3 top stocks to buy in July

Here are my picks for the best stocks to buy in July as the nation enters a crucial economic period with a possible lift in Covid restrictions.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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It is a very interesting time for investors in the UK with further lifts in lockdown restrictions in sight. Businesses could function at a greater capacity in mid-July if the scheduled governmental review deems it prudent. With this in mind, here are my picks for stocks to buy in July.

A FTSE 100 bargain

The first company on my list is Tesco (LSE: TSCO). A dull 2020 for the grocer trickled into its 2021 performance as well, with the share price dropping 10% since mid-February. But Tesco remains the largest supermarket chain in the country and holds a market share of 27%. In comparison, Sainsbury comes second with a 15% market share. This gulf in sales figures was maintained through a turbulent pandemic period, which saw a sharp spike in online grocery sales. 

Tesco showed an 8.1% increase in sales figures compared to the end of 2019. This is a sign that the company is holding on to sales gained during complete lockdown. Also, Tesco CEO Ken Murphy has stated that the profits in 2021 could hit 2019-20 levels. This potential 20% growth in operating profits, combined with an immediate focus on shareholders returns, puts Tesco on my list of stocks to buy in July.

There are risks associated with Tesco stock as analysts predict a stagnation in sales figures as shopping trends return to normal. But the focus on increasing dividends, attractive entry price, steady sales figures and large market share makes Tesco a great long-term investment in my opinion.  

Smith & Nephew and Diageo

Medical equipment firm Smith & Nephew (LSE: SN) is one stock I am watching keenly in July. The company specialises in artificial joints and orthopaedic surgery equipment and advanced wound-management systems. 

Even though the UK government restarted elective procedures in mid-2020, there is a massive backlog. A recent report has stated that nearly 10 million people in the UK are now waiting for elective surgical procedures and nearly 140,000 patients in England have been on the waitlist for a year. 

Smith & Nephew’s shares hardly saw any growth in the last year. This, combined with concerns over the delta Covid-19 variant, could affect Smith & Nephew stock. But the company also reported a 11.5% jump in revenue to $1.3bn in the first quarter (Q1) of 2021, making it a top pick for many. This rise could continue into 2022 if restrictions are eased further. 

Another company on my watchlist is Diageo. The beverage firm has reported an 18% increase in share price in the last six months. With an increase in attendees at music festivals and sports events, the company could see a sharp spike in sales soon. Also, the next ease in restrictions could allow nightclubs to function in the country. This definitely earns Diageo a spot on my list of stocks to buy in July.

But this potential increase is highly dependent on lifting restrictions, which could be postponed. There is still uncertainty surrounding the delta variant and a spike in cases could see us all placed under lockdown again. But Diageo has shown tremendous resilience throughout the pandemic and remains a robust choice in my opinion. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, Smith & Nephew, and Tesco. 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.

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