Best Stocks to Invest in July 2021 – Week 3

US stock markets are looking strong despite concerns over a slowdown in growth and rising inflation. Markets are back near their record highs. What are the best stocks that you can invest in the third week of July?

Over the long term, equities turn out to be the best asset class at least among the traditional assets. While markets are at a record high and some investors are apprehensive of the valuations, there are still some stocks that you can invest in now.

1. Virgin Galactic: (NYSE: SPCE)

Virgin Galactic is a space travel company that went public in 2019 through a reverse merger with Chamath Palihapitiya’s SPAC. It recently successfully completed its test flight with its founder Sir Richard Branson. Branson became the first billionaire to reach space. However, SPCE stock tumbled despite the successful light. It was likely due to the $500 million share issuance announced by the company. Being a pre-revenue company, which is burning cash, SPCE needs to raise cash.

Virgin Galactic looks like a good stock to buy

SPCE stock is now down almost 47% from the peaks and has a market cap of around $8 billion. Wall Street analysts are bullish on the stock and its median target price of $41 is a premium of 23% over current prices.

Earlier this month, Cowen raised its target price on SPCE to a street high of $51. “We are more positive about the prospects of a successful commercial spaceflight program in 2022. Visibility, marketing programs, and ticket sales should support valuation,” it said in the release. Analyst Oliver Chen listed “Potential delays with the remaining test flights, technical issues that may potentially emerge from test flights, SPCE’s inability to achieve profitability, any safety-related problems or technical mishaps, and higher competition,” as the potential risks.

UBS had downgraded SPCE stock

Meanwhile, UBS downgraded SPCE stock amid the run-up and lowered it to a neutral from buy while raising the target price to $45. “Looking beyond the summer of flights, there is likely to be less news flow in the fall as the flight program stands down for maintenance into 1Q22. Moreover, share lock-ups of the original investor base expiring (~30% of float) could add some pressure,” said UBS in its release.

The space travel industry is expected to reach a TAM (total addressable market) of $1 trillion over the next two decades. SPCE has a first-mover advantage in the industry and the leadership of Branson makes it a space travel stock worth investing in.

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2. Berkshire Hathaway (NYSE: BRK.B)

Berkshire Hathaway is a conglomerate and holds several companies ranging from candy makers to aircraft part manufacturers. It also owns GEICO insurance. Also, the company has a portfolio of publicly traded stocks which is currently valued at over $310 billion and Apple is its largest holding.

Berkshire Hathaway looks like a good stock to buy

Berkshire Hathaway can be a part of the core portfolio. Over the long term, the stock can deliver better than market returns, just like it has done over the last many decades. If you are wary of the current market valuations and are looking at something relatively undervalued, Berkshire Hathaway stock would fit the bill. The company has a massive cash pile that chairman Warren Buffett has been using for repurchases in the absence of other compelling opportunities. With the Oracle of Omaha finding value in Berkshire Hathaway stock, it looks like a stock worth investing in.

Berkshire Hathaway has been trading in a narrow price channel between the 50-day and 100-day SMA (simple moving average). While the 50-day SMA has been a strong resistance, it has found support at the 100-day SMA. The stock’s 14-day RSI (relative strength index) of 51.3 is a neutral indicator and reflects neither oversold nor overbought positions.

If you are looking at a stock for long term investment available at reasonable valuations, Berkshire Hathaway would fit the bill.

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3. Clover Health (NYSE: CLOV)

Clover Health went public through a reverse merger with Chamath Palihapitiya’s Social Capital Hedosophia Holdings III (IPOC). It is the only company that merged with a Palihapitiya SPAC to trade below the IPO price of $10. There have been some headwinds for the company including a report from short-seller Hindenburg Research that accused it of fraud. The company also lowered its guidance during the most recent earnings release.

CLOV looks like a good growth stock to buy

Clover Health is a fast-growing company and it’s the fastest-growing Medicare Advantage plan in the US. Palihapitiya believes that CLOV is a “10x idea” and called it “one of the most straightforward investments I’ve ever made.” Analysts expect the company’s revenues to rise 21.7% in 2021 and 30.4% in 2022.

Clover Health is expected to become profitable on the EBITDA level by 2023 and is a bet on the growing Medicare spending in the US which by estimates is expected to double between 2019 and 2025. The stock looks attractive below the $10 price level and looks like a good investment.

CLOV trades below the 50-day and 100-day SMA. However, looking at the premarket price action today, the stock could rise above the 100-day SMA which would be a bullish technical indicator.

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4. Ford (NYSE: F)

Ford stock has gained 58% in 2021 and is among the top 10 S&P 500 gainers. The stock, along with General Motors has seen a valuation rerating this year. After years of underperforming electric vehicle stocks, both Ford and General Motors are outperforming in 2021.

Ford looks like a good stock to buy

Ford looks like a good stock to invest in after having fallen from its recent highs. The stock has a median target price of $16 which is a premium of 12.8% over current prices. Legacy automakers have doubled down on their electric vehicle and autonomous driving plans. Markets have also taken note of their pivot to electric cars and the stocks have surged.

From a fundamental perspective, Ford stock looks attractive and trades at an NTM PE of 12.3x. The company is launching all-electric models of its best-selling models and recently unveiled the F-150 Lightning, whose ICE model has been America’s bestselling pickup for decades.

Ford’s F-150 is widely believed to account for the bulk of the company’s profits even as it hasn’t disclosed the breakup. The model will compete with Tesla’s Cybertruck which has an unconventional design. Ford has said that the F-150 Lightning would be profitable for the company. While Ford has seen a valuation rerating, the stock still looks like a good investment as it has more scope for expansion of valuation multiples.

Ford stock looks strong on the charts

Ford stock is also looking good on the charts and has crossed above both 50-day and 100-day SMA. The stock looks in an uptrend and could be a cheaper alternative to play the electric vehicle story.

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5. Microsoft (NYSE: MSFT)

Microsoft has joined Apple in the league of $2 trillion market cap companies. The stock is up almost 30% in 2021 and still looks like a good investment. Today, Citi raised the stock’s target price to a street high of $378. “We expect to see a strong finish to Microsoft’s FY21 with a combination of recovering IT budgets, an uptick in expected reseller growth, signs of reacceleration in consumption models and slightly higher PC numbers vs. 3 months ago.”

The company is set to release its earnings next week. Several other Big Tech companies like Apple, Alphabet, Amazon, and Facebook are also set to release their earnings next week.

Microsoft looks like a good stock to buy

Microsoft stock trades at an NTM PE multiple of 34.8x which is ahead of its historical averages. However, the company has seen a valuation rerating as it has diversified into several growing businesses.

Earlier this month, Morgan Stanley also reiterated MSFT as overweight. “Channel work and our CIO survey point to building momentum across the Cloud, Hybrid and On-premise portfolio, which should power a solid Q4. While investors seek reassurances margin expansion continues into FY22, our model suggests durable high-teens EPS growth and upside in the share.”

Microsoft’s median target price of $300 implies an upside of 6.6% over current prices. Its lowest target price is $256.70 which is a discount of over 8.8% while the highest target price of $378 is a premium of 34.3% over current prices.

Of the 38 analysts polled by CNN Business, 35 rate MSFT stock as a buy while the remaining three rate them as a hold. Analysts might upwardly revise the stock’s target price after the upcoming earnings release. Overall, MSFT looks like a good stock to buy and play the digital transformation story.

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