RIIQ Top 10 Watchlist

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Top Picks This Month!

Top 10 WATCHLIST for August 2024

Every month, we spotlight 10 stocks that we believe are the most promising. We’ll follow these stocks closely and provide you with updates on their performance, analyst signals, company health, latest news, and upcoming projects. You’ll get a monthly analysis of these stocks that, in our view, present interesting investment opportunities. Whether it’s due to potential undervaluation, a recent dip creating a buying opportunity, or the implementation of innovative new strategies, these stocks are carefully chosen for their long-term growth potential.

And these picks aren’t just pulled out of a hat. Our list is dynamic and might change month-to-month based on their relevance and potential. We adapt to the market trends and shifts to ensure we’re always bringing you the best opportunities. For this edition, we’re covering various high-growth sectors influenced by demographic and technological fundamentals, including semiconductors, healthcare, and consumer goods.

Why these sectors? As you may know, semiconductors are the backbone of modern technology, with growing demand in every tech-driven industry. Healthcare sees constant innovation and an aging global population makes this a sector to watch. Consumer goods are evolving as consumer trends shift, with certain companies standing out for their ability to adapt and thrive. Many leading consumer goods companies also tend to harness very strong brands, consistent operating histories, and durable competitive advantages.

Stay updated and invest smart.

Each month, we’ll keep you updated on our picks of the current RIIQ Top 10 stocks, and how they are performing. With these updates, you’ll be well-informed and better prepared to make savvy investment decisions.

So, let’s dive in and uncover those hidden gems in the stock market!

#10 UnitedHealth Group

UNH, a giant in the healthcare sector, is known for its massive profits and steady growth through both organic expansion and acquisitions. While it might not have the sizzle of a tech stock, it’s a solid performer in its own right—especially now when the stock might be trading at a discount!

Recently, the company has hit some bumps, like rising costs and a data breach involving Change Healthcare. However, these issues aren’t expected to derail the business long-term. With a forward P/E ratio of just over 20, UnitedHealth is trading below the S&P 500 average of 23, making it a potentially good deal.

Despite a challenging 2024, UnitedHealth has shown impressive growth from 2020 to 2023, with revenue climbing from $257.1 billion to $371.6 billion and profits increasing from $15.4 billion to $22.4 billion. Plus, it offers a 1.5% dividend yield, adding some extra appeal for investors.

In short, UnitedHealth Group might be facing some short-term challenges, but it remains a strong, long-term investment. Keep an eye on it!

#9 Texas Instruments (TXN)

 Texas Instruments, a major player in the semiconductor world, is crucial for electronics in industries like automotive and industrial automation.

So, what's the latest? In Q2 2024, TI saw some rough patches. Revenue from its Analog segment dropped 11% year-over-year, and free cash flow tumbled 53%. That’s a bit of a bummer, but the company is staying focused on long-term gains with its hefty investments and disciplined spending.

Looking ahead, TI is forecasting Q3 2024 revenue between $3.94 billion and $4.26 billion, with EPS estimates from $1.24 to $1.48. Although these figures indicate a year-over-year decline of approximatively 10%, there is some encouraging month-over-month improvement.

In short, Texas Instruments is navigating through a tough patch but is gearing up for future growth. Keep an eye on their strategic investments and cash flow as they work through these bumps in the road.

#8 Marvell Technologies (MRVL)

Marvell, a leading player in semiconductor solutions, has been riding high on the wave of AI demand. In the past year, its data center segment—boosted by AI-related products—has seen sales soar by 87% year-over-year, reaching $816.4 million in Q1 fiscal 2025.

However, it's not all smooth sailing. Despite this surge, Marvell’s total revenue dropped 12% from $1.3 billion last year to $1.2 billion. So, why the dip? It’s partly due to slower growth in other business areas, even as the data center segment has become a major revenue driver.

What’s next for Marvell? Its long-term success will depend on leveraging its strategic shift towards AI-driven data center solutions, which has already shown promising growth despite broader market challenges. So Marvell’s data center segment could keep growing for years to come.

Is Marvell a good stock to buy now? With Wall Street giving it a “buy” rating and a median target price of $90, the stock looks promising. But we take Wall St ratings at face value. Of course, proper due diligence and greater investment analysis is warranted. However, given the potential for sustained demand in AI and improving margins, Marvell could be a solid long-term investment.

#7 Coca-Cola Company (KO)

Coca-Cola, a key player in the beverage industry, recently posted some solid numbers for Q2 2024. The company saw a modest uptick in product volume, showing that people aren’t just paying more—they’re buying more.

However, the overall picture shows a delicate environment. McDonald's boosted sales by offering a $5 meal, and the idea has caught on: 93% of its establishments want to maintain the offer. This trend reflects a broader evolution: consumers are looking for value in their purchases, and this is affecting the entire food and beverage sector.

What does this mean for Coca-Cola? The company's price increases work to a certain extent, but there's a limit to what consumers can tolerate. With the focus on value, Coca-Cola may find it difficult to maintain high profit margins and sales growth. But thanks to its constant dividend payout rate of 2.8% a year, and uninterrupted distribution since 1893, the shares remain interesting if you want a regular income.

So, is Coca-Cola still a good choice? Although the company is holding its own, market pressure for value and cautious spending mean that growth could be slower. For now, Coca-Cola's stability is a plus, but it's worth keeping an eye on how the company adapts to changing consumer habits.

#6 Costco Wholesale (COST)

Costco, the wholesale giant known for its competitive prices, is gearing up for more growth with a membership fee hike. Think pricing power!!

The least we can say is that Costco has been a star performer, with a stock rising nearly 1,700% since 2000. Recently, the company just announced an 8.3% membership fee increase, from $60 to $65 for regular members and $120 to $130 for executive members, directly boosting their operating income.

Despite these positives, Costco stock is pricey with a P/E ratio of 50, well above its five-year average of 40. Most of all, historically, Costco’s stock has seen dips of 20% to 40% and the current pullback is about 8%, suggesting it might not be the ideal time to buy.

Even great companies can be bad investments if you pay too much, but a better buying opportunity might come with this solid company.

#5 Nike (NKE)

Nike, the global leader in sportswear, has been one of the worst-performing stocks in the Dow Jones this year. While the S&P 500 and Nasdaq Composite have surged, Nike’s shares have cratered 32% year-over-year, hitting historically cheap levels.

What’s going on? Last month, Nike reported underwhelming earnings for its fiscal 2024, with revenue inching up just 1% to $51.4 billion. Nike is grappling with shifting consumer trends. Comfortable footwear brands like Birkenstock and Crocs are thriving, while Nike struggles amid uneven consumer trends and macroeconomic challenges, including inflation and interest rate hikes affecting this kind of discretionary spending.

With this said, is it time to buy Nike stock? Despite operational issues, Nike remains an iconic brand and its stock trades at a P/E ratio of 19, about half its 10-year average (around 37), making it tempting. However, given the poor performance and bleak outlook, expectations are low.

If Nike shows any growth, the stock might rebound.  Keep in mind, however, that Nike is a well-established brand also known for its regular dividend payout of 2% a year, making it a stock of choice for diversifying income sources. In any case, for now, maybe it’s best to stay on the sidelines and monitor the company's progress closely. Hopefully we'll have some good news by next month about the Swoosh!

#4 Lulu Lemon Athletica (LULU)

A premium sportswear brand known for top-quality yoga and fitness products, Lululemon Athletica has recently seen its shares drop to their lowest since spring 2020 amid concerns over its financial performance in a sluggish retail market.

By the end of July, Lululemon's stock fell to $256, marking it as the biggest decliner on the Nasdaq Composite.

Lululemon's stock has lost about half its value since the start of 2024, now trading at a price-to-earnings ratio of just 20, well below its historical premium. Despite these challenges, Lululemon is still growing, with a 10% revenue increase year-over-year and 40% growth in international sales in Q1. Another key indicator to monitor is Lululemon's return on equity (ROE) of 41% in August 2024, which has fluctuated between 25% and 40% over the past five years (well-above average), demonstrates strong profitability and efficient management of equity, making it an excellent performance indicator to consider in the analysis. Return on invested capital (ROIC) has been consistently strong as well!

So, should you buy Lululemon now? First, despite Wall Street’s cautious stance, Lululemon’s growth opportunities, particularly internationally and plans to double revenue by 2026, make it a compelling buy at its current undervalued price. And most of all, Lulu Lemon is a strong and known brand, leveraging its rapid expansion and loyal customer base, becoming a key player in the fitness and wellness industry.

If you’re open to some risk, Lululemon could be a smart addition to your portfolio.

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