If you’re not looking for stocks to buy right now because you’re worried about jumping on the “sell in May and go away” bandwagon, you’re making a rookie mistake.
Investing isn’t really as easy as selling in may and walking away, which is one of the most well-worn sayings in investing. The idea is simple, sure. If you keep your money in stocks from October through May, then pull it out and take the summer off, boom — you beat the market. Depending on the person analyzing the data and how they present it, this can be true, but remember:
The devil is in the details.
We recently showed you seven stocks to sell that follow that trend and in fact are worthy of ditching in May. But that doesn’t mean they’re all garbage, and in fact, there are a number of stocks you should jump on before the month is through.
The best stocks to buy in May are particularly resilient, typically posting gains when the market is busy snoozing. The S&P 500 itself has average a return of just 0.6% for the month of May over the past five years. Believe it or not, that’s only slightly below average. Moreover, only one year has actually been down in that time — that’s four up years in the past five!
We’ve compiled a list of 16 companies that our data models identified as “Buy in May Stocks.” This was based on the number of years each company has seen buying vs. selling, and the degree of positive returns. Of course, seasonality doesn’t determine everything, so we’ve filtered this down to the seven stocks with the strongest overall bull cases.
Let’s hop in and look at this list of seven stocks you should absolutely buy in May.
Stocks to Buy Now: Sherwin-Williams (SHW)
3-Month Upside: 11%
Sherwin-Williams Co (NYSE:SHW) shares have cruised more than 25% higher year-to-date, outpacing the market by more than threefold as investors maintain a bullish outlook for homebuilding-related companies.
Sherwin-Williams averages a return of 3.9% for the month of May over the past five years, and hasn’t missed a beat, posting gains in each of those years. The consistency makes sense — not only do homebuilding crews ramp up work, but the house-painting business thrives during the summer months.
SHW is trading in technically strong territory and currently holds a “Buy” recommendation from our models. The company surged in April after a positive earnings report, breaking back into a long-term bullish trend channel that now targets a price of $375.
Stocks to Buy Now: Regeneron (REGN)
3-Month Upside: 17%
It’s the right time for pharmaceutical and biotech companies to hit seasonality, right as the Trump administration is getting a little traction on the healthcare reform the market expected.
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) just made a 7% move higher after its most recent earnings report. That rally has seen some traders take profits, but seasonality suggests now is the time to grab shares … not sell them.
We should see support at $420, and REGN has has upside potential first to $460, which chart resistance should lie.
Past that, we believe Regeneron will target $500 after a break above the $460 level as momentum continues to build.
Stocks to Buy Now: Quest Diagnostics (DGX)
3-Month Upside: 12%
Quest Diagnostics Inc (NYSE:DGX) is one of those stocks that has been on our model’s bullish lists for the past three years. The fundamental story is simple and sound: Lab work, regardless of healthcare reform, will continue to grow in demand. Nothing’s stopping that.
DGX shares broke above $100 after their last earnings report, putting them on the radar of many traders that are now trying to squeeze into the stock without sending it through the roof.
Speaking of squeezing, the short interest ratio on Quest Diagnostics is a lofty 9.1, meaning that these new highs are causing a lot of pain for those that hold the stock short. DGX is set for a short squeeze even higher because of that.
Our models target a move to $120 over the intermediate-term (three to four months).
Stocks to Buy Now: Abbott Laboratories (ABT)
3-Month Outlook: 12%
Abbott Laboratories (NYSE:ABT) is another embattled biotech name that’s on this list of seasonally strong stocks to buy now.
Abbott Labs just enjoyed a boost from a better-than-expected quarterly earnings report, moving the stock from $43.50 to $44.70. But it’s a turn of the technical tide that should help shares the most this May.
Abbott Labs shares are now trading above their 50-day moving average again. In addition, this trendline is beginning to transition into a bullish outlook as it is edging toward an uptrend itself. Bottom line: The technicians are about get really bullish on ABT.
Watch for some round-numbered resistance at $45. Otherwise, our seasonality and the bullish outlook suggests that Abbott Labs is likely to beat the “sell in May” rule and head toward $50.
Stocks to Buy Now: Apple (AAPL)
3-Month Upside: 6%
It almost pains us to cover Apple Inc. (NASDAQ:AAPL) with a bullish tint.
Apple, which is at all-time highs and sits at more than $820 billion in market capitalization, is one of the most crowded trades on Wall Street — something we dislike as a general rule. Nonetheless, the data tells us that Apple shares have averaged a move of 3.8% over the past five Mays.
Just so we can be a little skeptical, Apple is set to host the WWDC event in the beginning of June, and a lot of hoopla goes into this event. This suggests that Apple’s strength in May is probably attributable to “buy the rumor” activity attached to the early June event.
Put the event aside. Apple shares are trading in a new bullish channel after last quarter’s earnings report. For now, AAPL is likely to remain a leader in the tech sector with a target of (gulp) $163.
Stocks to Buy Now: Mohawk Industries (MHK)
3-Month Upside: 11%
Following the same theme as Sherwin-Williams, Mohawk Industries, Inc. (NYSE:MHK) is a consistently strong performer in May based in part on the increase in homebuilding seen during this season.
Our technical models love Mohawk Industries due to the strong trends, and the fact that they’re being maintained at lower volatility levels than the very sleepy market. Currently, the 50- and 200-day trendlines are in bullish patterns themselves, suggesting dedicated support on pullbacks.
Mohawk Industries recently pulled back following the company’s most recent earnings report. The increase in buying as the stock approached its 50-day moving average, however, suggests that May is likely to follow the already established trend.
Look for shares to punch higher to roughly $260.
Stocks to Buy Now: Darden Restaurants (DRI)
3-Month Upside: 7%
Finally, another long-time favorite of our modeling is Darden Restaurants, Inc. (NYSE:DRI). The company announced a great earnings report in March that propelled the stock back into new high territory, and investors are still trying to catch up to the shares.
Short sellers are still on the wrong side of this stock, indicating that the new high status of Darden Restaurants is likely to draw even more buyers into the fold.
Currently, our models maintain a “Buy” on the stock through the summer with a target to add to positions if the stock were to pull back to $85.
DRI averages 3.5% over the month of May for the past five years. With a target of $93, our models expect 2017 to repeat its strong May performance.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.