There is some truth behind the old investment adage, “sell in May and go away.” The summer months tend to be stock market low points with September being one of the worst across all three major market indices. There is even a name for it: the September Effect.
But for me, the summer doldrums mean it is time to buy. Because I like to buy stocks when they go on sale, periods when stocks are falling is when I’m looking for bargains. Previous high-fliers are now more attractively priced. So long as you seek out quality companies with good, long-term growth prospects, buying when the market is selling is the perfect time to ensure your portfolio sees outsized gains over time.
Below are three of the best stocks for Q3. They offer a mix of solid businesses, discounted valuations and excellent prospects for beating the market.
First Solar (FSLR)
Solar panel pure-play First Solar (NASDAQ:FSLR) is the world’s leading manufacturer of thin-film solar panel technology. With a focus on utility-scale applications in the U.S. market, First Solar is perfectly positioned to capture increased demand for renewable sources of energy.
First, the Biden administration imposed steep tariffs on cheap, Chinese imports that should give First Solar a competitive edge. Second, inflation fell more than expected in June increasing the likelihood of interest rate cuts in September. That could spark a wave of investment.
It was the Federal Reserve’s unprecedented rate hikes two years ago that cratered the solar industry. The cost of financing solar installations simply became prohibitively expensive. Yet Amazon (NASDAQ:AMZN) just achieved an aspirational goal of many businesses by matching 100% of the electricity its consumes with 100% renewable sources. It is now the largest corporate purchaser of renewable energy in the world by investing billions of dollars in more than 500 solar and wind projects globally.
First Solar is down 24% from its 52-week high and though is up 35% year-to-date it trades at just 11 times next year’s earnings estimates. However, Wall Street sees the solar shop growing earnings at a blistering 58% annually for the next five years. First Solar stock trades at just a tiny fraction to that estimate making it one of the best stocks for Q3 to buy.
Tilray Brands (TLRY)
Marijuana stock Tilray Brands (NASDAQ:TLRY) is also well positioned to capitalize on growing legalization trends. With rescheduling of cannabis in the U.S. and legalization adopted in Germany, the opportunity to expand globally is arguably the best it has been in years.
Tilray already has a substantial presence in the German market. As a provider of medical marijuana in the country, which is the largest market for it in Europe, its sales team has boots on the ground that can take off running. The pot stock also has production facilities in Portugal and Canada and exports marijuana to Germany. Obviously, legalization in the U.S. would be the biggest catalyst for growth.
Revenue and gross profits are already growing with first-quarter sales jumping 30% and adjusted gross profits widening 17%. Although Tilray still produces GAAP losses, it dramatically lowered them from $1.1 billion last year to just $105 million this year. With analysts forecasting 37% compounded annual earnings growth, GAAP profits should be a reality soon.
Roku (ROKU)
One of the biggest beneficiaries of streaming videos proliferation during the pandemic was connected TV leader Roku (NASDAQ:ROKU) though it declined sharply in the aftermath. Roku stock is down almost 90% since those highs and off 33% in 2024. It may be perfectly positioned for a turnaround.
The shakeout expected in streaming is underway. AT&T (NYSE:T) spun off its entertainment unit into Warner Bros Discovery (NASDAQ:WBD) that combined HBO Max and Discovery+ into Max. Paramount Global (NASDAQ:PARA) folded Showtime into Paramount+ and now Paramount itself is being acquired by Skydance Media. Disney (NYSE:DIS), of course, gained full control over Hulu and both it and Warner Bros have joined forces to offer a streaming bundle to include Disney+, Hulu and Max.
With further deals possible, competitive pressure on the remaining companies will lessen, potentially boosting profits. Just as digital advertising has returned in force, Roku stands ready to pounce on the industry’s recovery.
First-quarter revenue jumped 19% to $882 million as the number of active accounts rose 14% to 81.6 million. It was the third consecutive quarter Roku had positive adjusted EBITDA and free cash flow. Wall Street forecasts long-term earnings growth of 43% annually. It makes Roku one of the best stocks for Q3 to buy.
On the date of publication, Rich Duprey held a LONG position in T and WBD stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
