3 Smart Stocks to Buy on the August Decline

There are a lot of great stocks to buy on the decline right now. Market volatility that has continued since July, along with overreactions to second-quarter financial results, have pushed share prices of some large companies to attractive levels. Investors brave enough to take a position now will likely be rewarded with future gains.

While the market may remain volatile in the short term and further declines may occur, it would still be a good idea to start a position in the stocks of strong companies and gradually increase this position in the event of any further weakness in the share price. Many stocks have fallen recently despite posting strong quarterly prints as investor expectations and valuations have become overly optimistic.

Here are three smart stocks to buy on the decline in August.

Elf Beauty (ELF)

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elf Beauty (NYSE:ELF) just reported second-quarter financial results, and its stock is down 15%, presenting a great buying opportunity. The cosmetics retailer also raised its forward guidance, but not enough to reassure investors, sending the share price sharply lower. But make no mistake, elf Beauty remains a strong growth stock. The company announced Q2 EPS of $1.10, compared to 84 cents expected on Wall Street. Revenue of $324 million beat expectations for $305 million. Sales were up 50% year-over-year (YOY).

elf Beauty raised its guidance for the rest of the year, saying it now expects sales of $1.28 billion to $1.30 billion and earnings of $3.36 to $3.41 per share. Unfortunately, the guidance left Wall Street wanting more. Analysts had sales of $1.30 billion for the company and were looking for annual earnings of $3.42 per share. elf Beauty sells its products mostly online and is popular with Gen Z and Gen Alpha consumers. The company markets its products on popular social media sites such as TikTok.

During the earnings call, management said they are not worried about a consumer pullback in the beauty category and remain optimistic about the rest of 2024. Investors shouldn’t worry either and should buy ELF stock, holding considering that the share price has increased by 825% in the last five years.

Taiwan Semiconductor Manufacturing (TSM)

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Taiwan Semiconductor Manufacturing (NYSE:TSM) stock was dragged down by the rotation of technology names. While TSM stock has recovered somewhat recently, its share price is down 10% since the start of July. However, all indications are that the microchip and processor company’s business is booming. In fact, the company just reported a 45% year-over-year increase in its July sales as demand for artificial intelligence (you) microchips accelerate.

Sales in July totaled $7.9 billion. Revenue from January to July this year was up 31 percent from the same period in 2023, the company said. Taiwan Semiconductor produces about 75% of all microchips and semiconductors in the world. It has increased its numbers several times this year as orders to manufacture AI chips increase. Taiwan Semiconductor is currently forecasting full-year revenue growth of around 25%.

The company is scheduled to report its next quarterly financial results in mid-October and expectations are for a successful print, making now a good time to buy TSM shares on the decline. Over the past 12 months, Taiwan Semiconductor stock has gained 78%.

Restaurant Brands International (QSR)

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Restaurant Brands International (NYSE:QSR) recently published mixed financial results for the second quarter of this year. But the numbers show that good things are happening at the company. EPS of 86 cents in Q2 just narrowly missed Wall Street’s target of 87 cents. Revenue of $2.08 billion beat estimates of $2.02 billion. Sales at the company, which owns Burger King, Firehouse Subs, Popeyes and Tim Hortons, rose 17 percent from last year.

Overall, same-store sales across the portfolio of restaurant brands rose 1.9% in Q2. International locations operated by Restaurant Brands posted same-store sales growth of 2.6%. Same-store sales at Tim Hortons rose 4.6%, while same-store sales rose 0.5%. This was partially offset by sales declines of 0.1% for both Burger King and Firehouse Subs. The company is in the midst of a multi-year turnaround strategy at Burger King that is starting to pay off.

In June this year, Restaurant Brands International acquired Popeyes China, the franchise network in the nation of 1.4 billion people. Popeyes China will be included in Restaurant Brands’ next quarterly financial results. QSR shares are down 9% this year and a solid pick among stocks to buy on the decline.

As of the date of publication, Joel Baglole did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

At the time of publication, the responsible editor had (either directly or indirectly) no position in the securities mentioned in this article.