Last month, inflation took an even more prominent role in market discussions, as the newest consumer price index numbers showed prices up 5% year over year.
Furthermore, the Federal Open Market Committee updated its expectations for when the next interest rate hike would be, and the majority of central bank leaders now see rates rising in 2023, a year earlier than prior forecasts.
Keeping in mind that inflation is running hot heading into the first full month of summer, here are five of the best stocks to buy for July:
— Citizens Financial Group (ticker: CFG)
— Lowe's Cos. (LOW)
— Berkshire Hathaway (BRK.B, BRK.A)
— Alibaba Group (BABA)
— Centene Corp. (CNC)
Citizens Financial Group (CFG)
Believe it or not, this humble regional bank is the oldest company on this list by nearly a century. Dating back to 1828, CFG offers consumer and commercial loan operations, credit cards, wealth management and many other services offered by traditional banks.
Banks are uniquely poised to be some of the best stocks to buy in the coming years, especially if inflation ticks up and the Fed has to raise interest rates sooner and more aggressively than previously thought. Banks make more money in rising rate environments, when the spread between what they pay depositors and what they charge borrowers is growing.
The $20 billion CFG trades for less than its book value, and pays a 3.4% dividend, making it one of the rare value stocks to buy in a hot market.
Lowe's Cos. (LOW)
Named one of U.S. News' 10 best stocks to buy for 2021, Lowe's stock remains a compelling buy even after rising more than 19% year to date. Not only is Lowe's one of the central players in the home improvement surge that has been going on for over a year now, but it has a smaller footprint than rival Home Depot ( HD), allowing it to expand more quickly than its chief competitor.
This is reflected in analyst expectations for five-year earnings per share growth, with experts forecasting 19.1% growth versus 10.7% for Home Depot. Despite those elevated expectations, Home Depot trades for about 21 times forward earnings compared to 16 times forward earnings for LOW.
Comparable sales, one of the retail industry's most vital metrics, shot up by 25.9% last quarter. Lowe's is still reasonably priced with room to run entering July.
Berkshire Hathaway (BRK.B, BRK.A)
Although not exactly the small regional bank that Citizens Financial Group is, the $640 billion Berkshire is also a good pick in a rising rate environment like the one economists expect over the next several years.
That's because Berkshire is a mammoth holding company with heavy exposure to the insurance industry. CEO Warren Buffett is famously enamored with the "float" — or unspent premiums that customers pay to the insurance company before any claims are paid out. That money is then invested by insurers, many of whom put much of that capital into fixed-income investments like bonds and Treasurys.
Analysts expect earnings per share to rise 25% in 2021.
Alibaba Group (BABA)
Like Lowe's, Alibaba was named one of U.S. News' 10 best stocks to buy for 2021, but unlike Lowe's, the stock is down modestly year to date. The company routinely posts absolutely blockbuster growth numbers, with revenue soaring 63.9% last quarter compared with the same quarter last year.
Despite this, BABA trades for just 27 times earnings and 19 times forward earnings, which is a modest price for a fast-growing e-commerce leader in the world's hottest market.
One of the reasons BABA hasn't rallied in 2021 is the rising oversight of the Chinese government, which has started to take a tougher stance on Alibaba and its subsidiaries ever since founder Jack Ma criticized Chinese financial regulators last year.
China has been quick to rebound from the depths of the pandemic, with gross domestic product jumping 18.3% in the first quarter.
Centene Corp. (CNC)
Centene, a $42 billion health insurer, rounds out the list of the best stocks to buy for July: Centene has strong momentum with shares up more than 25% in the last six months, and it trades for a reasonable multiple at less than 13 times forward earnings.
Compared to larger health insurers like UnitedHealth Group ( UNH) and Anthem ( ANTM), which have price-to-book ratios of 5.8 and 2.8, respectively, Centene looks incredibly cheap at 1.6 times book. The company, which has a large exposure to programs like Medicare and Medicaid, is also snapping up competitors. In 2020, it acquired WellCare, and early this year it announced the acquisition of Magellan Health for $2.2 billion in a deal expected to close in the coming months.