Investors continue to face a number of challenges at the moment, both in the UK and abroad. UK inflation remains high, although it has fallen back slightly –6.8% in July compared with 7.9% in June. Analysts are still pencilling in another interest rate hike by the Bank of England in September.

Meanwhile, concerns about rising interest rates also remain a major concern Stateside, hitting the US tech sector for six. The so-called ‘Magnificent Seven’ tech stocks, which include Meta, Apple and Alphabet, have lost millions off their combined market capitalisations in recent weeks as investors have taken flight – providing possible long-term buying opportunities for new investors.

Bearing these considerations in mind, here are some of the stocks we think could be the best to buy in September 2023. They have been selected for their market capitalisation, past performance and future growth prospects. Only invest money you can afford to lose.

Imperial Brands – attractive for its dividend yield

Investing in tobacco companies is not for everyone. However, dividend seekers could do worse than buy shares in Imperial Brands, which is a strong cash generator. After an initial strong run earlier this year, the shares have dipped by 6% to 1771.5p, yet they yield a chunky 8% and trade on a price earnings ratio (PE) of just 10. The company is completing its £1 billion cash return to shareholders in the second half of the year.

While the traditional tobacco market may be on the wane, the vaping market is opening up and the tobacco giant is busy trying to move its customers onto these next generation products.

What’s more, although cigarette volumes have fallen this year, due to the winding down of Covid-related boosts – customers smoked more during lockdown - Imperial is continuing to see strong demand in its US, Spanish and Australian markets.
Half-year operating profits increased by nearly 30% (28%) to £1.5 billion (from £1.2 billion in 2022), while sales rose slightly by 0.3% to £15.4 billion (£15.3 billion in 2022).

At 1771.5p, the shares are trading some way off their three-year highs of 2185p last seen in July 2022, and are worth buying for the dividend yield and growth prospects. Analysts at broker Royal Bank of Canada think the shares could reach 2,200p.

Microsoft – a solid player in artificial intelligence and cloud

Microsoft is enjoying plenty of buzz from the excitement in artificial intelligence and its new products are generating definitive orders, suggesting they are living up to at least some of the hype. Chairman and chief executive officer Satya Nadella recently told investors that its customers are not just asking how they can use their AI products but “how fast”.

Its Cloud products are also performing well, with sales up 30% in the recent fourth quarter results. These were strong, with group sales up 8% to $56.2 billion, while operating profits rose 18% to $24.3 billion. Full-year net income fell slightly compared with last year’s figures, however, coming in at $72.4 billion ($72.7 billion in 2022). However, one downside is that Microsoft has had to resubmit its takeover of gaming firm Activision Blizzard to UK regulators.

At $322, Microsoft shares are up 16% this year but off their recent 10 year highs of $351.47. The shares aren’t cheap, on a price earnings ratio of 32, but analysts at broker Tigress Financial think they could reach $433.

Next – weathering the storm

Next recently posted its August update, which showed that trading continues to be strong at the clothing and furnishings retailer. Full price sales rose 6.9% in the second quarter – ahead of previous guidance of an expected increase of 0.5%. In June the company released an unscheduled trading statement revealing that trading was much better than expected, due in part to the warmer weather. Since then, full price sales have been up 3.7% on last year, better than the company’s internal forecasts.

As such, Next has increased its earnings guidance for the full year by £10 million to £845 million. This is still down 2.9% on last year’s figures but better than expected given the challenging macroeconomic environment.

Like Marks & Spencer, Next appears to be weathering the cost of living crisis well. The shares are up 19% this year to 6,936p but still trade on a relatively affordable price earnings ratio of 12 and remain some way off their three-year highs of 8440p, seen in December 2021. They also offer a dividend yield of 3%. Analysts at broker Liberum think the shares could reach 7,500p.

Phoenix Group – strong cash generator

Phoenix Group has an impressive dividend yield of 10%, which should be an attractive prospect for income seekers. The life insurer, which operates savings and pensions businesses, is a strong cash generator and has a target in place to deliver cash of between £1.3 billion and £1.4 billion in 2023 and £4.1 billion between 2023 and 2025.

Shares in the company are down 14% this year to 518p – as it continues to recover from the gilts crisis last autumn and the weak UK stock market. However, analysts at broker Barclays think they could reach 765p.

Past performance is not a guide to future returns