One of the most time intensive aspects of investing is finding the best stocks to buy that fit in with your investment strategy. After all, between the Nasdaq and New York Stock Exchange, there are a whopping 6,100 different stocks to choose from. With so many choices, where do you start?
The list below outlines the top stocks to buy this month.
Best Stocks to Buy in May 2022
Not all stocks are created equal, and with a massive number of retail investors flooding into the market last year, it’s been a bit of a wild ride. This year has been off to a more lackluster start.
The S&P 500 was down around 9% at the end of January and the Dow erased about 6% of its value. Big names like Amazon.com, Alphabet, and Apple are all down substantially too.
Considering the change in the investment landscape, here are the stocks you should be paying attention to:
- Green. There has been a major change of guard in Washington, and changes in D.C. ultimately equate to changes in the stock market. The Democratic party, led by President Joe Biden and in control of all branches of government, has been clear about its views toward climate change and changes it believes need to take place in the energy industry. As such, many companies focused on clean, renewable energy are doing very well.
- E-Commerce. The coronavirus pandemic led to a surge in shopping online. Many consumers who would never have purchased anything online suddenly found themselves buying groceries, gifts, clothing, and even medicine over the Internet. Moreover, many liked the experience and might not go back. As a result, e-commerce has been booming and will likely continue to do so.
- Travel. Vaccines are readily available, and more than 60% of Americans are now fully vaccinated, according to the Mayo Clinic. As more people receive their vaccines, they’ll not only be more comfortable traveling, they’ll be eager to do so after a long stay at home. As a result, the best travel stocks are likely to see a strong rebound ahead.
- Health Care. Health care stocks are generating quite a bit of excitement. While most companies working on COVID-19 vaccines and therapeutics are realizing overvaluations, there are plenty of opportunities to invest in companies across the sector, which is growing at a staggering rate.
- Undervalued Plays. Many stocks are considered to be entering into undervalued territory as a result of the significant declines felt early on this year. Stocks of many excellent, profitable companies are down 10%, 20%, or more from their recent highs thanks mainly to recent market jitters, potentially setting them up for a strong recovery.
With that in mind, here are nine of the best stocks to look into this month:
1. Amazon (NASDAQ: AMZN)
The coronavirus pandemic is a horrible thing. More than 355 million people around the world have gotten sick, with more than 5.6 million people losing their lives. There’s no downplaying the seriousness of this illness.
However, even the darkest cloud has a silver lining.
Online retail companies have become prime beneficiaries of the crisis. For months, consumers were told to stay at home, only leaving the confines of their homes in search of absolute necessities.
While there were already growing numbers of consumers shopping online, travel restrictions and temporary lockdowns led to a tidal wave of consumers who shifted from brick-and-mortar shopping to shopping on the web. Naturally Amazon.com, one of the most successful e-commerce websites in the world, seemed likely to benefit greatly from this trend — and benefit it has.
Since June 2020, the company’s stock price has climbed from around $2,545 per share to nearly $2,800 per share, with its price peaking at over $3,700 per share in July of 2021. With this kind of growth, the e-commerce pioneer has not only become one of the largest companies in the world, but one of the strongest growth stocks on the market.
Since its high in July of last year, the gains have tapered off significantly, leading many to argue that a strong rebound is ahead.
As a result of the pullback, the stock’s valuation has been brought down to a relatively normal level. Amazon trades with a pretty high valuation, with a price-to-earnings (P/E) ratio of around 55. While that P/E may seem high, that’s right around average for the e-commerce industry, which is known for significant revenue growth that offsets the high prices paid for stocks in the sector.
Perhaps that’s why all 30 analysts covering the stock rate it a Buy according to TipRanks, which outlines an average price target of a whopping $4,150.83 per share.
All in all, with e-commerce dominance at a time when more and more people are shopping online, Amazon.com stock is one to watch closely.
2. Alphabet Inc. (NASDAQ: GOOG | GOOGL)
While Alphabet isn’t necessarily a household name, its core product, Google, definitely is.
According to Statcounter, Alphabet’s Google controls nearly 92% of online search market share. If that’s not dominance, nothing is.
How does Google make money on searches? That’s where its other core product, online advertising, comes in. Most search results yield four or more paid ads along with organic results.
Google search isn’t the only place Alphabet makes money on ads. Through the Adwords network, the company shows ads on various websites across the Internet, paying a share of the revenue generated to the site owner and holding a large cut for its own profits.
According to Statista, Alphabet controls more than 31% of all online advertising by revenue and accounts for the largest online advertising network in the world.
There’s a reason Google changed its corporate name to Alphabet. At the end of the day, Google didn’t accurately depict everything the company had its hands in. The company’s core focus is search and advertising, but it owns 26 subsidiaries in industries ranging from health care to Internet service providers.
Analysts love the stock as well. According to TipRanks, all six analysts rating the stock rate it a Buy. Moreover, the average price target sits at $3,316 per share, suggesting the potential for a nearly 30% upside over the next year.
All told, Alphabet has had a stellar run over the past year. However, early 2022 declines have brought the stock to a more reasonable valuation, setting the stage for a strong rebound ahead and making GOOG one for the books.
3. Apple (NASDAQ: AAPL)
Staying on the tech trend, Apple is next on the list. With a market cap of more than $2.6 trillion, the tech giant is one of the largest companies in the world, the largest company listed on the Dow Jones Industrial Average, and like the stocks mentioned above and the majority of those mentioned below, it has become a household name.
As you likely know, Apple is the creator of the iPhone, iPad, and Mac computers, with the iPhone representing the vast majority of the company’s revenue.
The stock had a strong finish to 2021, but gains tapered off throughout January, bringing the stock down to what many believe is a discount.
In big tech, there are few growth stories that are quite as strong as Apple’s, especially in the fiscal fourth quarter of 2021. Here are some key stats from the earnings report:
- Revenue. The company generated $83.4 billion in revenue, up 29% on a year-over-year basis.
- Net Income. Net income came in at $20.6 billion, up 47.5% year-over-year.
- Earnings Per Share (EPS). Finally, EPS came in at $1.24, up from $0.73 per share in the same quarter one year ago.
While the numbers are impressive, the quarter proved to be a hard one for Apple. Sales missed expectations, which Apple said was the result of supply chain issues that many expect to work themselves out in the near future.
Nonetheless, the company’s revenue and earnings growth remain strong, and it’s these numbers that form the basis for the overwhelmingly positive analyst opinions on the stock. Out of 27 analysts covering AAPL stock, 22 rate it a Buy, four rate it a Hold, and one rates it a Sell, with an average price target of $181.40 per share, representing the potential for more than 12% gains, according to TipRanks.
Notwithstanding recent volatility, the stock is currently trading with a relatively high valuation when compared to the industry average. However, like other big tech names on this list, the high valuation associated with the stock is offset by the strong growth seen in revenue and earnings, which many believe will continue for the foreseeable future.
4. Gevo (NASDAQ: GEVO)
Gevo isn’t necessarily the type of company you would expect to see on a list like this. The company isn’t a large cap stock and is anything but profitable, and the stock was still trading as a penny stock in late 2020. While it’s still in the small-cap stage, it’s a risky stock that many are willing to bet on.
Gevo experienced an exceptional rise in early 2021, reaching record highs in February 2021. Since then, it has given up around 70% of its value, leading many to argue that the stock is significantly undervalued and represents a buying opportunity..
Gevo is a clean energy company, but the company isn’t making solar panels, windmills, or batteries. Gevo is focused on the production of clean, renewable fuels, making it an interesting take on exposure to energy stocks.
Over the past several years, the company has perfected technology that allows it to turn renewable feedstock like waste wood and food scraps into clean, renewable fuels, including jet fuels that have been used to power commercial flights.
Recently, Gevo has been getting quite a bit of attention from proponents of clean energy and demand from airlines and fuel distributors around the world. That attention has been amplified over the past year or so as a result of a change in political tides.
With President Joe Biden in the White House and Democrats in control of Congress, many expect there to be major clean energy legislation in the near future. Companies that operate in the clean energy space are likely to benefit from the following:
- Grants. Grants will likely be provided to clean energy companies like Gevo to fund research and to increase the supply of clean energy products.
- Tax Cuts. The federal government is likely to further support clean energy companies through tax policies that benefit green energy producers, helping these companies to keep funds in house and offer more competitive pricing of clean energy to consumers.
- Increasing Demand. Many expect tax credits to be provided to consumers who take advantage of clean energy products. Should this be the case, consumer demand for these products will likely increase — yet another plus for Gevo.
Expecting a rise in demand, Gevo is in the process of building its first Net Zero production facility, where it will be able to produce massive amounts of clean fuel with a net zero carbon footprint. The facility is expected to be completed and operational by the end of 2022. With the plans to build this and other facilities, the company is following a growth business model like that of Amazon.com, investing in infrastructure early to stay ahead of the curve later.
At the same time, Gevo has a strong balance sheet due to a capital raise in early 2021, and with the clean energy movement gaining steam, it has plenty of support from the retail investing community. This, combined with a recent dip in price that creates a compelling value opportunity, makes Gevo stock worth its position on your watchlist.
5. The Walt Disney Company (NYSE: DIS)
The Walt Disney Company is yet another household name on the list. Even if you’ve never been to Disney World or DisneyLand, you likely grew up watching Mickey Mouse or another Disney character bouncing around on your television screen.
Moreover, if you’re like most millennials who’ve cut the cable cord and chosen to stream entertainment, you’ve at least heard about Disney+, if you’re not already one of its growing number of subscribers.
When it comes to investing in the company, there are two big reasons you may want to consider diving in:
- COVID-19 Recovery. Disney felt quite a bit of pain as a result of COVID-19. Without consumers wanting to travel, its theme parks, hotels, and cruise lines have been struggling. The company’s theme parks and travel attractions are open. Around the world, however, consumers dream about going to Walt Disney theme parks, and considering the state of the COVID-19 crisis, demand is likely to boom ahead, leading to a significant rebound.
- Streaming Entertainment. One of the major drivers in Disney’s recent stock growth has to do with its activities in the streaming entertainment space, which it has knocked out of the park. Launched in November 2019, Disney+ had more than 118 million subscribers as of November 2021, up from 86.8 million in December 2020 and 60.5 million in early August 2020.
Between a likely recovery in Disney’s travel-related business and incredible growth in the company’s streaming entertainment business, the company is firing on all cylinders.
Although it’s never a good idea to blindly follow analyst opinions, it is helpful to use their opinions as a source of validation for your own. When it comes to The Walt Disney Company, analysts seem to love the stock: 22 analysts currently cover it, with 15 rating it a Buy and seven rating it a Hold with an average price target of $195.35 per share, representing the potential for more than 40% growth over the next year.
All in all, Disney has struggled from time to time, but you can never count the stock out. The company has a history of pivoting and making changes that are best for its growth and its investors. That’s not likely to change. Now, with recent headwinds leading to declines, the Walt Disney Company has plenty of potential for dramatic growth ahead.
6. Netflix (NASDAQ: NFLX)
Netflix, like many others on this list, is a household name. The company rose to fame by giving consumers the ability to stream entertainment, rather than buy it or subscribe to cable services. In fact, the company is known as one of the pioneers of streaming video.
As with other home entertainment stocks, COVID-19 proved to be a positive for the company, resulting in increased subscribers, revenue, and earnings. However, early 2022 hasn’t been so great for the company.
As competition continues to flood into the space, many wondered if the company had what it takes to maintain its leadership position. Even the management of the company acknowledged slowing growth in subscribers, which led to steep declines in late January.
As a result of a more than 20% drop in the stock’s price in January, there’s a strong argument that there’s plenty of room left in the recovery, especially with Netflix continuing to pour cash into the development of exclusive content.
Moreover, the concept of cord cutting isn’t expected to dissipate any time soon. In fact, as the cost of cable services continues to climb and consumers focus on saving money, cord cutting is likely to continue.
Sure, there’s plenty of competition on the playing field, but it’s hard to bet against a pioneer, especially one with a long history of investing in content, technology, and marketing strategies that have yielded fruit. The current slowing in subscribers is likely nothing more than a bump in the road.
Nonetheless, it’s important to note that this is the riskiest stock on the list. If Netflix can’t get subscriber growth booming again, further declines may be ahead.
That’s likely why many analysts have abandoned their bullish views on the stock. According to TipRanks, of the 34 analysts covering the stock, 16 rate it a Buy, 15 rate it a Hold, and three rate it a Sell. The average price target is overwhelmingly bullish at $521.04, though, representing the potential for more than 40% gains.
Ultimately, Netflix is a great investment for the right investor. While there is the risk that the company won’t be able to turn subscriber growth around, if it does, the stock could see significant gains ahead. So, if you’ve got a strong appetite for risk and believe in the pioneer of streaming entertainment, it’s a great time to dive in.
7. NVIDIA (NASDAQ: NVDA)
NVIDIA isn’t necessarily a household name — that is, unless you’re a tech junky. However, if you use technology at all, there’s a strong chance you are an end user of the company’s semiconductor products.
The company is the inventor of the Graphics Processing Unit, or GPU, a computer chip that was designed to expand the capabilities of computers and game consoles to provide improved graphics for the end user.
However, the GPU has gone far beyond what NVIDIA probably ever expected it would.
Today, the company’s high-tech computer chips are used in various servers and data centers. Given the company’s dominance in the data-center space, chances are its chips are being used in the server that’s feeding you the content you’re reading right now.
As technological innovation continues, GPUs are becoming increasingly important. Over the years, the company has proven that through continued innovation, its chips are likely to stay on top of the competition.
Moving forward, these chips are going to become more ingrained in day-to-day life, playing important roles in the development of artificial intelligence, autonomous driving, and other technologies of the future.
The stock may also be a great way to gain access to the crypto boom. Not only are investors diving into cryptocurrencies, the crypto community is investing heavily in non-fungible tokens, or NFTs, and interactive worlds to use them in. This trend is expected to significantly increase demand for GPUs and CPUs.
Now might just be the perfect time to get involved.
NVIDIA completed a four-for-one stock split on July 20, 2021, when shareholders received four shares at a quarter of the current price in exchange for each single share they own. The move is far more than cosmetic.
With the stock trading over $800 per share, access to the stock has been limited for those with less money to invest. The split effectively cut the price of each single share by 75%, bringing it down to around $200 and making it a more accessible price for investors with smaller portfolios.
This move worked wonders, leading a rush in demand for the stock and resulting in a spike in value. Like most tech stocks, however, there has been a cool-off period recently, bringing the stock back down to a more attractive valuation.
Not only is the company a pioneer in the high-end computer graphics and processing space, it continues to innovate, consistently staying one step ahead of the competition and making the stock one worth watching closely.
8. Bio-Rad Laboratories (NYSE: BIO)
Given current times, the medical sector garners quite a bit of conversation. While the majority of focus is being placed on companies working to develop vaccines and therapeutics for the coronavirus, a huge opportunity is emerging surrounding the technology that makes the development of these products possible.
Bio-Rad Laboratories doesn’t develop vaccines or therapeutics. Instead, it focuses on providing other companies in the biotechnology space with the technology, documentation, and equipment needed to develop new therapeutics and vaccines.
This puts the company in the perfect position.
For some time now, the U.S. has been going through an evolution in medicine. New technologies have given experts an understanding of how the human body ticks like never before, paving the way for the development of cures for some of the world’s most devastating conditions.
Just 30 years ago, hepatitis C was a death sentence. Today, it can be cured. The same goes for a wide array of ailments for which advancements in medicine have led to cures or better treatments.
For all of this to happen, clinical trials must take place and equipment and data must be acquired. As such, companies like Bio-Rad Laboratories realize high levels of demand.
As of the third quarter of 2021, revenue came in at $715.2 million representing year-over-year growth of more than 10%. As the medical community works to solve more significant problems, the company’s leading products and services will continue to experience high levels of demand.
According to MarketWatch, there are six analysts covering the stock, all of whom currently rate it a Buy.
All told, Bio-Rad Laboratories offers up a long list of in-demand products in the biotechnology space. With expectations for a continuation of the recent innovation in the medical space, there’s no reason to expect any slowing in the company’s growth, making it a stock that’s hard to ignore.
Avoid Playing the Short Squeezes
By banding together and purchasing a massive number of shares in these stocks, retail investors on the WallStreetBets subreddit forced massive short squeezes, causing incredible losses for hedge funds and leading to just as significant profitability for many of the retail investors involved.
As a result, GameStop, Blackberry, AMC, and even Canadian cannabis company Sundial Growers saw dramatic gains. Millions of newcomers started to follow the WallStreetBets subreddit in hopes of tapping into these incredible gains.
Many expect more moves like this throughout 2022.
Unfortunately, the short squeeze is a complex trade to play, and a large number of the newcomers to the stock market bought in at the wrong time, losing a massive amount of money on the downswing.
This has even led to a rush into Bitcoin after WallStreetBets posted about the electric vehicle maker Tesla accepting Bitcoin as a form of payment, becoming the first vehicle manufacturer to do so.
Following the herd may seem like an exciting concept, especially when it seems as though the herd is winning. But the reality is that by following the herd on these highly volatile moves, you’re opening the door to potentially significant losses, especially if you’re not an experienced stock trader.
Wise investment decisions, built on research and made for the long run, are the decisions that ultimately result in wealth for those who make them.
Whether you’re looking to invest in the stock market for the first time or you want to rebalance your portfolio to take advantage of the hottest trends on Wall Street, the stocks listed above are compelling opportunities to look into.
You’ll notice that each of the stocks on the list fall into the big tech and e-commerce, travel, clean energy, or health care categories. These categories seem to be the home of the biggest opportunities on the market today.
Nonetheless, you should never blindly follow the opinions of any expert. Doing your own due diligence is the only tried-and-true way to make successful long-term investments.
Disclaimer: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.