- If you really decide to sell in May and go away, you may miss out some profits from these undervalued stocks to buy.
- Goldman Sachs (GS): Trading revenue surged in Q1.
- Novartis (NVS): A high yield dividend aristocrat in healthcare.
- AT&T (T): The telecom giant offers good fundamental value.
The topic of undervalued stocks to buy is getting significant attention following the recent declines on Wall Street. Many retail investors know the “sell in May and go away” adage in the stock trading world. It refers to an 18th-century English custom that suggests that traders sell their shares and relax during the summer holidays.
Modern stock markets have in part adopted this approach as a strategy. Historical data shows that, on the average, stock prices perform better between November and April than they do between May and October.
Such metrics may inspire readers with ideas on what to do, especially when there is potential for a bear market. For instance, you could literally sell share in your portfolio to enjoy a long summer holiday away from the markets. Then, you could potentially come back on Labor Day and continue investing.
However, such a bold action may also mean you can possibly miss out on up moves, especially if broader markets begin to recover. Therefore, you may want to explore opportunities, like buying undervalued stocks.
We already know that inflation hit a 40-year high, and the Fed wants to bring it down. Geopolitical crises and resulting supply chain issues are also on our minds. Yet the uncertain market conditions offer several gems that are trading at low valuations.
With that information, we present three undervalued stocks to pay close attention in May.
|GS||The Goldman Sachs Group, Inc.||$299.41|
Undervalued Stocks to Buy: Goldman Sachs (GS)
Financial services group Goldman Sachs (NYSE:GS) is at the heart of the global financial world, offering a wide range of services.
Goldman Sachs reported Q1 results in mid-April. Net revenue came in at $13 billion, down 27% year-over-year. Diluted earnings per share was $10.80 compared to $18.60 for the same period a year ago. Cash and cash equivalents totaled $274 billion. Despite the turbulent environment, management is confident about returning solid results during the year.
Yet, GS stock is down 21% year-to-date and 15% over the past 12 months. The dividend yield is at 2.6%. Shares are trading at 8.1x forward earnings, well below the financial sector average 11.8%.
Meanwhile, the stock changes hand at 2.1x trailing sales. At present, the 12-month median price forecast for GS stands at $420.
Global healthcare heavyweight Novartis (NYSE:NVS) traces its roots back about 250 years. Novartis is the world’s No. 5 pharmaceutical giant in terms of 2021 sales. Management focuses on five core therapeutic areas: cardio-renal, immunology, neuroscience, solid tumors and hematology.
Novartis released Q1 FY22 results on April 26. Net income came in at $2.2 billion, up 8% from a year ago. EPS was $1 compared to 91 cents for the same period one year before. Free cash flow was $920 million. Management is expecting even better performance as the result of growth-focused organizational change.
NVS stock is down 4% so far in 2022. The current price yield a dividend of 3.9%.
Shares are trading at 13.9x forward earnings, below the healthcare sector average 22.3%. The P/S ratio is 3.7x. Currently, the 12-month median price forecast for NVS stands at $93.70.
Undervalued Stocks to Buy: AT&T (T)
AT&T (NYSE:T) was established more than 145 years ago. It is now one of the telecom giants stateside.
AT&T released Q1 FY22 results on April 21. Revenues for the first quarter totaled $38.1 billion versus $43.9 billion in the year-ago quarter. Diluted EPS was 65 cents compared to $1.02 for the same period last year. Free cash flow came in at $700 million.
Management is pleased with the greatest addition of post-paid customer base over the last decade. The company expects to improve its strong position in the market and deliver better results with the 5G and fiber-optics network tailwinds.
T stock is up 6% in 2022, but down 19% over the past 12 months. The dividend yield is also a mouth-watering 5.6%. Shares are trading 7.6x forward earnings, below the communication services sector average 17.9%. The P/S ratio is 0.9x. At present, the 12-month median price forecast for AT&T stands at $22.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.