Five stocks to buy in May

 

There is an old saying on Wall Street that goes “Sell in May and go away”. The idea behind the adage is that during the summer months news dries up, people go on vacation, and low trading volumes lead to lackluster market performance.

With the markets near record highs, a lot of investors are probably fearing that a market correction will occur over the summer months, and are tempted to unload their positions and wait until the fall months to get back into the market.

I agree that investors should spend some time giving their portfolios a thorough checkup ahead of the summer months, and at the very least make sure you have your assets properly diversified and your allocations remain as you intended.

With so much bullish sentiment in the market at this point, you do not want to jump completely out of the market, but you do want to make sure you are in stocks that have either been strong, or have catalysts in place to lead to price appreciation in the months ahead.

Keeping this in mind, let’s take a look at a five stocks that appear to be solid candidates at this point in time.

Under Armour

There has been a lot of pessimism surrounding Under Armour (UA) over the last year, as falling earnings have weighed heavily on the stock, but the worst seems to be behind the stock at this time. The company recently reported its first-quarter numbers on April 27, and as expected the company reported a net loss for the quarter. While earnings were negative, the company’s loss of one penny was better than the three cents loss that the street expected. In addition, quarterly sales were in-line with the consensus, and up slightly from the same period last year. The better than expected earnings gave the stock a lift, which it will likely build on through the summer months. The company’s international business remains strong, with sales rising 52% year over year. A lot is riding on the company’s international business, as it accounts for just 20% of the company’s overall revenue at this point, so if it can continue to expand its presence overseas the stock has a bright future.

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Chart courtesy of www.stockcharts.com

JPMorgan Chase

Rising interest rates, and expected easing of regulations on the financial sector set the stage for strong earnings growth for the financial sector. Banking giant JPMorgan Chase (JPM) reported its first-quarter numbers in mid-April, with results on both the top and bottom line easily surpassing analyst estimates. The company earned $1.65 on sales of $25.58 billion, versus the consensus $1.52 on revenue of $24.87 billion. The stock moved a little higher on the report, but shares remain attractive with a P/E of just 13.4. Analysts see earnings growth of 8.2% during the current year, and 14.2% in 2018. Economic conditions are fantastic for the sector at this time, and based on the stock’s valuation and growth estimates JPM is a fantastic stock to buy at this time.

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Chart courtesy of www.stockcharts.com

Lowe’s

With the housing recovery remaining strong, home improvement retailers such as Lowe’s (LOW) have been top performers. Lowe’s reported its last set of quarterly numbers in March, and the results were well above estimates for both the top and bottom line. As the housing market improves, Lowe’s benefits from demand for new projects, as well as current homeowners feeling more confident about investing money into their homes. Rising interest rates do pose a risk for the sector, but even with the recent rate hikes rates remain incredibly low on an historic basis, and should not derail the housing sector at this time. LOW trades with a P/E of 24.7, which is very attractive considering analysts forecast earnings growth of 16.0% during the current year, and an additional 14.3% next year. The company will next report earnings on May 24, and if it can once again outpace analyst estimates the stock should build on its recent gains and move to a new record high.

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Chart courtesy of www.stockcharts.com

Alphabet

Immediately following the presidential election tech stocks took a beating, but the market quickly came back into the sector, and shares of all the major players have soared in recent months. Alphabet (GOOGL), the parent company of Google, is among the top performers of the sector, and the stock continues to set new record highs. With shares new record levels, valuation is always a concern. The stock’s P/E is a bit high at 31.8, and while earnings are forecast to drop 1.2% during the current year, analysts see growth of 18.5% in 2018, which is one reason shares have been trending higher. President Trump wants to enact a tax holiday for companies to bring back cash held overseas at a tax rate of just 10%, and he also wants to lower the overall corporate tax rate to just 15%. Both of these initiatives would be a huge advantage for companies like Alphabet that have massive overseas cash hoards. Wall Street remains bullish on the stock, setting an average price target of $1,020.39, versus its current price of $959.10.

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Chart courtesy of www.stockcharts.com

Wal-Mart

Shares of retail giant Wal-Mart (WMT) have thrived in recent months. While Amazon.com (AMZN) continues to cause problems for most brick-and-mortar retailers, Wal-Mart has managed to adapt in ways that helped the company compete better than most. When Wal-Mart lifted its minimum wage and invested heavily in its e-commerce business Wall Street turned bearish on the stock, assuming it was spending too much money on initiatives that would not pay off in the long run. As it become evident that the initiatives were starting to work, Wall Street rallied back into the stock, which is currently trading just shy of its 52-week high. Its last quarterly report, the company showed comparable same store sales growth of 1.8%, and profit that was slightly better than expected. The impressive same store sale growth brought strong enthusiasm into the stock, and shares have trended steadily higher since the report. Wal-Mart will announce its next set of quarterly numbers on May 18, and if it can once again show nice same-store sales growth the stock will build on its recent gains.

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Chart courtesy of www.stockcharts.com

Symbols: AMZN GOOGL JPM LOW UA WMT
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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