A new month, a new Best Buys List.
Each month, I’ll give an overview of my favorite stocks of the month.
Let’s dive into this update and show you some of my favorite stocks.
July 2026
The S&P 500 was up +0.2% in July.
Investors are neutral today according to the Fear & Greed Index:
Best & Worst Performers
This overview shows you the best and worst performers in our investable universe.
Worst performers
The cheaper we can buy great companies, the better.
The biggest decliner this month? Monro Inc., losing 34%.
Monro runs a national chain of automotive service and tire centers.
Monro’s stock dropped because weak consumers aren’t spending much on auto service, and the company reported an unexpected loss of $0.09 per share for its most recent quarter.
Revenue has declined year-over-year, after the company closed 145 underperforming stores.
And management reported that with high gas prices persisting, consumer trends were not any better in July.
Best Performers
Paycom Software was this month’s best performer, increasing by more than 50%!
Paycom provides cloud-based human capital management and payroll software.
The stock has gone up because of a strong earnings report and improving margins due to AI efficiency.
Revenue grew nearly 10% year-over-year to $531 million.
Management raised its full-year 2026 revenue guidance
AI-driven automation tools are boosting efficiency, leading to expanding profit margins and stronger free cash flow
Spotlight: Home Depot ($HD)
How Home Depot Makes Money
Home Depot is the world’s largest home improvement retailer.
They sell building materials, home improvement products, and lawn and garden supplies to two main groups:
Do-it-yourself (DIY) customers
Professional contractors (Pros).
Why Home Depot deserves to be in the spotlight:
Scale Advantages: Home Depot operates an efficient supply chain, and its size allows it to negotiate better terms with suppliers than smaller competitors. These work together to keep Home Depot’s margins high.
The Pro Customer Base: Professional contractors make up a significant portion of their sales. Pros are sticky, repeat customers who buy in high volumes and need Home Depot’s reliability and product availability.
High Free Cash Flow: The company generates a lot of free cash flow, which management consistently uses to pay a growing dividend and buy back shares.
Why the stock is down:
Home Depot had 4 quarters where their Net Income fell compared to the year before - a streak they finally broke this quarter.
But the falling profits are due to macroeconomic factors rather than business issues.
The U.S. housing market has slowed down, which means so have home improvement projects and renovations:
High Interest Rates: Increased mortgage rates have locked homeowners into their current houses, causing existing home sales and housing turnover to slow down.
Delayed Projects: Because borrowing costs are high, consumers are delaying large, debt-financed remodeling projects (like full kitchen or bathroom renovations).
The fundamental business remains intact, making this an opportunity to look at a high-quality operator being temporarily pressured by the economic cycle.
August Best Buys
I scanned our Buy-Hold-Sell List for great quality compounders and dependable dividend payers trading at attractive discounts.
Let’s dive into 5 of our favorite income ideas for this month!
5. VICI Properties ($VICI)
How does VICI make money?
VICI is a real estate investment trust (REIT) that owns one of the largest portfolios of gaming, hospitality, and entertainment destinations, including highly regulated assets on the Las Vegas Strip like the MGM Grand and Caesar’s Palace.
It’s very difficult to build a new casino in Las Vegas - land on the Strip is limited, there are high regulatory barriers, and assuming you clear those hurdles, it’s very expensive.
VICI also has very predictable cash flow.
They use long-term, triple-net leases (often spanning 15 to 40 years).
These make the tenants are responsible for all property taxes, insurance, and maintenance.
There is a concentration risk with so many of VICI’s properties being in Las Vegas.
But they are expanding to other areas and types of properties like Great Wolf Lodge Indoor Water Parks, Luck Strike Bowling, and the recently purchased Club Med in St. Croix.
4. Tractor Supply Co. ($TSCO)
How does Tractor Supply make money?
Tractor Supply is a rural lifestyle retailer supplying recreational farmers, ranchers, and rural homeowners with agricultural and property maintenance products.
Tractor Supply specializes in heavy, bulky, and costly-to-ship products like livestock feed, fencing, and large tools.
Customers strongly prefer to buy these locally, which makes their network of more than 2,400 stores more valuable, and protects them from online competitors.
Management has a proven track record of generating a Return on Invested Capital (ROIC) between 15% and 20%.
The stores have a very loyal customer base, with 40 million people participating in their Neighbors Club loyalty program.
These members drive roughly 80% of all company sales, carry a 97% retention rate, and spend three times more than non-members.
It’s hard for a retailer to have a real moat, but I think Tractor Supply does.
There’s evidence of it in the ROIC and the strong Dividend growth record.
The Top 3 August Best Buys
The top three spots on this month’s list are reserved for premium members of Compounding Dividends.
However, I just published a full breakdown of the business sitting at the #3 spot.
Become a free subscriber below and I’ll show you where to find it.
One Dividend At A Time,
-TJ
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
Disclaimer
As a reader of Compounding Dividends, you agree with our disclaimer. You can read the full disclaimer here.