2 Cheap Stocks to Buy in May for Long-Term Growth
Today’s episode of Full Court Finance at Zacks dives into the broader market after stocks suffered a brutal April. The selloff pushed the S&P 500 and the Nasdaq right near new 52-week lows, while some strong growth names and established companies are trading below their pre-covid highs. The episode then focuses on two retail stocks, Yeti (YETI) and Sonos (SONO), that are starting to look rather cheap and might be worth buying.
Market bears quickly squashed the bounce last Thursday to close April on a dismal note. The S&P 500 fell nearly 8% last month, for its worst showing since the initial covid selloff in March 2020. Meanwhile, the tech-heavy Nasdaq tumbled over 13%, for its largest monthly decline since October 2008, as Wall Street recalibrates growth stocks that are sensitive to higher interest rates.
The S&P 500 is trading 15% below its records, with the Nasdaq down roughly 24%. The wave of selling has seen even the largest names on the planet such as Amazon fall over 10% in one session. The downturn, coupled with soaring prices and rising interest rates has many investors selling or moving to the sidelines. The sweeping covid lockdowns in China and the ongoing Russian invasion of Ukraine only add to the fears and unknowns.
Despite all of the legitimate reasons for caution and selling, Wall Street must put money to work in order to beat 8.5% inflation. Yet even with interest rates climbing, the 10-year U.S. Treasury is only at 3% (its highest levels since 2018). This could keep investors hunting for inflation-topping returns in stocks.
Given this backdrop, some investors with long-term outlooks might want to start taking a look at slowly starting positions in solid stocks with good outlooks that are trading at discounted prices and valuations. The first stock up today is Yeti Holdings, Inc. YETI ahead of its first quarter fiscal 2022 financial results on Wednesday, May 11.
Yeti stock has been hit hard amid supply chain disruptions and higher costs that are now chipping away at profit margins. Still, the high-end cooler company and drinkware maker is set to grow both its top and bottom lines by double-digits in 2022 and 2023. Yeti is trading 50% below its highs and it’s trading at its lowest forward earnings multiple since the covid selloff.
The other stock we look at today is high-end speaker maker Sonos SONO. The stock is trading for under $25 per share and its Zacks consensus price target represents 85% upside to Monday’s levels. Sonos, which also reports on May 11, has expanded its product lineup and customer base as it competes against the likes of Amazon, Apple, and others.
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