Hot Summer Season – the best picks to invest now
Iryna Trygub-Kainz, MBA, FRM®
Investment Management, Investment Blogging & Coaching
Following the impressive year-to-date performance of the S&P 500 Index and Nasdaq 100 Index, we anticipate a potential market correction in July. Historically, value stocks tend to outperform growth stocks during periods of heightened uncertainty. In our report, we feature our top summer investment picks aimed at generating higher returns during the typically quiet summer months.
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In our report, “Summer Investment Strategy,” we highlighted potential industries and sectors that tend to outperform the stock market during the summer months. We believe a stock market correction is overdue, and as a result, we expect a weak performance in July. Considering current market conditions, we recommend a combination of value strategies and earnings growth to achieve higher returns during the typically slow summer period.
Below, we present our top summer investment picks, which we believe have a high probability of outperforming the stock market in the coming weeks.
Top summer investment picks
AZZ Inc. (AZZ)
AZZ Inc. (AZZ) is a provider of hot-dip galvanizing and coil coating solutions to a range of end-markets in North America. The Company operates through two segments: Metal Coatings, and Precoat Metals. The Metal Coatings segment is a provider of metal finishing solutions for corrosion protection, including hot-dip galvanizing, spin galvanizing, powder coating, anodizing, and plating to the North American steel fabrication and other industries. The Precoat Metals segment provides aesthetic and corrosion protective coatings and related value-added services for steel and aluminum coil, primarily serving the construction; appliance; heating, ventilation, and air conditioning (HVAC); container; transportation and other end markets in North America. The Company’s business segments provide sustainable, unmatched metal coating solutions that enhance the longevity and appearance of buildings, products and infrastructure that are essential to everyday life.
AZZ is rated “Strong Buy” with a 12-month target price of $92.80, a 17.29% upside from the current price of $79.12. AZZ is due to report earnings in 16 days (July 5, 2024).
Institutional investors decreased holdings by -0.23% last quarter, based on disclosures of 187 investors. Among the top buyers of AZZ’s shares are Fidelity Investments, First Trust, Arrowstreet Capital, Zurich Cantonal Bank, Credit Suisse and others.
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AZZ is a big player in manufacturing-electronics industry and should benefit from the industry growth. Electronics manufacturers anticipate 9.5% revenue growth in 2024, up from 5.2% in 2023 and even higher revenue growth in 2025.
AZZ currently trades at attractive market multiples compared to its peers’ average. AZZ’s forward P/E ratio stays at 14.56x, Price/Sales ratio of 1.11x and P/BV stays at 1.64x.
In our view, AZZ could present interesting BUY swing trade opportunity in the coming weeks. The company successfully completed the transition from a company with diverse businesses to a focused metal coatings solutions provider. This year AZZ achieved its 37th consecutive year of profitability and generated strong cash flows from continuing operations. AZZ published its third ESG report, with over a 30% increase in ESG disclosures and is committed to advancing ESG initiatives, thus offering long-term value creation for investors. AZZ aims to drive growth, target new M&A opportunities, reduce debt, and maintain leadership in market segments in the coming years 2025-2030.
Tri Pointe Homes, Inc. (TPH)
Tri Pointe Homes, Inc. (TPH) operates as a homebuilder, which is engaged in the design, construction, and sale of single-family attached and detached homes. It offers its services across ten states, including Arizona, California, Colorado, Maryland, Nevada, North Carolina, South Carolina, Texas, Virginia and Washington, and the District of Columbia.
TPH is currently rated “Buy” with a 12-month target price of $44.00, a 18.57% upside from the current price of $37.11. TPH is due to report earnings in 36 days on July 25, 2024. Historically TPH delivered positive earnings surprises to the market. According to the current market consensus, EPS should reach $1.09 (+43% qoq and + 87% yoy); revenue should grow by 7.1% qoq and 21.7% yoy.
Institutional investors decreased holdings by -3.73% last quarter, based on disclosures of 295 investors. Among the current top buyers are: Citadel Advisors, Schonfeld Group, Daiwa Securities Group, Jane Street Capital, Allianz Asset Management and others.
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In our view TPH might be attractive play on recovery in the home building industry, as we foresee gradually improving environment due to lower interest rates going forward in the Q4 2024 and the year 2025. According to Business Wire projections, there’s an anticipated 5.2% rebound in residential construction, driven by monetary easing gains in the second half of 2024.
TPH currently trades at attractive valuations: forward P/E ratio stays at 9.6x, P/Sales at 0.96x and P/BV at 1.22. Our estimated target price of $47 per share offers upside of 21%. We believe there could be attractive entry price level between $34 and $36 per share for a mid-term swing trade up to the price target.
Emerson Electric Inc. (EMR)
Emerson Electric Co. is a global technology and software company. The Company is a global manufacturer that combines technology and engineering to provide advanced solutions to its customers. The Company operates through six segments under two business groups, such as Intelligent Devices, and Software and Control. Its Intelligent Devices business includes Final Control, Measurement & Analytical, Discrete Automation, and Safety & Productivity. The Software and Control business include Control Systems & Software, AspenTech, and Test & Measurement. Final Control segment includes valves, and actuators & regulators product offerings. Measurement & Analytical segment includes liquid analysis, gas analysis, tank gauging system and others. Discrete Automation segment includes industrial solutions product offerings. Safety & Productivity segment includes tools and home products. AspenTech segment provides asset optimization software that enables industrial manufacturers to maintain operations.
EMR is rated “Strong Buy” with a 12-month target price of $130.54, a 20.11% upside from the current price of $108.68. EMR is due to report earnings in 40 days on July 29, 2024. Historically, the company provided positive earnings surprises to the market. In fiscal Q3 2024 EMR should report EPS of $1.41 (+21% qoq and +9.3% yoy); Q3 2024 revenue should reach $4.43 billion (according to the current market consensus), which would be an increase of 12% yoy and 1.1% qoq.
Institutional investors decreased holdings by -1.86% last quarter, based on disclosures of 1,626 investors. Among the top buyers are: Davidson Kempner Capital, Citadel Advisors, Credit Agricole, SG Americas Securities, Schroder Investment, Clean Energy Transition, ClearBridge Investments, Bank of America and others.
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While Emerson Electric doesn’t operate data centers directly, its strategic investments in digital grid software and other technologies position it well to benefit from the broader AI-driven infrastructure expansion. Additionally, the company’s focus on industrial automation and digital strategies aligns with the accelerating trends in robotics, AI, and edge computing. Emerson deployed one of T-Systems’ largest modular data centers in Europe, capitalizing on cloud services growth.
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