5 Top Stocks to Buy in September

Whether it’s the smell of pumpkin spice lattes, the last barbecue of the summer, the start of the football season, or the change in the weather — there are plenty of signs that fall is in the air.

In the investing world, that means it’s the perfect time to get your portfolio in order so you can sit back and relax when the holiday season arrives.

Here’s why five Fool.com contributors picked Palo Alto Networks (PANW -2.11%), Marathon Digital (MARA -8.62%), Chevron (CVX -2.22%), Dominion Energy (D 1.49%)and Deere (OF -0.01%) as top stocks to buy in September.

Secure your portfolio

Demitri Kalogeropoulos (Palo Alto Networks): There are good reasons that the cybersecurity market is so popular with investors right now. Demand trends are excellent as more work processes move online, and the software-as-a-service selling model is building in predictable growth and cash flow, too. Palo Alto Networks just demonstrated how a strong position in this growing industry can generate excellent returns for patient investors.

On Aug. 19, the company posted fiscal 2024 fourth-quarter earnings that showed 12% year-over-year growth in sales, which marked a modest slowdown compared to the 16% growth for the full year. But investors were still happy with that growth as it beat expectations on strong demand for its next-generation security platform. Palo Alto Networks’ finances are even more exciting. Adjusted profit margin improved by 3 percentage points to 27%, while sales and net income more than tripled. “We successfully balanced profitable growth,” CFO Dipak Golechha said in a press release.

Management is projecting another year of solid sales growth and improving margins ahead for fiscal 2025. Investors can consider that outlook an excellent reason for the stock’s premium valuation. Sure, Palo Alto shares trade near all-time highs. But I’d expect further records ahead as the company continues to cash in on its premium market position. Adjusted cash flow is approaching 40% of sales and profit margin should hit 30% of sales in 2025. Those are excellent reasons to consider putting Palo Alto Networks on your watch list right now.

Bitcoin miners don’t look silly anymore

Anders Bylund (Marathon Digital): My interest in Bitcoin (BTC -3.96%) mining stocks is on the upswing. In particular, I believe Marathon Digital is heading into the pumpkin spice season of 2024 on a strong note and I’m giving it a closer look.

Several experts are predicting that Bitcoin will see a significant price increase over the next year or so. The recent halving of Bitcoin mining rewards reduced the cryptocurrency’s inflation rate below that of physical gold production. With spot Bitcoin exchange-traded funds (ETFs) finally available to retail and institutional investors starting to get in on the trading action, the biggest name in cryptocurrency could deliver another impressive surge across the second half of 2024 and all of 2025.

The most obvious way to invest in that likely price trend is to buy some actual Bitcoin, or perhaps a spot Bitcoin ETF such as Bitwise Bitcoin ETF (a favorite of mine). But the performance of the leading crypto miners has lagged far behind Bitcoin’s recent gains, setting the stage for a sector-sweeping clean-out. Some miners are struggling to make ends meet after the halving, while a couple have strong balance sheets, robust business models, and a high chance of emerging as winners in the simmering Bitcoin surge.

And Marathon Digital stands out as a leader in this admittedly risky space. The company has $256 million in cash reserves, roughly 25,000 Bitcoin (worth approximately $1.5 billion at current crypto prices), and only $250 million of long-term debt. This company is equipped to weather a long and cold crypto winter.

On top of that robust financial platform, I find it encouraging that Marathon is trying some new ideas. The company is expanding its mining operations, actively buying more Bitcoin in the open market, and helping the Kenyan government manage its energy utilization.

These are not the acts of a desperate company on the brink of bankruptcy. I see a confident business with solid profit margins and growth plans heading into a potentially game-changing Bitcoin boom with conviction and financial certainty. Yet, Marathon’s stock has gained just 31% over the last year (while Bitcoin more than doubled with a 127% surge), and the stock is trading 42% below its annual peak.

So, I’m a Marathon investor now. Your mileage may vary, especially if you agree with Warren Buffett’s bearish Bitcoin views. But if you expect the leading cryptocurrency to become a commonly used financial instrument and gain value in the long run, you should consider following my lead on this potentially undervalued Bitcoin miner.

A great chance to buy a high-yield dividend growth stock

Neha would call (Chevron): Oil and gas giant Chevron’s second-quarter numbers, announced in early August, didn’t sit well with investors. The stock was already losing momentum ahead of earnings and continued to fall later, and is now trading barely 6% off its 52-week low as of this writing. I believe this is an excellent opportunity for investors to buy the oil stock for the long term. That’s because even if Chevron missed earnings estimates and hit a hurdle for an impending acquisition, its cash flows haven’t and shouldn’t stop growing.

Chevron agreed to acquire Hess for nearly $60 billion last year but hasn’t been able to close the deal yet because of rival ExxonMobil‘s attempts to thwart it. ExxonMobil owns a substantial stake in Hess’ prized oil assets in Guyana and is claiming first right over them. It’s a massive deal that could more than double Chevron’s free cash flow (FCF) by 2027, so it’s not surprising to see Chevron investors turning wary, given ExxonMobil’s moves to block the deal. However, Chevron’s growth plans, even without Hess, are impressive enough to justify buying the stock on a dip.

Chevron’s production hit a record high in the second quarter thanks to its recent acquisitions, and the company expects its annual FCF to grow by an average of more than 10% through 2027 at a Brent crude oil price of $60 per barrel. It is also targeting a return on capital employed (ROCE) of more than 12% by 2027, reflecting management’s focus on higher profitability.

Growing cash flows should also mean bigger rewards for Chevron investors. The oil stock increased its dividend for the 37th consecutive year in early 2024 and continues to return excess cash in the form of share repurchases. That means even if oil prices dip and Chevron’s Hess deal falls through, you can still expect a fatter dividend check year after year from the 4.5%-yielding oil stock. Now that looks like a deal you’d not want to miss, what with Chevron shares hovering close to 52-week lows now.

A smart rate-cut play

Keith Speights (Dominion Energy): Federal Reserve Chair Jerome Powell said on Aug. 23, 2024, “The time has come for policy to adjust.” In other words, expect the Fed to cut interest rates in September.

Rate cuts could be great news for the stock market. However, utility stocks could especially benefit for a couple of reasons. First, income investors could find them more attractive than bonds because lower rates cause bond yields to decline. Second, utility companies often have significant debt. Lower interest rates reduce their borrowing costs.

Which utility stocks are the best picks in September? I rank Dominion Energy high on the list. This stock has already been a big winner in 2024. Rate cuts should boost Dominion’s share price even further.

Income investors should love Dominion Energy’s forward dividend yield of close to 4.8%. With the company projecting annual operating earnings-per-share growth of between 5% and 7% through 2029, keeping the dividends flowing shouldn’t be a problem.

There’s an old saying in retail that the most important thing is “location, location, location.” I think the adage could apply to utilities, too. And Dominion Energy’s location is a big plus.

The company serves customers in 13 states, but it’s headquartered in Virginia. Northern Virginia is the biggest data center hub in the world. These data centers require enormous amounts of electricity. Unsurprisingly, Dominion views the data center market as a key growth driver.

Maybe Powell was giving a head fake with his recent comments, but I don’t think so. Rate cuts are likely on the way. If so, Dominion Energy is a smart rate-cut play.

Deere can endure a prolonged slowdown

Daniel Foelber (Deere): On Aug. 15, Deere reported $1.734 billion in fiscal 2024 third-quarter net income — a 42% decrease compared to the fiscal 2023 third-quarter results. And yet, the stock moved 6.2% higher in the session after the report and earnings call — providing a good lesson on the importance of understanding expectations.

Going into the print, Deere had been hovering around a two-year low. Starting in 2021, rising crop prices and low interest rates led to a surge in demand for Deere’s products, which initiated a multiyear boom in earnings. But the cycle began to turn in late 2023 as demand cooled and higher interest rates made borrowing costs more expensive. Deere investors are accustomed to its cyclicality. The question was how much earnings would fall and how long this slowdown would last.

While no one knows the duration of a cyclical downturn, investors did breathe a sigh of relief when Deere confirmed its guidance for $7 billion in fiscal 2024 net income — which was the same guidance it gave in May but below the initial guidance from last November of $7.75 billion to $8.25 billion.

Deere’s end markets have characteristics similar to those of the oil and gas industry. Years of outsized spending on new equipment helped farmers boost output. On the earnings call, Deere said that North American farmers are experiencing one of their best crop outputs in years, but because corn, soy, and wheat prices are down more than 15% year over year, farm net incomes are declining. Even the most well-run exploration and production companies can see their earnings take a hit if oil prices fall. A similar situation is occurring in the agriculture industry, which has trickle-down effects on Deere’s business.

At times like these, it’s essential to filter out the noise and focus on an investment thesis rather than get too bogged down in quarterly results. Deere is an industry-leading diversified original equipment manufacturer with a network of valuable service centers and dealer partnerships spanning the large-scale commercial agriculture, construction, forestry, and small agriculture and turf categories. The company invests heavily in innovation, with a growing research and development budget and software and hardware offerings that help customers track and manage their data to lower costs and boost production. Deere consistently buys back a considerable amount of its stock and pays a growing dividend. Over the last five years, Deere has increased its dividend by 93% and its share count is down 12% thanks to buybacks.

Despite estimates for lower earnings, Deere’s forward price-to-earnings is only 15.3 — making it a great value. Add it all up, and Deere checks all the boxes for a cyclical stock worth buying in September.