5 Top Stocks to Buy in August

Key Points

• The pullback in Netflix, Costco, and ASML is a buying opportunity.

• Enterprise Products Partners is a good value with a high dividend yield.

• Vertex Pharmaceuticals has become too cheap to ignore.

• 10 stocks we like better than Netflix ›

It's been an excellent summer for the broader stock market, with the major indexes hovering around all-time highs and strong earnings from many top companies.

Turning the page to August, some investors may be searching for red-hot growth stocks with room to run, while others may be on the lookout for companies that are out of favor and on sale.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

These Fool.com contributors are going with the latter route, as Netflix (NASDAQ: NFLX), Costco Wholesale (NASDAQ: COST), ASML Holding (NASDAQ: ASML), Enterprise Products Partners (NYSE: EPD), and Vertex Pharmaceuticals (NASDAQ: VRTX) have all sold off.

Here's why these companies stand out as top stocks to buy in August.

Image source: Getty Images.

I'll take a 13% discount on this world-class stock

Anders Bylund (Netflix): Media-streaming veteran Netflix ended June at $1,339.13 per share. One month later, the stock had given back some of those record gains, dropping 13% by the end of July. You can call it profit-taking, or investor nerves, or just a price adjustment. Either way, I think it's high time to buy Netflix stock again.

I'll admit that the stock isn't cheap. Even after July's price correction, Netflix trades at a lofty 49 times earnings. However, the company has earned every penny of that beefy stock price.

Revenue rose 16% year over year in the second quarter. At the same time, the business grew more efficient, and operating margins increased from 27.2% to 24.1%. As a result, bottom-line earnings skyrocketed from $4.88 to $7.19 per diluted share -- a 47% jump. Free cash flow nearly doubled, and the company bought back more shares than it issued.

It would be one thing if this report were an outlier among several missed swings, but it wasn't. This is how Netflix runs its business nowadays, focusing on profitable growth instead of subscriber additions at any cost.

And I don't see any game-changing missteps driving the stock lower in recent weeks. Again, you can call it profit-taking, or you can point to a shaky economy. But the company posted another analyst-stumping earnings report on July 17, and the stock price just kept sliding anyway.

Fair enough. Every stock has a fair value, and maybe Netflix investors took this one a little bit too high in the spring. This is a new era for Netflix's business plan that should be good for its investors in the long run. So despite the generous valuation ratios, Netflix stock just might never be this cheap again. It's time to buy Netflix.

Time to bulk up on Costco

Demitri Kalogeropoulos (Costco): Investors rarely get the chance to buy Costco stock at a compelling discount, which is why the retailer's July slump is worth a closer look. Shares are roughly flat so far in 2025, trailing the 9% spike in the S&P 500 through late July.

Sure, the warehouse giant's growth slowed recently. Comparable-store sales rose 6% in June, down from 8% gains in the past 10 months. But that boost still implies that Costco is seeing strong customer traffic in a competitive industry. Target's comps were negative in the most recent quarter, and Walmart reported a less than 3% uptick back in May.

Investors will get fresh details on Costco's expansion pace when the company reports July sales trends on Aug. 6. Watch for signs of stabilizing comps in that announcement.

Costco's e-commerce growth has been stellar, too, which should help support higher profits over time. Sales on its website tilt toward expensive consumer discretionary purchases like furniture, jewelry, and electronics, so it's good news for margins when that segment outpaces the wider business. Digital sales are up 16% over the past 10 months, management said in early July. We'll get an update on that figure in early August, too.

It's true the stock isn't particularly cheap right now. Investors are paying 1.5 times sales for Costco compared to Walmart's valuation of 1.2 times revenue. Yet Costco's premium is down from nearly 2 times sales back in January. That represents a good deal for a company with a long track record of market share growth, stable, subscription-based profits, and excellent cash generation.

If you've been waiting for a better entry price on this attractive business, this could be the time to push Costco stock up to the top of your watch list.

ASML's long-term investment thesis has never been stronger

Daniel Foelber (ASML): There's no sweeter sound to the ears of a long-term investor than when a top stock sells off for near-term factors. That's what's happening to Dutch photolithography semiconductor equipment manufacturer ASML. And it's a phenomenal buying opportunity for investors this August.

At first glance, the semiconductor industry looks like it's on a tear, driven by epic gains in stars like Nvidia and Broadcom. But look closer, and there's a mini sell-off going on in much of the supporting cast.

Analog and embedded semiconductor supplier Texas Instruments sold off after reporting earnings. So did Arm Holdings, Qualcomm, and ASML. All four companies posted solid earnings, but guidance pointed to a near-term slowdown due to factors such as shifting supply-and-demand dynamics, trade policy, and geopolitical tensions.

It was a reminder that the semiconductor industry -- although chock-full of multidecade growth prospects -- is highly cyclical and prone to cooling off, even during an evolutionary period in artificial intelligence (AI).

ASML stands out as my top pick from the sell-off in semiconductor stocks. The company has a virtual monopoly in systems for the printing (or scanning) stage of the semiconductor manufacturing process. This step involves printing circuit designs onto silicon wafers -- creating a highly complex, precise 3D structure. ASML has spent decades developing its extreme ultraviolet (EUV) systems.

Compared to the older deep ultraviolet (DUV) systems, EUV can reduce costs for ASML's customers (chip fabs) and help them fulfill more complex orders faster by using wavelengths that are 14 times shorter than DUV light, reducing the number of process steps. The shorter wavelength allows chipmakers to pack more transistors per chip, which boosts their capabilities.

On its latest earnings call, ASML said it could not confirm growth for next year due to an uncertain geopolitical climate and macro concerns. The company's supply chain is sensitive to tariffs, and it has major customers in Taiwan, South Korea, and China -- making it vulnerable to trade policy. So I would expect ASML's stock price to react to trade-related news. However, management confirmed the company's 2030 targets due to explosive demand for its higher-margin EUV machines.

All told, ASML stands out as a compelling investment opportunity for folks with at least a five-year time horizon. The stock price could do just about anything in the near term, but the company is at the top of its game. It's the most exciting time ever to invest in ASML, but the market is too caught up in what could happen next quarter, so it's missing the big picture.

Play it safe with this monster dividend stock

Neha Chamaria (Enterprise Products Partners): With the S&P 500 trading at historically high valuations, the Motley Fool CEO Tom Gardner recommends dividend and value plays for a defensive stance now. I'm all for defensive dividend stocks now, especially companies backing their yields with steadily growing cash flows and payout.

Enterprise Products Partners is one such stock that belongs in your portfolio. Shares of the oil and gas pipeline company yield a hefty 7%, and management has increased the dividend for 27 consecutive years. That's not even the best part.

Enterprise Products' cash flows have comfortably covered dividends over the years. In fiscal 2024, for example, it generated record distributable cash flow (DCF) of $7.8 billion, providing 1.7 times coverage of the dividends declared for the year. That DCF coverage makes Enterprise Products' dividends very safe.

As it is, Enterprise Products' dividend is highly bankable because of the recession-proof nature of its business. Midstream energy infrastructure companies provide services like storage, processing, and distribution under long-term contracts with little exposure to oil and gas prices. What's more, the bulk of these contracts also have inflation escalation clauses to mitigate the impact of inflation on cash flows.

But here's the biggest reason why this defensive dividend stock is a solid buy now. Enterprise Products is bringing projects worth nearly $6 billion online this year, so management expects free cash flows to "take a step up" in 2026 and 2027. Read that as bigger dividends -- the bigger the company's cash flows, the bigger the dividends it can pay to its shareholders.

A great growth stock for nervous investors

Keith Speights (Vertex Pharmaceuticals): I'll readily admit to being something of a "nervous Nellie" right now. The stock market is near all-time highs. The Buffett indicator (the ratio of total U.S. stock market capitalization to GDP) is above a level that Warren Buffett has referred to as "playing with fire." I suspect that many are underestimating the negative impact on consumer spending and the U.S. economy that the full brunt of tariffs will have.

But I think that Vertex Pharmaceuticals is a great growth stock to buy in August for nervous investors like me. This biotech stock is cheap if you factor in its growth prospects. Vertex's price-to-earnings-to-growth (PEG) ratio, which uses analysts' five-year earnings growth projections, is a super-low 0.58, according to LSEG.

There are no worries about a consumer spending decline or economic downturn hurting Vertex's business. The company markets the only approved therapies that treat the underlying cause of cystic fibrosis (CF). These CF drugs generate more than 90% of Vertex's revenue.

My main reason for excitement about Vertex, though, is its new products and promising pipeline candidates. The drugmaker launched Journavx earlier this year. It's the first new class of pain medication in over 20 years. I expect the non-opioid pain drug will be a smashing commercial success.

Vertex could have additional winners in the not-too-distant future. The company is evaluating inaxaplin in a late-stage clinical study for treating APOL1-mediated kidney disease. Povetacicept is another late-stage program targeting chronic kidney disease IgA nephropathy. Zimislecel advanced to pivotal testing after encouraging results in earlier clinical trials as a one-time treatment (i.e., cure) for severe type 1 diabetes. All three of these targeting indications have patient populations larger than CF.

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Anders Bylund has positions in Netflix, Nvidia, and Walmart. Daniel Foelber has positions in ASML and Nvidia. Demitri Kalogeropoulos has positions in Costco Wholesale and Netflix. Keith Speights has positions in Enterprise Products Partners, Target, and Vertex Pharmaceuticals. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Costco Wholesale, Netflix, Nvidia, Qualcomm, Target, Texas Instruments, Vertex Pharmaceuticals, and Walmart. The Motley Fool recommends Broadcom and Enterprise Products Partners. The Motley Fool has a disclosure policy.