Stocks hit more all-time highs in April, driven by the beginning of earnings season, improving economic conditions, more multitrillion-dollar spending plans and a Federal Reserve intent upon supporting the American economy at all costs.
Interest rates also fell slightly, with the yield on the 10-year Treasury declining by about 8 basis points in April. Earlier this year, the rapid rise of yields on 10-year government debt negatively impacted growth stocks, whose present value is disproportionately affected by far-off cash flows and the “risk free rate” of government bonds.
With earnings season still in full swing and the market with a bit of momentum behind it, here are five of the best stocks to buy for May:
— Facebook (ticker: FB)
— Camping World Holdings (CWH)
— Occidental Petroleum (OXY)
— Target (TGT)
— Amazon.com (AMZN)
Selected by U.S. News & World Report as one of 2021’s 10 best stocks to buy overall, Facebook’s second-quarter earnings report last week simply underscored why the social media giant is such a compelling addition to portfolios.
The company demolished earnings per share (EPS) and revenue expectations, with EPS coming in at $3.30 against predictions for $2.37. Revenue, which rose 48% year over year, easily surpassed the consensus figure of $23.67 billion, coming in at $26.17 billion instead.
The business benefited from a resurgence in ad spending, which manifested itself in a 30% increase in the price per ad and 12% more ads delivered than in the same period a year ago when the pandemic was in its nascent stages and uncertainty was much higher than it is today.
With 3.45 billion people using one of its products every month, it’s tough to dislike FB at roughly 28 times earnings.
Camping World Holdings (CWH)
A far smaller company, this $3.8 billion seller of recreational vehicles has been on a tear recently, with shares up nearly 400% from a year ago and more than 66% in 2021 alone. Surging demand for RVs is behind the growth, and yet the stock trades at less than 15 times earnings and less than 13 times forward earnings.
This year is primed to be a good one for CWH, with analysts expecting revenue growth of more than 13%, but the company is wisely working on a more sustainable plan for growth in the long term, rolling out a platform to facilitate private short-term rentals of RVs that resembles an Airbnb model but for RVs.
Depending on your risk tolerance, investors may want to wait until quarterly earnings come out before the market opens on May 4 to buy in; shares are likely to be volatile — for better or worse — in the wake of the report.
Occidental Petroleum (OXY)
The energy sector has been, euphemistically speaking, a tough place to invest since the sudden onset of oil’s bear market in 2014. Investors in the sector didn’t get much of a break last year either when the pandemic devastated global energy demand amid an ongoing multiyear supply gut. In an unprecedented turn of events, the supply-demand dynamic was so skewed that the price of oil futures briefly went negative.
Naturally, that was bad for Occidental Petroleum, a Houston-based oil and gas producer — as well as the rest of the industry. But Occidental had it a little rougher than the average energy stock, as it was integrating an ambitious, debt-fueled 2019 acquisition of Anadarko Petroleum for $57 billion.
Although Occidental has been selling off some assets to reduce debt, it’s understandable that with OXY currently worth around $24 billion, there’s still some deleveraging work to do. But that leverage also means that when oil prices are rising, as they have been in 2021 with the pandemic markedly easing in developed economies, there’s greater-than-average upside. Shares were up more than 46% year to date through Friday’s close.
That sword cuts two ways, and with an earnings report coming May 10, it’s even more unlikely that this month will be uneventful for OXY shareholders. In other words, this is a higher-risk investment than other stocks on this list.
But trends are moving the right way, and with Berkshire Hathaway ( BRK.B, BRK.A) as one of Occidental’s biggest creditors, there’s a well-earned sense that the Oracle of Omaha wouldn’t lend money to a doomed enterprise.
For any fans of Wall Street success stories out there, Target has a great one. Long perceived as a somewhat unremarkable, boring player in the retail arena, Target lived for decades in the shadow of Walmart ( WMT) and Amazon.com.
But one has to give credit where credit is due, and Target’s decision in 2017 to devote billions of dollars to a multiyear effort to rebuild and aggressively expand its e-commerce capabilities has paid off enormously.
The fruits of that investment were most evident in the curveball of a year known as 2020. It was an absolute blockbuster year that built upon an already impressive 2019, the first year that saw those billions pay off with pronounced share price gains. The company’s digital investments paid off handsomely as consumers isolated at home; revenue grew by more than $15 billion — a one-year surge that was more significant than the company had seen in its prior 11 years overall.
Target reports first-quarter results on May 19, but regardless of how last quarter went, TGT is on an absolute roll, and at 24 times earnings it’s a sound, relatively low-risk way for investors to gain long-term exposure to retail.
Simply put, there’s not another company quite like Amazon on the face of the earth. Since the dawn of the company, it has plowed back every dollar it earned (and then some, using debt) to expand as aggressively and intelligently as possible, with an obsession over customer satisfaction as a core tenet of its culture.
Decades later, Amazon is a multitrillion-dollar business that’s finally permanently in the black and posting absurd growth numbers despite its large size. Last quarter, sales rose by more than 44% year over year, with earnings per share more than tripling.
And, believe it or not, online retail as a category is still in the early innings even now. According to Digital Commerce 360, U.S. e-commerce sales accounted for just 21.3% of overall retail sales in 2020.
Amazon reported a remarkable quarter last week, so no earnings are on the immediate horizon, but it would take a dramatic turn of events to alter Amazon’s long-term trajectory.
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Update 05/03/21: This story was published at an earlier date and has been updated with new information.