Jayson DerrickThe classic stock market saying, “Sell in May and go away” could very well come true as the death toll from the Covid-19 pandemic continues to rise and investors are rightfully spooked. But investors with cash to invest and looking to take advantage of falling stock prices could do so carefully and responsibly with these top four shares to invest in May.
Apple: encouraging earnings, bright outlook
Shares of Apple lost more than 1.5 per cent on the first trading day in May as investors found some fault in the iPhone maker’s fiscal second-quarter earnings report. But it wasn’t all that bad as revenue was up just shy of 0.5 per cent year-over-year to $58.3bn (£47bn, €54bn) and earnings per share (EPS) rose more than 3.5 per cent to $2.55.
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Apple was considered to be part of a small group of mega-cap tech stocks that were expected to show disastrous results. Sure, it goes without saying that Apple’s next quarter or two could end up being the disaster analysts and investors expected. But looking beyond the next few months, investors can find plenty of reasons to be confident that buying Apple shares in May is a good move.
First, the company itself felt confident enough in its outlook to lift its dividend by 6 per cent to 82 cents per share on top of an incremental $50bn in share repurchases. Second, Apple’s pipeline of new product and services launches represent a multiyear-long investment thesis. The company is heavily rumoured to be introducing a plethora of products, including a 5G phone, and revamped wearables, e.g. an Apple Watch with compelling health and wellness features, among others.
And what usually happens in May that makes Apple’s stock a good buy? The rumour mill starts turning ahead of the highly anticipated annual product launch event in September. The question for investors is: do you want to buy the stock before rumours start to gain validity or after the fact?
Las Vegas Sands: betting on the future today
Gambling revenue in the all-important Macau region was down 97 per cent in April and stocks with exposure to the region were hard hit during May's first trading session. Shares of Las Vegas Sands lost more than 5 per cent on May 1 which gives investors a cheaper entry point.
Similar to the case for investing in Apple, investors should invest in Las Vegas Sands because of its long-term outlook.
Unlike many companies across the world scaling back on investments, Las Vegas Sands said in its late-April earnings report it will both proceed with a previously announced $5.5bn in capital expenditure programmes in Macau and Singapore and seek new growth opportunities in new regions.
According to CNN Business’s 12-month price forecasts for Las Vegas Sands Corp, 17 analysts set a median target of 61.00, with a high estimate of 73.00 and a low estimate of 49.00. The median LVS estimate represents a +34.18 per cent increase from the last price of 45.46 (as of May 5, 2020).
The company also decided to suspend its quarterly dividend payment which would save it billions of dollars that can be used for acquisitions. CEO Sheldon Adelson said during the conference call it will “of course” pursue deals, especially across gambling regions in Asia – but “the price has to be right.”
Las Vegas Sands CFO Patrick Dumont doubled down on the CEO’s comments and said it will look to buy “high-quality assets”. The company will focus on regions where it is cheaper and more lucrative to buy a property than build its own presence from scratch.
Gilead: coronavirus treatment solidifies status
Everyone from Wall Street to Main Street saw the headline that Gilead’s Remdesivir is effective in treating patients suffering from COVID-19. By no means is this conclusive evidence it can serve as a cure, rather a treatment that seems to be effective for some.
Nevertheless, Gilead was on the receiving end of a US Food and Drug Administration emergency authorisation for Remdesivir. This means doctors can allow patients to take the therapy without it going through a formal regulatory procedure.
Yet Gilead’s stock, valued at more than $100bn, lost nearly 5 per cent on the first trading day of May. Confusing move? Yes and no.
Gilead is giving away doses of Remdesivir while simultaneously investing $1bn into R&D and manufacturing. Granted, this part of the story doesn’t translate to increasing shareholder value. However, this makes it clear Gilead is a one-of-its-kind bona fide leader in global biotechnology and certainly a stock worthy to be held by any investor with a long-term focus.
According to CNN Business’s 12-month price forecasts for Gilead Sciences, 23 analysts set a median target of 80.00, with a high estimate of 97.00 and a low estimate of 58.00. The median GILD estimate represents a 0.35 per cent decrease from the last price of 80.28 (as of May 5, 2020).
Estée Lauder: encouraging CEO Comments
Estée Lauder CEO Fabrizio Freda was a guest on CNBC’s Mad Money and laid out a simple case why investors can be confident in buying the beauty company’s stock in May. He said that even during a global pandemic consumers will find a way to get the products they want and this was the case for Estée Lauder.
The company earlier reported an impressive top-and-bottom line beat in its fiscal third-quarter report. This caught some by surprise as one would assume beauty products are a discretionary item that would be considered an unnecessary expense.
However, the work-from-home environment implies people still need to look their best for online meetings. Freda said: “At the same time, you just need to imagine that we are all working with different technologies, like Zoom or Skype, etc., and many people want to look OK in these video interactions.”
According to CNN Business’s 12-month price forecasts for Estée Lauder, 21 analysts set a median target of 180.00, with a high estimate of 240.00 and a low estimate of 141.00. The median EL estimate represents a 3.23 per cent increase from the last price of 174.36 (as of May 5, 2020).
Best shares to invest in May 2020: be smart with your May stock purchases
Investors looking for stocks to invest in now should be reminded to do so carefully. Stock market trends as of the beginning of May are mixed at best and both bulls and bears have compelling arguments to back their point of view.
Bulls argue progress is being made in the fight against Covid-19 and the world is ready to responsibly and carefully reopen the economy. Bears, on the other hand, are quick to point out the pandemic is just as deadly and reopening the economy could lead to a new surge in cases – not to mention the potential for hundreds of millions of people around the world to lose their jobs.
Which side is right? We don’t know. Investors would be wise to buy small amounts of shares in May and then move to the sidelines before there is more clarity which direction the world is heading in.
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