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10 Editor’s Picks — What to Buy in May

New additions to the free Buy List: Coke and Arch Coal

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Fusion-io admittedly has been disappointing since my recommendation last month. Shares were driven down largely because of earnings on April 26. The good news was that the “data decentralization” company posted record revenue of $94.2 million for the fiscal third quarter of 2012, up 40% from $67.3 million for the same quarter of 2011 and up 12% from $84.1 million for the prior quarter. The bad news was that FIO posted a tiny net loss for quarter of $4.7 million, or 5 cents per share. That was compared with a small profit in 2011.

But Fusion-io is very much a startup, so I’m not inclined to panic over these numbers. In fact, in the past 90 days alone this stock has seen a very wide range of about $22 to $32 a share, so anyone watching this stock shouldn’t be surprised by the volatility. The company went public less than a year ago and boasts big-name clients including Apple (NASDAQ:AAPL) and Facebook. I think FIO still is a strong buy for investors looking for a next-generation tech stock to add to their portfolio.

JPMorgan has rolled back about 6% as the market has slowed down and financial stocks have cooled off. After reporting earnings April 13, investors were encouraged by strong investment banking results and improvements in mortgage revenues. Net income was up strongly from $3.7 billion in 2011 to $5.38 billion in this latest quarterly report. The downside was that a lot of this came from one-time gains — a $1.8 billion pretax benefit from reduced loan-loss reserves, a $1.1 billion pretax benefit from WaMu’s bankruptcy settlement and other items. So on the whole, investors weren’t all that impressed.

However, I remain convinced that more is more and that, in the long term, JPM will be a great buy. I continue to recommend JPM for long-term investors, especially income-oriented portfolios. JPMorgan yields 2.7% with the Federal Reserve breathing down its neck — so just imagine what the dividend could be in a year or two if its balance sheet continues to mend. If and when a recovery happens, banking stocks are going to benefit — and as the biggest player in banking by assets, JPM will perhaps benefit most.

Update on the Rest of our Editor’s Picks

Here’s a full breakdown of performance of my Editor’s Picks from my initial recommendation, compared with the performance of the broader market.

Other stocks previously recommended in my Editor’s Picks include Alcoa (NYSE:AA), Caterpillar (NYSE:CAT), Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Strangely enough, not a single one of these picks moved more than 2% up or down in the month of April despite earnings. I continue to believe all of these investments are a good addition to your portfolio.

Alcoa: Once again, AA kicked off earnings season with a bang and reaffirmed my bullish call in the stock. Read about strong AA earnings in a post from April 11, or read my original recommendation of AA. (Disclosure: I personally own Alcoa stock).

Caterpillar: The machinery giant put up record first-quarter profit still easily beat Wall Street expectations. Shares have slowed down after a great start to the year, but I expect the run to continue. Read about strong CAT earnings in a post from April 25 or read my original recommendation. Dividend note: Caterpillar also will pay a 46-cent dividend in May 19 to anyone who bought in before April 19.

Intel: I recently wrote an article about the prospect of buying a stock for a newborn, and sitting on it for 20 or 30 years as an inheritance. My pick for just such a strategy was Intel (read about why here). Intel just launched its smartphone chip and posted decent earnings even though revenues were flat. I remain bullish on Intel in the long term. Read my original recommendation. Dividend note: Intel goes ex-dividend on May 3, paying 21 cents a share on June 1.

Apple: What’s not to like about Apple? When it was logging consecutive declines, I reaffirmed my buy recommendation — and I hope you heeded the advice. Apple popped 9% after earnings to prove it had its mojo back and reclaimed the $600 mark. Read about Apple’s great earnings in a post from April 24 or read my original Apple recommendation.

Microsoft: I recapped a strong earnings report for Microsoft on April 20 that show how the company is seeing continued success from legacy software like Windows. The momentum on MSFT has waned considerably since a nice run to start 2012, but I remain convinced it’s a strong long-term investment — especially with its 2.5% current dividend yield. Read my original recommendation on Microsoft for more. Dividend note: The company will pay out 20 cents per share on June 14 to shareholders who own the stock before May 15.


To be crystal clear, I have a personal stake in Alcoa, Goodyear and Arch Coal. I bought each of these stocks at approximately the same time as my recommendations to you on This is partly because I want to put my money where my mouth is, but more so because I want to invest in stocks that go up — and I believe the profit potential in these picks is very real.

I have an open track record on all of my Editor’s Picks recommendations here, but I encourage you to email me at or use the comment section below to speak your mind. I want these trades to be profitable for you, but most of all I want to earn your trust — so don’t be a stranger.

Jeff Reeves is the editor of, and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace??.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves was long AA, GT and ACI.

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