At last, we’re into September and soon the ‘silly season’ will be over. Western stock markets tend to be subdued during the summer, particularly during late August. Thus, the market often marks time from June to September. Often, this leads to lower trade volumes, reduced liquidity and higher volatility. For example, the FTSE 100 index has gone nowhere for three months and stands 0.7% below its 16 June close. But now that it’s ‘Back to School’ for Mr Market, here are three of my best stocks to buy in September. I don’t own these shares, but I’d happily buy all three today.
Best stocks to buy #1: Imperial Brands
The first of my best stocks to buy is Imperial Brands (LSE: IMB). Formerly known as Imperial Tobacco, it is a major producer of tobacco, cigarettes and vaping products. Its leading brands include Davidoff, Gauloises, JPS, Kool, West, and Winston cigarettes. Though smoking is harmful (and even fatal), global cigarette sales actually rose in Q1 this year. Hence, this Bristol-based business generates plenty of cash for buying back shares and paying dividends. At its current share price of 1,555.5p, Imperial is valued at £14.7bn. Its shares trade on a price-to-earnings ratio of 5.3 and an earnings yield of 18.9%. They also offer a dividend yield of 8.9% a year, versus the FTSE 100’s forecast 3.8%. Despite Imperial’s high debt levels that mean a certain amount of risk, this stock looks cheap to me.
September share #2: Persimmon
The second of my best stocks to buy is Persimmon (LSE: PSN). One of the UK’s biggest housebuilders, York-based Persimmon was founded in 1972. The UK housing market has boomed over the past 12 months, partly due to reduced stamp duty tax breaks. Hence, Persimmon has been making hay while the sun shines, yet its shares have eased off since June. On Friday, they closed at 2,870p, over £4 below their 52-week high of 3,272p, and valuing the group at £9.2bn. Today, Persimmon shares trade on a price-to-earnings ratio of 11.6 and an earnings yield of 8.6%. Their dividend yield of 8.1% a year is one of the FTSE 100’s highest. Also, the group has over £1.3bn in cash on its balance sheet. Although I think the UK housing market is overheating, Persimmon might actually gain from any bubble bursting, thanks to its superior capital strength. But a prolonged or steep fall in house prices could be bad news for this stock.
My #3 share: Intermediate Capital Group
The third of my best stocks to buy is Intermediate Capital Group (LSE: ICP). ICG is a global alternative asset manager in private debt, credit and equity. In other words, its funnels money to help private and public companies to grow. By mid-2021, ICG managed over $65.2bn in assets across multiple funds. And when stock market and other financial assets boom, so does ICG. Indeed, over the past five years, ICG shares have skyrocketed by 261.4%, making them one of the FTSE 100’s best performers. During 2020/21, it made bumper profits and earnings in the heightened market volatility. At its current share price of 2,219p, ICP is valued at £6.6bn. Currently, its shares trade on a price-to-earnings ratio of 14.3 and an earnings yield of 7.0%. They offer a modest dividend yield of 2.6%, but this is respectable for a go-go growth stock. But if financial markets go into reverse, this could depress ICG’s future earnings.
