If you’ve been trading for any length of time, you’ve undoubtedly come across the phrase, “sell in May and go away.” Although we’re not 100% sure from where this phrase originated, it likely came from an English tradition where the well-to-do left London and escaped to the countryside to avoid the hot summer months. And with everyone “going away” because of the novel coronavirus pandemic, the very idea of considering stocks to buy seems utterly ridiculous.
Admittedly, the backdrop fundamentally is the worst for bullish investors. As you know, the Bureau of Labor Statistics dropped a bombshell: total nonfarm payroll employment dropped by a staggering 20.5 million. Moreover, the unemployment rate jumped to 14.7%. By the government agency’s own admission, “This is the highest rate and the largest over-the-month increase in the history of the series.”
So no, the narrative is nowhere near positive for stocks to buy. But why broach the topic at all?
For one thing, equities generally have held up well despite the horrific calamity. Sure, some sectors like oil are facing a painful and unprecedented paradigm shift. In fairness, though, many organizations have reasonably weathered the storm thus far. Some have actually benefited from the carnage. Therefore, we can’t throw out the concept of stocks to buy entirely.
Additionally, some political pundits have pointed to a disconnect between strength in equities and the devastation of the labor market. While jarring, investors need a place to park — and hopefully grow — their money. They’re not getting it in the bond market. But they might with these stocks to buy:
- Costco (NASDAQ:COST)
- Kroger (NYSE:KR)
- Home Depot (NYSE:HD)
- Dollar General (NYSE:DG)
- Gilead Sciences (NASDAQ:GILD)
- NextEra Energy (NYSE:NEE)
- Allstate (NYSE:ALL)
- Altria Group (NYSE:MO)
- RCI Hospitality (NASDAQ:RICK)
Relatively safe and offering pertinent products and services, I wouldn’t be too quick to hit the sell button on these companies. Instead, you should either hold them or consider a modest position among these stocks to buy:
Stocks to Buy: Costco (COST)
Every time I pass by a Costco store on my way to do grocery shopping, I marvel at the number of cars in the parking lot. While my observations may not be emblematic of all Costco locations in the U.S., I have a feeling that it’s within a tight range of accuracy. After all, the company popularized the concept of big warehouse shopping centers. This business model’s incredible popularity during the Covid-19 panic has supported the fundamental argument behind COST stock.
Nevertheless, shares haven’t exactly killed it on a year-to-date basis. Rather than a sign to sell, I consider Costco as one of the stocks to buy or hold in May. That the retailer is attracting so much physical foot traffic is an extremely encouraging indicator of resilient strength. Many Americans are still afraid to go grocery shopping. Further, they feel a general sense of anxiety when entering stores.
Beyond COST stock overcoming a psychological barrier, the underlying business has economic resiliency. According to a Shopperscape survey last year, the average Costco shopper has an average household income “of just over $100,000.” Therefore, COST will probably be the last retailer to go down.
Although it’s an obvious pick for stocks to buy, Kroger has proven to be a worthwhile, long-term investment. Yes, KR stock incurred some ugly volatility during the height of the Covid-19 crisis. But through the twists and turns of the pandemic, the grocery giant has come out on top. Currently, shares are up double digits since the beginning of the year and this sentiment may well continue throughout 2020.
Why? You only need to read between the lines. As I mentioned above, many folks are simply too scared to venture out. Although some states began reopening their retail outlets in late April/early May, several restrictions are in place. That means whatever foot traffic is willing to come out must necessarily be mitigated. Again, many are choosing to shelter in place.
However, people are still flocking to Kroger stores, which is a positive sign of resiliency. And really, we mere mortals don’t have a choice. Therefore, I’m bullish on KR stock.
Home Depot (HD)
With so much focus on toilet paper runs and now meat shortages, the coronavirus mania has somewhat ignored Home Depot. However, I think this is a mistake. It’s not like critical infrastructure won’t fail just because an economic calamity occurred. Indeed, due to Murphy’s law, this would be a sickeningly perfect time for something to go wrong.
When it does, you have Home Depot. Not only does this drive the case for HD stock, the underlying company has a history of being a steady rock during times of crisis.
Furthermore, management is getting very smart about the e-commerce threat. During this pandemic, I made a few purchases online at Homedepot.com and I was very impressed at how convenient and seamless the process was. This push toward digital relevancy makes HD stock one of the perhaps surprising picks among stocks to buy.
Dollar General (DG)
A frequently discussed pick for recession-resistant stocks to buy, Dollar General has enjoyed a significant bump up during this pandemic. However, coronavirus-fueled investments attract skepticism. After the crisis fades in the rearview mirror, investors wonder, will they still be relevant? For DG stock, the answer is a hearty “yes.”
If you look at the technical chart for Dollar General, you’ll notice that shares dipped heavily throughout most of March. I believe this was the case because shelter-in-place orders prevented shoppers from visiting. Further, you’ve got to assume that dollar stores’ consumer base don’t typically have the funds for delivery services.
But with most states either reopening or planning to do so (with certain restrictions in place), this dynamic bolsters DG stock. Yes, the coronavirus may be fading away — though it could come back later this year. Assuming it doesn’t, we now have a full-blown economic crisis to deal with. Thus, any company that provides discounted goods to hard-hit consumers is worth considering among stocks to buy.
Gilead Sciences (GILD)
From the get-go, Gilead Sciences has represented a beacon of hope in the coronavirus pandemic because of remdesivir. An antiviral drug, Gilead proposed it as a solution for prior diseases, but success was limited. But research demonstrated promising results against coronaviruses. Therefore, they pushed it as a Covid-19 solution. Although overall efficacy is somewhat unclear, medical experts deemed recent tests encouraging. Not surprisingly, GILD stock has jumped higher this year.
However, skepticism, especially for pharmaceutical companies abounds. Making matters worse, the initial rollout of remdesivir was a mess. Still, stakeholders of GILD stock have bullish catalysts on their side. For one, the Food and Drug Administration authorized emergency use of the drug in May. Second, the Trump administration still supports remdesivir, outlining its plan to distribute the drug.
Should the novel coronavirus strike again this winter, remdesivir will have tremendous relevancy. While Gilead isn’t perfect, I think it belongs in your list of stocks to buy.
NextEra Energy (NEE)
For 100% transparency sake, I have not been the greatest fan of green and renewable energy mechanisms. I’m still skeptical because of the efficiencies — or lack thereof — of alternative energy producers. However, the coronavirus completely changed my opinion about NextEra Energy and NEE stock, though not necessarily in the way you might think.
According to NextEra’s website, the company is the world’s largest producer of wind and solar energy. In the future, this fact will be extremely relevant for national security and stability. No, I don’t want to live in a neighborhood with these giant wind-blowing machines. However, the fact that they exist means that we are less reliant on volatile Middle Eastern politics.
Although the oil price war between Saudi Arabia and Russia may have ended, the devastation to American oil workers has only begun. If instead these workers were building alternative energy plants, theoretically, they would be insulated from much pain. Therefore, I would put NEE stock in a list of potential stocks to buy, if you haven’t already done so.
Right now, insurance companies like Allstate suffer from a significant risk profile. With millions of Americans losing their jobs and forced into food banks for sustenance, it’s clear that priorities have shifted. This hard transition means that many families are skipping rent payments, which doesn’t bode well for ALL stock.
It’s not clear when we return to something resembling normal. But at some point, we do have to get back to work. Therefore, demand for insurance products will eventually rise. The uncertainty, though, has kept pressure on ALL stock.
Still, there is reason for hope. Primarily, not everything about the coronavirus pandemic has been a negative for Allstate. Most notably, car accidents and fatalities have plummeted as the lockdowns began. And with presumably fewer cars on the road in the months following a full reopening, this statistic will likely stay lower than normal.
If so, this would translate to a cost reduction for Allstate. Combined with its necessary products, I would continue to hold this in your list of fundamentally sound stocks to buy.
Altria Group (MO)
On the surface, Altria Group doesn’t strike most investors as one of the viable stocks to buy. Several reports have surfaced that suggest smoking increases your risk of contracting Covid-19. With such a ringing endorsement, you wouldn’t want to be anywhere near MO stock.
However, smoking is an addictive habit. If it were that easy to quit, smokers would have done so long ago. After all, the practice in and of itself is ridiculously harmful. However, one of the reasons why people continue to feed the addiction is that cigarettes provide stress relief. With the quarantines and subsequent economic devastation, there has never been a more stressful time in modern American history.
Further, sales of cigarettes have picked up substantially during this crisis. That might not necessarily mean that people are smoking more. Rather, they may be stocking up for a rainy day. Given this intense demand, I believe MO stock provides risky but credible upside potential.
RCI Hospitality (RCI)
With the end of this list of stocks to buy, I’m going to discuss my most speculative idea. As you know — or if you don’t, your “friend” might — RCI Hospitality takes generous liberties with the word hospitality. Of course, hospitality of any category has taken a huge hit during this pandemic and RCI stock was no exception. But over time, I see pent-up demand buttressing this sector.
According to CNBC, the more mature segment of the hospitality industry boomed following the global market crash of 2008. It’s a rough situation, but an unavoidable one. On one end of the spectrum, you have people looking for work. On the other end, you have folks looking for companionship, especially after a cataclysmic collapse.
I’m not judging nor am I justifying anything. Clearly, RCI stock is not an investment for everyone. But if you want to bank on sociological realities, this is it.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long MO stock.