Welcome to August, one of the most exciting times of the year for ASX investors. Why, you ask? Because it's earnings season!
Picture it as the Aussie investing world's version of the Oscars, during which hoards of ASX companies reveal their results and hope to get shareholders cheering for their performances.
This August will, no doubt, be action-packed, with fans and critics alike carefully scrutinising every earnings report.
On that note, we asked our Foolish writers which ASX shares they think represent winning buys right now.
Here is what the team came up with:
6 best ASX shares to buy in August 2024 (smallest to largest)
- Global X Semiconductor ETF (ASX: SEMI), $278 million
- Betashares Global Cybersecurity ETF (ASX: HACK), $951 million
- Temple & Webster Group Ltd (ASX: TPW), $1.16 billion
- Megaport Ltd (ASX: MP1), $1.75 billion
- Xero Ltd (ASX: XRO), $21.09 billion
- Santos Ltd (ASX: STO), $25.95 billion
(Market capitalisations as of market close 31 July 2024).
Why our Foolish writers love these ASX stocks
Global X Semiconductor ETF
What it does: The Global X Semiconductor ETF is an ASX exchange-traded fund (ETF) invested in companies that develop and manufacture semiconductors globally.
By Kate Lee: The SEMI ETF unit price has fallen around 14% from its all-time high in June 2024 after having more than doubled since October 2022.
Bloomberg reported that the United States Government might consider further export restrictions, which has pressured the semiconductor sector. In addition, Tesla's weak profits and Alphabet's rising capex have spooked investors. Although the SEMI ETF doesn't directly own these two companies, these developments hurt overall investment sentiment relating to the sector.
However, this could also present an excellent opportunity to buy the Global X Semiconductor ETF.
The underlying earnings momentum appears strong. ASML's strong results, released a couple of weeks ago, and Alphabet's increasing capex suggest the industry's spending on artificial intelligence (AI)-related infrastructure remains high.
While Nvidia's earnings result, scheduled for 28 August, might lead to short-term volatility, it is crucial to remember that AI transformation is likely only in its infancy, and the SEMI ETF owns some global industry leaders with solid business fundamentals.
Motley Fool contributor Kate Lee owns shares of Nvidia Corp and ASML Holdings.
Betashares Global Cybersecurity ETF
What it does: The Betashares Global Cybersecurity ETF is an ETF that offers ASX investors a portfolio of global companies that are all leaders in the cybersecurity space.
By Sebastian Bowen: This August, I'm considering an investment in this cybersecurity-focused ETF.
As we're all aware, July was dominated by the global IT outage attributed to cybersecurity company CrowdStrike. This has understandably sparked a fall in CrowdStrike shares and those of other cybersecurity companies. CrowdStrike happens to be a major holding of the HACK ETF, and that is partly why this investment is jumping out at me right now.
Last month's outage was a pertinent reminder of how dependent the modern world is on cybersecurity systems. While CrowdStrike shares have dipped substantially, this has only reinforced my belief that individuals, businesses, and governments will increasingly be willing to spend top dollar on the best cybersecurity services in the years ahead.
As such, the Betashares Global Cybersecurity ETF is an investment I'll be eyeing this August. I think it will serve well in any ASX share portfolio in 2024 and beyond.
Motley Fool contributor Sebastian Bowen does not own shares of the Betashares Global Cybersecurity ETF or Crowdstrike Holdings Inc.
Temple & Webster Group Ltd
What it does: Temple & Webster is the largest pure-play online retailer of furniture and homewares in Australia. It has more than 200,000 products on sale. The company also has a trade and commercial division and a home improvement products website (TheBuild), which significantly increases its total addressable market.
By Tristan Harrison: I'm still calling Temple & Webster stock a buy, with the company's share price down well over 25% from its 52-week high achieved in March 2024.
I like the Temple & Webster business model. Suppliers send most products directly to customers, reducing the company's need to hold inventory and enabling it to be quite capital-light despite selling a vast array of products.
Temple & Webster's May trading update was also very promising. Despite the financial difficulties faced by many households, the ASX 300 retailer managed to grow its revenue by 30% year-over-year for the period 1 January to 5 May 2024. This growth occurred at the same time as the overall furniture and homewares market experienced a 4% decline, indicating the business is gaining market share.
Temple & Webster said repeat and first-time customers continued to drive that growth, which is a promising sign for further future growth.
Excitingly, the company highlighted that the home improvement and trade and commercial divisions were delivering revenue growth of more than 30%.
In a good sign for long-term profit margins, Temple & Webster's suite of internal AI tools is delivering, in aggregate, conversion rate increases of more than 10% and is handling around 40% of all customer interactions.
Motley Fool contributor Tristan Harrison owns shares of Temple & Webster Group Ltd.
Megaport Ltd
What it does: Megaport provides a network-as-a-service platform, allowing customers to create various networking configurations worldwide: Private peer-to-peer networks, cloud provider on-ramps, and software-defined networks, while only paying based on usage.
By Mitchell Lawler: Data centres are in high demand as artificial intelligence takes the world by storm. But while processing power draws crowds, little attention is paid to networking needs amid a growing reliance on an interconnected world.
Furthermore, the requirement for flexibility and agility in our digital world is increasing. The impact of the outage caused by Crowdstrike recently clearly shows our reliance on these systems.
I believe Megaport is an undervalued piece in the network puzzle. Connecting more than 2,500 customers, such as TikTok, Entain, and the Bank of Sydney, the company's solution is a cornerstone of the modern network.
Megaport recently turned a profit, and I suspect earnings growth could outpace revenue as the business's operating leverage begins to shine.
Motley Fool contributor Mitchell Lawler does not own shares of Megaport Ltd or Crowdstrike Holdings Inc.
Xero Ltd
What it does: Xero is an online accounting software provider that connects small business owners with their numbers, banks, and advisors anytime. At the last count, Xero had 4.2 million subscribers worldwide.
By James Mickleboro: With the tech sector coming under pressure in July, I think now is the time to pounce on this high-quality company, especially if you're looking to make a long-term investment.
That's because I believe Xero has a multi-decade growth runway thanks to its huge total addressable market (TAM). And when I say huge, I mean it. You just need to look at what Goldman Sachs is saying to see this.
Its analysts state that they "see Xero as very well-placed to take advantage of the digitisation of SMBs globally, driven by compelling efficiency benefits and regulatory tailwinds, with >100mn SMBs worldwide representing a >NZ$100bn TAM." This means Xero is only really scratching at the surface of its TAM despite having over 4 million subscribers.
It's no wonder then that Goldman Sachs has a conviction buy rating and a $180.00 price target on Zero shares.
Motley Fool contributor James Mickleboro owns shares of Xero Ltd.
Santos Ltd
What it does: Santos is a global energy company with operations across Australia, Papua New Guinea, Timor-Leste, and the United States. Santos' primary focus is producing oil and natural gas. The company is also aiming to develop low-carbon fuels for the future.
By Bernd Struben: Santos shares have lifted just 0.3% over the past 12 months amid a 5.5% decline in global (Brent) crude oil prices. Yesterday's closing share price of $7.99 sees Santos stock trading on an unfranked trailing dividend yield of 3.5%.
But I believe we'll see both the Santos share price and the company's dividend payments head higher over the year ahead. That's based on my forecast that global oil and gas prices are near a medium-term bottom.
Not only is the world's energy demand expected to grow modestly over the next six months, but the potential for supply disruptions in the Middle East has increased markedly with Israel retaliating against Lebanon-based Hezbollah's rocket attacks.
For the June quarter, Santos reported sales revenue of US$1.3 billion, in line with the prior quarter, while production increased 2% to 22.2 mmboe. Management expects half-year free cash flow to reach almost US$1.1 billion.
Santos' Barossa and Pikka projects are also progressing on track to the first production, indicating strong long-term growth potential.
Motley Fool contributor Bernd Struben does not own shares of Santos Ltd.
