The old saying “sell in May and go away” turns out to have been poor advice, at least over the course of the past month. In the month of May, the S&P 500 surged 6.2%, moving back to within spitting distance of a new all-time high. Thus far in June, the trend appears to remain in place toward the upside.
Of course, much of this recent rise has to do with the fact that stocks were overly beaten down during the month of April, as investors were largely in selling mode amid uncertainty around tariffs and other policies which took the muster out of a number of highly-valued growth stocks. As it happens, May’s rally has highlighted the value of staying patient in times of uncertainty, but staying invested can be harder than it appears, particularly when it’s one’s nest egg on the line.
Key Points
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The whole “sell in May and go away” trend is one that may have pushed investors out of the market too soon.
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Despite ongoing trade related concerns and other macro issues hampering the market, May’s rebound in these three stocks in particular shows the benefit of staying invested over the long-term.
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Now, most personal finance experts will continue to tout the value of “time in the market” as opposed to timing the market. And while all this recent turmoil certainly provided some investors with the impetus to move some of their holdings out of equities and into other asset classes (which isn’t always a bad move), it’s also true that the rebound rally from April lows has been massive.
For these three stocks in particular, the rebound has been notable. These are three companies I continue to believe remains strong buy and hold picks in any market environment. Here’s why investors may want to consider these stocks at least on the next dip in the market for the equity portion of their investing portfolios.
Constellation Energy (CEG)
Constellation Energy (NASDAQ:CEG) is a unique company in the energy sector that’s really been bucking a rather nasty downward trend in recent months, as the price of oil and gas continues to drop.
The ability for Constellation Energy to buck this trend has a lot to do with the fact this company is the largest producer of carbon-free energy in the U.S. As a leading nuclear power operator, Constellation continues to sign a range of long-term deals with mega-cap companies such as Meta Platforms (NASDAQ:META), which recently inked a new 20-year deal to buy power from one of Constellation’s Illinois-based nuclear power operations.
Other deals with top mega-cap tech companies looking to ramp up their investments in data centers and artificial intelligence capabilities have led to surging investor interest in the U.S. leader in this space. Given the exorbitant energy demand that’s likely to materialize in the coming years and decades, there’s a solid argument to be made that Constellation Energy’s growth runway is among the most robust in the energy sector.
With a capacity factor of more than 94% for its current nuclear fleet, and the growth potential ahead for the company’s new reactors which will come online in the years and decades to come, there’s a lot to like about Constellation’s ability to become a utility-like energy provider with strong earnings growth potential over time. With a robust balance sheet ($1.8 billion in cash), the company’s long-term debt obligations do look manageable. And factoring in these recent deals, there’s a lot to like about the company’s ability to produce outsized profit and capital returns over time.
Now, there are some concerns around when such profits will materialize. But for investors looking one or two decades down the road, this is a company I think is worthy of its recent rise and is worth considering as a buy and hold opportunity on future dips.
Seagate Technology (STX)
Another top growth stock that’s been moving in the right direction of late is Seagate Technology (NASDAQ:STX). The company’s bread and butter is providing data storage solutions to a range of clientele, from large institutional buyers in the cloud computing and enterprise IT sectors to retail customers like you and I. I’ve personally bought some Seagate storage devices, and their product quality and durability stand out as differentiating factors which should continue to propel strong market share over time.
The underlying thesis as to why investors may want to consider STX stock right now is tied to expected growth for data usage and storage needs. As consumers of all kinds utilize and generate exponentially more data over time, those looking to save this data in “cold” storage devices, such as those provided by Seagate, will continue to ramp up spending.
From a valuation perspective, I find Seagate to be a compelling option, at just 18-times earnings. Despite this rather low valuation multiple, the company has continued to deliver strong growth and a dividend yield of 2.3% to boot. That’s hard to find in this market, and suggests that investors are getting quite a deal with this value-friendly growth stock with strong long-term secular catalysts underpinning its future growth.
Phillip Morris (PM)
Another top performing S&P 500 stock over the course of the past month, Phillip Morris (NYSE:PM) surged nearly 14% for the month of May as investors appear to continue to look for much more defensive value-oriented bets. In terms of places I’d be looking to put defensive capital to work, companies like Phillip Morris with significant market share in what’s widely considered to be a consumer staples sector (and at a very attractive valuation) makes sense right now.
Now, Phillip Morris isn’t for every investor. The company is best known as a cigarette maker, with its Marlboro brand among the industry leaders in this regard. And while cigarette sales continue to make up a large portion of the company’s overall revenue and earnings, it’s also true that Phillip Morris has done a good job of pivoting away from cigarettes, looking to become the industry leader in nicotine sales (other pouches and vaping products) which continue to see strong growth.
Whether you’re positive or negative on this underlying business model, it’s clear that Phillip Morris’ long-term growth runway remains strong. With a valuation of just 24-times earnings and a very consistent long-term growth trajectory in hand, this is the sort of defensive stock that makes sense for cautious investors to want to own right now. In other words, for those investors who may be worried about valuations and where top highly-valued growth stocks may head, such investors may be increasingly inclined to look at a company like Phillip Morris in this environment.
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The post Stay Invested In These 3 Stocks That Are Bucking the Trend appeared first on 24/7 Wall St..
