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3 Top U.S. Stocks to Watch in September

By John Bromels - Updated Sep 18, 2019 at 8:25AM

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These outperformers from three different industries should earn a spot on your watch list.

Even though the traditional "earnings season" of late July/early August has wrapped up, investors shouldn't take their eyes off the ball. Sometimes, news comes down the pipeline outside of earnings that can have a big impact on a company's shares. 

Three U.S. companies I'm keeping an eye on in September are NextDecade (NEXT 3.69%), Oshkosh (OSK 1.77%), and Royal Gold (RGLD -2.53%). Here's why you might want to have these companies on your radar this month, too.

A bearded man looks through a magnifying glass

Keeping a watch list of your top stock market prospects can help your portfolio outperform. Image source: Getty Images.

Getting the greenlight

NextDecade is an up-and-coming liquefied natural gas (LNG) company that's currently in a holding pattern. Its plan is to build a pipeline it's calling the Rio Bravo Pipeline from Agua Dulce, Texas, to Brownsville, Texas (at the southern tip of the state, on the Gulf Coast). It's also planning to erect an export terminal at Brownsville that will ship the LNG overseas. 

On paper, the plan makes a lot of sense. The U.S. is producing more natural gas than ever, and a lot of it is coming from Texas. But it's a lot easier (and faster) to drill a well than to build a pipeline that runs for hundreds of miles to transport gas to coastal refineries and terminals. So right now, there's a big bottleneck in gas fields like West Texas' Permian Basin, which has caused gas prices in the area to plummet and producers to hold off on drilling new wells. By running its pipeline between Agua Dulce and Brownsville, instead of heading to the Houston area or into Louisiana like many other pipelines, NextDecade is avoiding most of the petrochemical manufacturing and other LNG facilities and expects to be able to operate its pipeline at higher capacities, ultimately making more profits. 

But right now the plan is just that: a plan. That's in part because the Federal Energy Regulatory Commission (FERC) hasn't yet given final approval to the project. A three-month waiting period expired July 25 (after FERC's July meeting), and the commission doesn't meet in August. So a final decision could be made at any point. If FERC gives the go-ahead, NextDecade still has to make a final investment decision of its own, and then shore up funding for the project.

NextDecade remains a speculative investment, because even if it gets the greenlight from FERC soon, it won't start exporting LNG until 2023. But an approval from FERC will put it one big step closer to its goals, and the stock price may improve as a result. That's why NextDecade is worth watching this month.

Trade troubles traumatize truck maker

Shares of Oshkosh took a surprise tumble in August after the specialty truck maker reported pretty solid earnings and upped its guidance. True, its cash flow is way down year over year, which may partially explain the drop. However, after the smoke cleared, the stock was still outperforming the S&P 500 for the year.

Investors are a bit nervous about Oshkosh right now, thanks to the ongoing trade war and other concerns about the markets Oshkosh's trucks serve. CEO Wilson Jones addressed these in the company's most recent earnings call:

We don't believe our customers are going to be as aggressive with their [capital expenditures]. ... I think when you look at some of the macroeconomic indicators out there, there are some changes there: residential construction [and] a few others that are showing some downward motion, and then you add in some of the trade policy uncertainties. I think it's just going to lead to not near the aggressive expansion that we've seen.

So far, Oshkosh has been able to pass along most of the higher materials costs that tariffs have imposed on its products. And with a price-to-earnings ratio of just 9.6, the stock's valuation looks cheap right now. But with Jones predicting slower sales on the horizon, it might not be the right time to buy. Also, if the trade war heats up further, Oshkosh's shares may drop again, offering investors an attractive opportunity to buy in. That's why I'd keep an eye on Oshkosh right now. 

NEXT Chart

NEXT data by YCharts.

The big "R" word

Yes, I mean "recession." The stock market started to get very nervous in August about a potential recession, particularly when U.S. treasury bonds entered an inverted yield curve, which is seen as a warning sign.

When recession fears go up, so does the price of gold. Gold is seen as a "safe investment" during recessions, so the price tends to increase when investors decide to pour their money into low-risk alternatives to stocks. And when the price of gold goes up, so does the price of gold-streaming stocks like Royal Gold.

Gold streamers are different than traditional gold miners. A streaming company funds the high up-front costs of opening a new mine in exchange for the ability to buy a percentage of what the mine produces at a discounted rate. So when the price of gold goes up, it's good for gold-streaming companies because their margins increase. 

Gold prices have been soaring over the summer as recessionary fears have intensified. The price of gold has risen 14.4% over the past three months, and is now more than $1,500 per ounce. That makes me concerned that a recession may already be priced into Royal Gold's stock. However, the company's shares began to fall again in September, which might indicate a buying opportunity, especially if you think a recession is about to arrive. This gold streamer is worth watching. 

Investor takeaway

Earnings season may have come and gone, but there's no bad time to keep an eye on top stocks. This month, consider adding NextDecade, Oshkosh, and Royal Gold to your watch list.

John Bromels owns shares of Oshkosh. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Royal Gold, Inc. Stock Quote
Royal Gold, Inc.
RGLD
$101.45 (-2.53%) $-2.63
Oshkosh Corporation Stock Quote
Oshkosh Corporation
OSK
$86.57 (1.77%) $1.51
NextDecade Corporation Stock Quote
NextDecade Corporation
NEXT
$8.16 (3.69%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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