects neither overbought nor oversold positions.
The stock trades at an NTM (next-12 months) EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) of just over 14x which looks pretty attractive. The company was sitting on a cash pile of over $145 billion at the end of the first quarter. You can count on Buffett’s expertise to invest the cash in good long-term investments.
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2. Alibaba (NYSE: BABA)
Alibaba is a Chinese tech stock and looks like a good long-term investment at these prices. The stock has been underperforming the markets for over a year now mainly on concerns over issues in China. However, the stock looks very attractive at these prices especially if you are looking at a good long-term stock.
Alibaba looks like a good long-term stock at these prices
Alibaba stock trades at an NTM PE multiple of only about 22x which is only about a third of Amazon. The Chinese e-commerce market continues to expand while Alibaba’s cloud operations have turned positive on the EBITDA level. The stock looks undervalued and recently caught the attention of Reddit traders also.
Looking at the technicals, Alibaba faces strong resistance near the 50-day SMA while it has found support at the 100-day SMA. The 14-day RSI is neutral at 54.5. All said, there are several triggers that could take Alibaba stock higher in the long term. These include the monetization of its stake in Ant Financial, an eventual reconciliation with Chinese authorities, international expansion, and organic growth in both e-commerce and cloud operations.
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3. Ford Motors (NYSE: F)
Ford is the second-largest automaker in the US. The stock has underperformed the markets over the last many years as investors stayed away from legacy automakers and instead pivoted towards pure-play electric vehicle stocks like Tesla and NIO. That said, legacy automakers are outperforming in 2021 and despite the sharp rise in the year, Ford looks like a good long-term stock to buy.
Ford is a good long-term play on the electric vehicle industry
Ford has a market capitalization of only about $58 billion which is lower than that of NIO. Even Lucid Motors commands a proforma market capitalization of around $45 billion despite it being a pre-revenue company. On the contrary, Ford is delivering cars and is now also rolling out several all-electric models including the best seller F-150 pickup truck.
Ford trades at an NTM PE multiple of around 13x. The stock has seen a valuation rerating over the last year and could see more valuation multiple expansion as well as earnings rebound. If you are looking at playing the electric vehicle theme which is among the most prominent long-term investing themes, Ford would fit the bill. Ford is looking bullish on the charts and has found strong support at the 100-day SMA. It also trades above the 50-day and 200-day SMA which is a bullish technical indicator.
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4. SoFi Technologies (NYSE: SOFI)
SoFi or Social Finance went public earlier this year through a reverse merger with Social Capital Hedosophia Holdings IV (IPOE). The SPAC (special purpose acquisition company) was sponsored by Chamath Palihapitiya who has also taken Virgin Galactic, OpenDoor, and Clover Health public.
SoFi is a fintech company and offers several financial products including trading services in stocks and cryptocurrencies. The stock is also popular among Reddit traders. Wall Street analysts are also bullish on the stock and both the analysts covering it have rated it as a buy. While Oppenheimer has a target price of $25, last month Rosenblatt Securities initiated coverage on SoFi with a buy rating and $30 target price.
Sounding a positive note on fintech companies, Rosenblatt analyst Sean Horgan said “The incumbent legacy banks face a challenging road ahead as a new wave of digitally native and mobile-first banks rush into the market.” Commenting on SoFi he said, “But for now, challenger banks face a ‘jump ball’ opportunity to seize market share from the old guard … and SOFI is well-positioned to capture a significant amount of the value hanging in the balance.”
SOFI looks like a good long-term stock
SOFI is also expected to get a bank charter that will help buoy sentiments and add to the company’s earnings. The company posted better than expected first-quarter earnings and the growth rates of members have been rising for the last several quarters. The company expects to post revenues of $980 million and an adjusted EBITDA of $27 million in 2021. It trades at an NTM price-to-sales multiple of around 14.8x which looks reasonable.
The company’s top line is growing at a fast pace and it expects its revenues to increase 43% annually between 2020 and 2025. A possible bank charter will mean further upside for these estimates. Looking at the strong growth outlook and reasonable valuations, SOFI looks like a good stock to buy for the long term.
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5. Paysafe (NYSE: PSFE)
Paysafe is another fintech company that went public through a SPAC merger earlier this year. The company merged with one of Bill Foley’s SPAC who has been a Wall Street veteran and has been associated with several big financial institutions. The company processes over $100 billion in payments and the market leader in the iGaming market.
The stock has been under pressure after the merger. However, the fall looks like a good opportunity to buy and hold this quality name for the long term. Looking at the technicals, the stock trades below the 50-day SMA. However, it is trading slightly above the 30-day SMA which has been strong support. The stock’s 14-day RSI is also neutral at 49.3.
PSFE is a good long term stock at attractive valuations
That said, looking at the fundamentals, it looks like a good stock. The stock trades an NTM EV-to-EBITDA multiple of only around 20x which looks very attractive. The stock is a good way to play the payments industry and the iGaming market. Looking at the increasing pace of digitization, companies like Paysafe could be among the beneficiaries as more transactions happen online.
Wall Street analysts are bullish on PSFE stock. Earlier this week, Cowen initiated coverage on the stock with an overweight rating and a $15 target price. All eight analysts covering PSFE have a buy rating and its median target price of $16.50 is a 40% upside over the next 12 months.
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