Stocks to buy

The 7 Best Sleeper Stocks to Buy in August

While it’s tempting on many levels to ride the flavors of the week, investors seeking long-term growth should consider the best sleeper stocks to buy. These securities feature very little investor interest for whatever reason. However, they offer significant upside potential, rewarding astute investors willing to look beyond the noise.

At this juncture, undervalued stocks to buy may offer one of the safest approaches to the equities market. Right now, so many hot names may face a correction due to rising economic pressures. Therefore, acquiring popular ideas may leave you holding the bag. With sleeper stocks with potential, you run a lower risk of that happening. In addition, genuine must-buy sleeper stocks should eventually attract the public’s attention. When they do, the subsequent upside could be fast and furious. Therefore, it often pays to go off the beaten path.

On that note, below are hidden gem stocks for August to consider.

Pfizer (PFE)

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Although Pfizer (NYSE:PFE) offered one of the most relevant ideas during the height of fears associated with the Covid-19 pandemic, fading relevance for the underlying solutions has made PFE one of the best sleeper stocks to buy. Sure, the print is ugly, there’s no denying that. Since the beginning of this year, PFE gave up more than 30% of its equity value. Still, the pharmaceutical giant enjoys vast scientific relevancies.

Undoubtedly, investors need to be cautious about certain metrics that make PFE appear significantly undervalued. For example, in its second quarter of 2023, the company posted revenue of $12.73 billion, down 54% from the year-ago quarter.

At the same time, Pfizer’s discounted cash flow (DCF) model – assuming earnings per share without non-recurring items (NRI) of 10.5% over the next 10 years – prints a fair value of $62.24. Given the most recent closing price of $35.64, PFE features a margin of safety of 42.74%. Therefore, it’s one of the hidden gem stocks for August to consider.

Centene (CNC)

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A publicly traded managed care company, Centene (NYSE:CNC) is an intermediary for government-sponsored and privately insured healthcare programs. Despite its relevance, the market hasn’t been too kind to CNC. Since the beginning of this year, shares tumbled nearly 17%. Over the past 365 days, the stock is down 30%. Still, for daring contrarians, Centene could rank among the best sleeper stocks to buy.

Generally speaking, the company’s balance sheet could use some improvement. For instance, its Altman Z-Score sits at 2.59, which sits in the gray zone regarding fiscal stability. On the positive side, Centene benefits from a three-year free cash flow (FCF) growth rate (per-share basis) of 71.5%, beating out 85.71% of its healthcare rivals.

Also, CNC symbolizes one of the undervalued stocks to buy. Presently, it trades with a trailing-year earnings multiple (without NRI) of 13.67. In contrast, the sector median stat stands at a loftier 19.09x. As well, CNC trades at 10.23x forward earnings. This stat ranks favorably lower than 77.78% of its peers.

Cal-Maine Foods (CALM)

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An American fresh egg producer, Cal-Maine Foods (NASDAQ:CALM) should fundamentally benefit from shifting consumer behaviors. Specifically, if economic pressures build, people will prioritize the necessities over discretionary purchases. However, the market appears to be severely discounting this logical (albeit cynical) thesis. Since the start of the year, CALM slipped more than 18% in equity value.

Still, investors seeking the best sleepers stocks to buy should really consider loading up on CALM. Primarily, the company benefits from excellent stability in the balance sheet. Right now, Cal-Maine has zero debt, giving it incredible flexibility for whatever lies ahead. Operationally, CALM enjoys a strong three-year revenue growth rate of 32.3%, above 92% of its rivals.

At the moment, CALM trades with a trailing-year earnings multiple (without NRI) of 2.92. In contrast, the sector median stat clocks in at 20x. Also, it’s worth pointing out that CALM trades at 0.7x trailing-year revenue. However, the sector median stat comes in at a loftier 0.96x. Combined with the compelling fundamentals, CALM represents one of the sleeper stocks with potential.

Jerash Holdings (JRSH)

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An interesting though risky idea for best sleeper stocks to buy, Jerash Holdings (NASDAQ:JRSH) manufactures and exports custom, ready-made sport and outerwear from Jordan. Per its website, Jerash makes products for some of the most popular brands in the world. It’s risky because you don’t really know how well the consumer economy may hold up. However, JRSH could rise if the economy turns out to be more resilient than expected.

For those that want to take a stab at JRSH, the underlying enterprise enjoys a strong balance sheet. In particular, it features a cash-to-debt ratio of 23.15x, superior to 88.47% of its peers in the apparel manufacturing industry. As well, it sees its Altman Z-Score ring up 4.99, indicating high stability and low bankruptcy risk.

Presently, the company runs a three-year revenue growth rate of 10.2%, above 72.36% of rivals. However, it also trades at a lowly 0.35x trailing sales. Therefore, it might be worth consideration for must-buy sleeper stocks.

Petco (WOOF)

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Another fundamentally enticing opportunity among the best sleeper stocks to buy that also carries significant risks, pet products retailer and services provider Petco (NASDAQ:WOOF) deserves a spotlight. Primarily, that’s due to America’s love for its pets. Looking at pet industry data in the U.S., consumers continue to shell out big-time bucks for their furry friends. Also, the industry growth trend is impressive because it runs in the face of headwinds such as inflation.

Now, the big question is, will this sentiment continue to hold strong if circumstances truly worsen? To be honest, the jury is out on that question. Sadly, during the Great Recession, harsh financial conditions forced households to abandon their pets. You’d think that the more conscientious millennials will hold onto the bitter end. Still, only time will tell.

In the meantime, Petco prints a very solid three-year revenue growth rate of 14.7%. Nevertheless, it also trades at an attractive sales multiple of 0.32. Thus, it might be one of the hidden gem stocks for August to consider.

MaxLinear (MXL)

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An American technological hardware company, MaxLinear (NASDAQ:MXL) provides highly integrated radio-frequency analog and mixed-signal semiconductor products for broadband communications applications. It sounds relevant because it is relevant. Unfortunately, the broader semiconductor market suffers from slowing demand, particularly in the smartphone and PC space.

Notably, MXL fell a bit more than 29% since the Jan. opener. In the trailing year, it gave up almost 39% of equity value. At the same time, for hardened contrarians, MXL could make a case for the best sleeper stocks to buy. Worth mentioning is that MaxLinear boasts an excellent three-year revenue growth rate of 45.8%. Also, its EBITDA growth rate impresses at 72.8% during the same period.

Despite its impressive performance, MXL trades at 1.86x trailing-year sales. In contrast, the sector median stat clocks in at 2.72x. Also, MXL’s forward multiple is 19.79. As a discount to projected earnings, MaxLinear ranks better than 26% of the competition. Thus, it’s one of the undervalued stocks to buy.

Airgain (AIRG)

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An extremely small enterprise, Airgain (NASDAQ:AIRG), which specializes in complex antenna design and other connectivity-related solutions, prints a market capitalization of just a whisker under $50 million. For many experts, that’s the cutoff between a nano-cap play and a micro-cap entity. Naturally, investors should be careful here. Also, shares lost more than 29% of equity value since the start of the year.

To be fair, Airgain doesn’t enjoy the greatest financial print, particularly with its negative profit margins (aside from its 36% gross margin). However, the company’s balance sheet is surprisingly robust. Conspicuously, its cash-to-debt ratio clocks in at 4.45x, better than 70.5% of its tech hardware peers.

Operationally, Airgain rings up a three-year revenue growth rate of 10.5%, beating out 68% of sector rivals. Nevertheless, AIRG trades at only 0.66x trailing sales. In contrast, the sector median stat runs at 1.4x. Therefore, AIRG may be one of the best sleeper stocks for those who want to gamble.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.