August has been a volatile month for the stock market, to say the least. But with market volatility comes great buying opportunities, so I’m looking out for additions to my Stocks and Shares ISA.

Whether or not we see a crash or a correction, I’m not worried. I’ll be waiting patiently on the sidelines to get in and grab bargains. Fear of a recession lingers in the US. But that suits long-term investors like me.

Here are two stocks that I’m keeping a close eye on.

Lloyds

The first is Lloyds (LSE: LLOY). After a strong July, August has not been quite as good for the stock so far. The share price has fluctuated up and down. As of this writing, it stands at 57 pence.

I think this is good value for money for a number of reasons. Let me explain why.

Firstly, it means the stock now trades at just 8.1 times earnings. Granted, all UK banks seem to offer good value for money at the moment. But Lloyds is still below the FTSE100 Average. In addition, it trades at 8.6 times forward earnings.

Add to that the dividend yield of 5.1%, which is comfortably covered by the income almost three times over. And any dividends I receive from investing through my ISA are tax-free.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is for information purposes only. It is not intended to be, nor does it constitute, tax advice. Readers are responsible for conducting their own due diligence and seeking professional advice before making any investment decisions.

Rising dividend

In addition, the dividend has also increased. Last year it rose by 15% to 2.76 pence per share. Analysts are forecasting further growth in the coming years.

However, I see some problems at Lloyds. The main one is falling interest rates. Further rate cuts will impact the net interest margin (NIM). NIM fell from 2.95% to 2.93% in the second quarter.

But with the stock price falling, I think now might be a good time to buy some shares. If I had the money, I would.

Burberry

The recent market volatility also had an impact Burberry (LSE: BRBY). To be honest, the share price was already on the decline before the turmoil in August. It is down 50.6% year-to-date. However, it has fallen a further 10.5% in the last five days.

The stock is at its cheapest since 2010. Today it trades at just 9.4 times earnings, well below the long-term historical average of over 22. Does this mean Burberry is now deep in the bargain market?

The story continues

Potentially. The price-to-sales ratio is also only 0.8. On paper, that screams like a bargain.

There is a reason for the share price decline. Several profit warnings in recent months have worried investors. Burberry now expects to post an operating loss in the first half of the year. The reason for this is the continued decline in sales in China. In the first quarter, sales in the stores fell by 21 percent.

A slow turnaround

However, I do believe that Burberry could recover, although it won’t be a quick turnaround. However, I do think the company has some advantages.

First, further interest rate cuts in the coming months are likely to boost spending. Moreover, despite the difficulties in Asia, the region remains a long-term hotspot for exciting growth opportunities as prosperity continues to rise.

For this reason, I would buy Burberry shares today if I had the money.

The post 2 top stocks to add to my stocks and shares ISA in August appeared first on The Motley Fool UK.

Further reading

Charlie Keough holds positions in Lloyds Banking Group Plc. The Motley Fool UK has recommended Burberry Group Plc and Lloyds Banking Group Plc. The views expressed on companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

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