I can’t quite believe that we’re basically halfway through the year, now that we’re in June. Yet that’s indeed the reality, and so I need to look at what are the best stocks I’d buy this month. The key element is looking at what’s impacting the key stocks now, and buying with the right outlook.
The current situation
To start with, what’s going on right now? Well lockdown restrictions eased further in late May, allowing more businesses to operate unhindered. Retail sales data for April showed a large monthly increase of 9.2%, highlighting consumer spending.
The only negative that rocked the market was that all of this good news could lead to higher inflation. Higher inflation could mean the Bank of England might need to raise interest rates sooner rather than later. This would hurt companies with large amounts of debt.
In my opinion, the outlook for the rest of the year is positive for stocks. When looking for the best stocks to buy now to take advantage for the rest of the year, I think I need to look at the consumer discretionary sector. With spending increasing as people feel more confident about the outlook for the economy, this is an area that could really benefit.
My best stocks to buy now
There are plenty of stocks that fall into the consumer discretionary bracket. For example, I’d look at buying shares in Burberry. The luxury fashion house struggled during 2020 due to physical store closures. Even with rising online sales, I still think the company will rely heavily on in-store purchases going forward. With stores in the UK and beyond now operating at close to full capacity, I think it’s a good time to buy right now.
I’ll need to wait until quarterly results come out in the autumn to prove this, but by then the share price might have already priced in the good news. Therefore, I think I’d be better off putting it on my list as one of the best stocks to buy now.
Another example from this sector is Auto Trader Group. I’d say that cars are a discretionary item, but even if you think otherwise, I think Auto Trader is still a buy right now.
Car dealerships reopened recently and I think that higher consumer spending naturally will flow into buying new and used cars. Over the past year, demand for driving has been almost non-existent due to the lockdowns. Yet with traffic returning, I think a lot of people will now think about whether to upgrade their motor.
Auto Trader is best placed to capture this business, being the largest digital automotive marketplace in the UK. The company commented last month that used car prices have risen 6.8% year-on-year, highlighting that demand is there.
The risk to saying that both stocks are the best to buy now is that my top-down thinking could be wrong. Further easing of restrictions on 21 June could be delayed. Variants of Covid-19 could not be covered by the vaccine, forcing us to rethink summer plans. In this case, I’d expect consumers to tighten their pockets, particularly regarding luxury fashion and cars.
The post Here are the best stocks I’d buy in June appeared first on The Motley Fool UK.
jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended Auto Trader and Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021