The stock market has seemingly turned the corner, with the market showing additional positive momentum in April. Despite numerous headline risks including inflation, a potential recession and additional bank failures, bulls have still had the upper hand lately. This might make investors worry about missing out as the market rises. The good news is that there are some deeply discounted stocks that haven’t joined the market’s upward rise; at least not yet.
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These five stocks look like solid buys heading into May and should give investors good value regardless of whether the broader market’s winning streak can keep on rolling or not. Here are five of the best stocks to buy now:
— JD.com Inc. (ticker: JD)
— Valero Energy Corp. (VLO)
— Pfizer Inc. (PFE)
— Danaher Corp. (DHR)
— United Parcel Service Inc. (UPS)
JD.com Inc. (JD)
It’s been a rough year for Chinese internet and technology companies. The combined forces of the lingering weakness in the Chinese economy along with a slowdown in digital services growth has provoked huge declines across the industry. There are geopolitical worries as well, making it a perfect storm for valuations. However, at some point, enough is enough. JD shares have fallen 38.1% year to date through May 2. Meanwhile, the actual business is still humming. JD shares are now going for less than 13 times projected 2023 earnings and about 10 times 2024’s estimates. The firm is expected to keep growing revenues around 10% annually in coming years and earnings at an even faster pace. This all adds up to a company that is successfully playing the long game in the Chinese market and is set for a recovery once the current storm clouds lift.
Valero Energy Corp. (VLO)
Valero is the largest independent refining company in North America. Historically, this has been a far from glamorous industry, prone to boom-bust cycles, low profit margins and jarring volatility. However, the industry’s fundamentals have greatly improved in recent years. The rise of domestic American oil production thanks to new techniques such as fracking have given refiners more favorable inputs for their facilities. Meanwhile, the lack of new refining capacity for many years, combined with some recent facility closures, has greatly improved the balance between supply and demand.
All this adds up to a situation where Valero can earn far more money on an ongoing basis than it did in past times. Despite this, investors seem to question Valero’s longer-term outlook. After a 12% year-to-date decline through May 2, VLO stock sells for just five times forward earnings and about two times enterprise value/EBITDA, which stands for earnings before interest, taxes, depreciation and amortization. That’s a deep bargain. Shares also offer a solid 3.5% dividend yield.
Pfizer Inc. (PFE)
Pfizer is one of the world’s largest pharmaceutical companies. It recently enjoyed the spotlight, along with a huge surge in revenues, thanks to its COVID-19 products. Pfizer’s revenues soared from around $40 billion annually prior to the pandemic up to $100 billion in 2022. Despite the dramatic jump in the company’s fortunes over the past couple of years, the stock price has not followed suit. In fact, shares are now virtually unchanged from where they traded at the beginning of 2020. That’s surprising, given the boost that the past few years have given Pfizer’s overall fortunes.
Analysts now expect the firm’s revenues to stabilize around $70 billion annually as the COVID-19 related revenues diminish in importance. Regardless, that’s a far larger figure than Pfizer was at a few years ago as the company is currently launching promising new products for both cancer and heart disease to drive additional growth. With the retreat in the share price, Pfizer now sells for just 11 times forward earnings.
Danaher Corp. (DHR)
Like Pfizer, Danaher is a health care company that investors have dumped amid a slowdown from falling COVID-19 related sales. Danaher’s focus is in life sciences tools and services. The company was integral in multiple parts of the COVID-19 response including diagnostics for virus testing along with bioproduction tools used for the creation of vaccines. More broadly, weakness in the biotech sector has caused a fall in demand for Danaher’s tools more generally. However, the long-term future for the biotech industry should be bright given America’s aging demographics.
Danaher, as a key “picks and shovels” supplier to biotech and pharma, is set to be a long-term beneficiary. Investors shouldn’t overly punish Danaher for the current pandemic-related fade given its tremendous track record. Shares have risen from around $13 nearly 20 years ago to more than $240 today. With shares not far off 52-week lows, Danaher is a quality company at a bargain price.
United Parcel Service Inc. (UPS)
UPS shares fell sharply in April following a worse-than-expected earnings report. The company warned of a weakening macroeconomic environment and worsening operating margins. While the global economic outlook is uncertain, investors are clearly expecting the worst at least as far as logistics companies go. This is hard to square with the fact that the broader stock market doesn’t seem to be suffering from similar levels of pessimism. This could make UPS stock a relative value at this point, especially with shares at less than 16 times forward earnings.
UPS stock also currently yields 3.6%. Despite the negative headlines, UPS’ core domestic parcel pricing has remained strong, and the company’s planned cost cuts should boost margins later in 2023. Shares could bounce back forcefully if an economic soft-landing scenario plays out. And the long-term outlook for delivery demand should remain upbeat as e-commerce continues to take market share in the years to come.
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5 of the Best Stocks to Buy Now originally appeared on usnews.com
Update 05/03/23: This story was previously published at an earlier date and has been updated with new information.
