5 Best Stocks to Invest in October 2021

September was bad for stocks and US markets closed in the negative for the first time in seven months. Also, it was the worst month for stocks since March 2020. What are some of the best stocks that you can invest in October ahead of the third-quarter earnings season?

Brokerages have been turning bullish on markets after the September sell-off and Goldman Sachs reiterated its year-end target price of 4,700 for the S&P 500.

1. U.S. Steel Corporation (X)

At its peak, the once iconic U.S. Steel Corporation was the leading steel producer globally. Now, it is not even the leading steel producer in the US. Meanwhile, the stock is up over 20% in 2020 even as it has fallen sharply from the peak.

Recently, Goldman Sachs, which is otherwise bullish on markets, double downgraded X stock from a buy to sell. “US domestic [hot-rolled coil steel] prices have averaged over $1,500/ton in 2021-to-date, >140% above the historical price levels. While part of this has been driven by strong demand and a lagging supply response, we believe the market may be anticipating a correction in the coming months as additional import volumes arrive and new capacity begin operations,” it said in its note.

What makes X among the best stocks to invest in now?

We are in a seasonally weak fourth quarter when US steel prices tend to soften. However, the prices should stabilize at much higher levels considering the current momentum. Biden’s infrastructure investments would also buoy sentiments. Also, as U.S. Steel pivots towards electric arc furnaces which have a higher variable cost structure, it should see a structural earnings improvement.

Also, its asset revitalization plan would help lift the earnings structurally. With an NTM (next-12 months) PE multiple of only 1.3x, X looks among the best stocks to invest in October 2021.

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2. NIO (NYSE: NIO)

Down a third this year, NIO is among the best stocks to buy in October. Incidentally, Goldman Sachs has had a love-hate relationship with NIO. It had upgraded the stock last year only to downgrade it within a month after the stock rallied. 2020 was a phenomenal year for NIO as the company survived a bankruptcy scare and soared over 1,100% for the year. Now, Goldman Sachs has again turned bullish on NIO stock and finds it among the best stocks to buy.

Why Goldman Sachs finds NIO as among the best stocks

Goldman Sachs is bullish on NIO due to its strategic positioning of the ET7 model. “The price point makes ET7 China’s most expensive car model ever launched by domestic manufacturers, strengthening Nio’s brand equity in the premium space,” said Goldman Sachs’ analyst Fei Fang. Notably, NIO had launched the model, its first sedan, earlier this year.

NIO is also expanding into international markets and has begun operations in Norway. Soon, it is expected to enter other markets including the US. To be sure, the competition in the electric vehicle (EV) industry is intensifying with the entry of new players. However, its premium brand position, battery-as-a-service proposition, and tacit support from the Chinese government make NIO stand out.

The entire EV space has been under pressure this year even as legacy automakers have raced ahead. All said, after the sharp fall from the peak, NIO now looks attractive and is among the best stocks to buy in October.

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3. ConocoPhillips (NYSE: COP)

The energy markets have been incredibly strong this year and $100 per barrel oil is not something that can be ruled out. The OPEC+ block has been quite disciplined with supply even as demand has picked up amid the momentum in the global economy. In the energy industry, COP is among the best stocks that you can consider in October.

JPMorgan finds COP among the best energy stocks to buy

JPMorgan listed COP as among the best stocks in the energy industry if crude oil were to hit $100 per barrel. COP is the largest crude oil producer in Alaska. It has globally diversified operations. The stock currently trades at an NTM EV-to-sales multiple of 5.2x. Notably, the stock prices of energy companies are still not factoring in crude oil at $100. Market sentiments towards energy stocks could change if crude oil sustains or rises from these levels.

Overall, given the continued strength in energy markets, COP looks among the best stocks to invest in October 2021.

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4. Apple (NYSE: AAPL)

After being the best-performing FAANG stock in 2019 and 2020, Apple stock has sagged this year. The stock is up only about 10% for the year and is underperforming the markets. However, the recent underperformance should not deviate the focus from the strong secular headwinds for the company.

Why Apple is among the best stocks to invest in?

If you are looking at a stock that you can hold for years and decades, Apple is among the best stock. Incidentally, Berkshire Hathaway, whose chairman Warren Buffett isn’t exactly fond of tech companies, finds Apple as among the best stock. The conglomerate is the second-largest Apple shareholder and the iPhone maker is the largest company in Berkshire’s portfolio. Buffett even regrets selling whatever little Apple shares he has sold over the last two years.

With a strong brand appeal, Apple is an incredible proposition. In the short term, the digital transformation and pivot towards 5G would drive its revenues. Over the long term, the company’s eventual foray into EVs will add shareholder value. Apple is among the best stocks if you want to invest like Buffett and hold a name for decades.

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5. Weber (NYSE: WEBR)

There have been strong inflationary pressures in the US markets as prices of almost everything from wages to logistics and packaging costs have gone up. The usual perception is that while larger companies can pass on the higher costs to consumers, smaller companies struggle to do so. However, Goldman Sachs has identified some of the small-cap companies that its analysts believe have strong pricing power.

Goldman Sachs finds WEBR as among the best stocks amid inflation

Goldman Sachs listed WEBR as among the best stocks amid multi-year high inflation in the US. Weber manufacturers charcoal, grills, and other accessories. The company was listed earlier this year and priced the IPO at $14, which was below the range. A flurry of US companies has had to downsize the IPO amid a tepid response from the markets. Meanwhile, WEBR stock went as high as $20.44 but currently changes hands at $16.50 which is where it ended its first day of trading.

The response to the company’s Weber Traveller grill has been phenomenal. “It’s perfect for tailgating. It’s perfect for camping. You could think of it as a post-pandemic kind of play because it’s all about people coming back to parking lots outside of stadiums and going to campsites and getting together with groups,” said CEO Chris Scherzinger. He also said that the company can barely meet the demand.

Recently, the company opened a manufacturing and distribution hub in Poland to meet the growing demand from Europe. Given its strong pricing power and increasing demand, WEBR is among the best stocks to invest in October 2021.

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