Equity bulls hardly paid any attention to the old maxim — sell in May and go away — in the month and breezed past a flurry of geopolitical crises and trade tensions. Wall Street stayed strong in the month with the S&P 500, the Dow Jones Industrial Average and the Nasdaq Composite enjoying their biggest percentage gains since January.
The small-cap Russell 2000 index witnessed its biggest monthly percentage jump since September. Some stocks even went up about 75% in the month. Now as May has ended, it is worth deciphering if this rally will last in June.
June Started on a Wrong Foot
As such, June was welcomed with renewed trade war tensions. Trump enacted steel and aluminum tariffs on the EU, Canada and Mexico as the previous exemption expired. Washington also announced 25% tariffs on $50 billion worth of goods from China and imposed new limits on Chinese investments in the United States. Needless to say, trade war fears will soon resurface.
Moreover, historically, June has been a soft month for Wall Street. A consensus carried out from 1950 to 2017 shows that June ended up offering positive stock returns in 35 years and negative returns in 33 years, per moneychimp.com, with an average negative return of 0.80%.
Against this backdrop, investors must be interested in knowing what could be the profitable bets at this moment. In this regard, here we will discuss a few stocks that were up about 40% in May and are still up for further gains in the near term. Along with the company-specific fundamentals, the macro economy will also support their run.
Stocks to Buy
Below we highlight a few stocks that gained at least 35% in May, but still has a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks have this year’s estimated growth of at least 10% and a forward P/E ratio of 30x or less.
Turtle Beach Corporation (HEAR - Free Report) – Up 216.4%
The Zacks Rank #1 company is an audio technology company. It designs audio products for consumer, commercial and healthcare markets. This company has estimated growth of 502.1% for the current year and a P/E ratio of 17.79x.
Blucora Inc. (BCOR - Free Report) – Up 46.0%
The Zacks Rank #2 company provides technology-enabled financial solutions to consumers, small businesses and tax professionals. The company expects growth of 19.86% for the current year. The stock has a P/E ratio of 22x.
Super Micro Computer Inc. – Up 36.2%
The Zacks Rank #2 company manufactures and sells energy-efficient, application optimized server solutions based on the x86 architecture. The stock belongs to a top-ranked industry (top 8%). The company has estimated growth of 19.11% for the ongoing year and a P/E ratio of 13.02x.
Federated National Holding Company (FNHC - Free Report) – Up 34.7%
It is an insurance holding company, which through its subsidiaries, controls all aspects of the insurance underwriting, distribution and claims processes. The company has estimated growth of 275% for the current year and a P/E ratio of 10.4x. The stock sports a Zacks Rank #1.
Shoe Carnival Inc. (SCVL - Free Report) – Up 32.2%
The Zacks Rank # 1 company is one of the country’s largest family footwear retailers. The company hails from a top-ranked Zacks industry (top 27%). The company has estimated growth of 36.24% for the current year and a P/E ratio of 16.45x.
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