Top 6 Stocks to Buy for May


Although we are in a long-term secular bull market, it is approaching important resistance at the March highs. This level also coincides with a significant resistance zone that eventually resulted in the market highs in 2007.

Stocks have advanced for several weeks, and the S&P 500 has gained almost 12% this year. Most of the big-name stocks have reported Q1 earnings, and 65% of the S&P 500 stocks have exceeded earnings estimates — a creditable but not spectacular performance in that many of the earnings estimates had been lowered.

The euro-contagion mess is still with us, along with concerns over China’s economic outlook. But these concerns are of a short to intermediate time frame. Thus, good quality stocks should be bought on pullbacks, and stocks that have just begun what appear to be major moves should be bought in stages starting now.

Here are your top stocks to buy for May:

Top Stock to Buy #1 – AT&T (T)

AT&T (NYSE:T), one of the most recognized brand names in the world, is expected to see gains in consumer wireless and broadband services. Its strong balance sheet, long-term customer relationships, and expanding profit margins should result in an increase in the stock’s P/E multiple, along with an increase in earnings. Analysts estimate that AT&T will earn $2.41 in 2012. The stock has a dividend yield of over 5%.

Technically the stock reversed from its 50-day moving average early in April, flashed a buy signal from our internal Collins-Bollinger Reversal (CBR) indicator, and then broke through a quadruple-top at $32. The target for AT&T is $38.

T Chart
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Top Stock to Buy #2 –EssexProperty Trust (ESS)

Essex Property Trust (NYSE:ESS) is a Real Estate Investment Trust (REIT) that owns and operates multi-family properties in California and the Pacific Northwest. Forecasts are for an average occupancy level of 96% in 2012, and rents this year are expected to rise by 6%. This REIT is a proven performer in redeveloping older properties, which supply a predictable stream of income.

ESS has a dividend yield of almost 3% and is expected to raise its dividend by 3%-5% this year.

Technically the breakout at $148 is very significant in that it breaks from a resistance line that extends back to February 2007. The target for ESS is $175.

ESS Chart
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Top Stock to Buy #3 – Kohl’s Corp. (KSS)

Kohl’s Corp. (NYSE:KSS) owns a chain of family-operated department stores that also provide online shopping. And it owns the Rock & Republic brand, which offers apparel and accessories.

The company’s earnings have steadily grown over the past five years. Earnings predictions are $4.30 in 2012 versus $3.65 in 2011, and $4.85 in 2013. Kohl’s has a dividend yield of 2.5%.

In addition to the long-term goals for the stock, it also appears to be a candidate for a quick trade — note the strong buy from the stochastic. The trading target is $56 and the longer-term target is $68.

KSS Chart
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Top Stock to Buy #4 – Pioneer Natural Resources (PXD)

Pioneer Natural Resources (NYSE:PXD) is an independent oil and gas exploration and production company with operations mostly in the United States and South Africa. However, the South African holdings are expected to be sold this year.

Earnings for the company are on a tear due to its unique position in thePermianBasinand its focus on oil production and cost cutting. S&P says that a higher liquid mix could boost earnings to $6.15 in 2012 and $8.85 in 2013, up from $3.95 in 2011.

The breakout from the triangle late in 2011 was a long-term bullish signal, but the follow-through after holding at its bullish support line is more significant. By breaking over $115, the target of $150 appears attainable within six months. Buy PDX now.

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Top Stock to Buy #5 – PulteGroup (PHM)

PulteGroup (NYSE:PHM) is a U.S. homebuilder with a financial services division that consists principally of mortgage banking and title operations. It appears that first-time buyers are becoming more active, and U.S. households are increasing at a greater rate than homebuilding, so we may have seen a bottom in the building industry.

Pulte is cash rich, with over $1.1 billion in cash that can be used to build or acquire communities. The company has increased its earnings (though still at a loss) for the past four years and is likely to turn profitable this year.

Technically a golden cross followed by a break through the long-term resistance line at $8 are powerful signals. And the April 27 break to $10 on twice the normal volume is a signal that PHM has the potential to run to the high teens.

PHM Chart
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Top Stock to Buy #6 – Velti (VELT)

Velti (NASDAQ:VELT) is a leading global provider of mobile marketing and advertising that enables companies to implement campaigns by communicating through their mobile devices. Recent acquisitions and the creation of the Open Device Identification Number (ODIN) Working Group have brought Velti to the forefront of mobile advertising.

The company’s Q4 2011 earnings were 59 cents, which beat analysts’ estimates of 48cents. Analysts expect 73 cents in FY 2012.

The stock broke from a consolidation rectangle in January and established a trendline with support on its 50-day moving average. A golden cross was flashed in April, as well as a buy from the stochastic. The trading target for VELT is $18.

VELT Chart
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