This story was originally published here.
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:
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.
Editor's Note: Click here to see the other eight stocks.
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