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5 of the Best Stocks to Buy for May

John Divine

After a legendarily bad March, the stock market got back on its feet again in April, as the three major indexes -- the S&P 500, the Dow Jones Industrial Average and the Nasdaq -- each advanced between 12% and 15% through April 29.

Even as tens of millions of unemployment claims poured in, U.S. stocks surged as the so-called "flattening of the curve" in the U.S. and the steady reopening of China gave pessimistic investors a glimpse of light at the end of the tunnel.

The Federal Reserve has also proven a swift and aggressive backstop for an economy in crisis, all but pledging as much financial support as necessary to keep bond markets afloat. All that being said, April's buoyant equities market stands in stark contrast to an economy facing an unprecedented crisis and dizzying uncertainty.

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With that cautious note in mind, here are five of the best stocks to buy for May:

-- Crown Castle International Corp. (ticker: CCI)

-- Kimberly-Clark Corp. ( KMB)

-- British American Tobacco ( BTI)

-- Alibaba Group ( BABA)

-- Slack Technologies ( WORK)

Crown Castle International Corp. (ticker: CCI)

Technically speaking, CCI is a real estate investment trust, but these securities trade just like stocks do -- so it's a distinction without a difference. The most important difference with REITs is that they pay 90% of their income out to their shareholders in exchange for not getting taxed at the corporate level.

There are a couple of reasons CCI makes the cut as one of the best stocks to buy for May: Firstly, the company owns, operates and leases out tens of thousands of cell towers. That business is only destined to benefit amid the pandemic as demand for data and wireless connections soars. The stock has responded in kind, with shares up about 13% year-to-date.

Secondly, with interest rates at zero, the 3% dividend isn't much to scoff at. Plus, CCI's aggressive efforts to expand and upgrade its cell towers to facilitate the coming shift to 5G make it one of the best stocks to buy for the 5G revolution -- a long-term bullish catalyst.

Kimberly-Clark Corp. (KMB)

Staying with the theme of insulating your portfolio from riskier holdings, consumer-goods giant Kimberly-Clark -- which is nearly a $50 billion blue-chip company -- is another stock to buy for May. Also offering a 3% dividend, KMB trades for about 20 times earnings and is beating the broader market year-to-date, with shares essentially flat through April.

With a diversified portfolio of personal products under its umbrella, one especially relevant branch of the company's business today is its consumer tissue segment, which sells some of 2020's hottest-ticket items such as paper towels and toilet paper. KMB also sells soaps, wipes, sanitizers and a whole bevy of other high-demand products all around the world.

Consumer goods have long been considered a favorite of defensive investors in times of recession and uncertainty, and while Wall Street traders seem to be gaining confidence going into May, Kimberly-Clark's predictability and its staple of trusted brands -- such as Cottonelle, Kleenex, Scott, Huggies and more -- make it an attractive holding in a horribly derailed global economy.

British American Tobacco (BTI)

Named one of U.S. News' best stocks to buy for 2020, British American Tobacco is one of the largest tobacco companies in the world and another extremely defensive income stock to buy. Although it's still down modestly on the calendar year, BTI is holding up better than the stock market at large. Plus, it offers a roughly 7% dividend yield, and uses just 65% of its earnings to do so, showing the sustainability of its payouts.

BTI trades for about 13 times earnings and nine times forward earnings. Although certainly not sexy and definitely unlikely to be the keystone holding in an ESG portfolio, BTI's captive customer base and brand portfolio -- Camel, Lucky Strike, Newport and more -- make it a great option for investors seeking preservation of capital and income investors.

Alibaba Group (BABA)

Another one of U.S. News' best stocks to buy for 2020, BABA has also been beating the market year-to-date and has held up far better than many might have expected given its exposure to China, where the pandemic originated.

Due in part to China's autocratic government, swift shutdown, tight monitoring and contact tracing, China's economy has been able to stem the bleeding faster than initial consensus outlooks. During shutdowns, Alibaba's impressive logistics network and dominant position in the country's e-commerce market combined to make it an even more essential part of the Chinese economy than it was to begin with.

Trading at 22 times earnings, Alibaba is growing like a weed, with revenue up 38% last quarter and expected to advance another 30% in the next fiscal year -- despite the impact of the virus.

Slack Technologies (WORK)

Slack, the workplace messaging platform, is far and away the most speculative name on this list -- and the only name on May's buy list that is not yet profitable. Like Zoom Video Communications ( ZM), Slack should be one of the major beneficiaries from the sudden work-from-home boom caused by the pandemic. Unlike Zoom, Slack stock has gotten little attention from the financial media, however.

Large corporate clients like IBM ( IBM) have their entire workforce on this product, generating recurring revenue for Slack and hooking employees into an ecosystem for facilitating workplace productivity. Although Slack isn't expected to be profitable this fiscal year or next fiscal year, the recent viral outbreak has actually caused analysts to boost their earnings per share estimates for two years from now from $-0.13 to $0.10 in the span of two months. Meanwhile, revenue is expected to nearly double over those two years, surging from about $860 million to $1.5 billion.

You won't get a dividend from Slack anytime soon. The company is difficult to value and shares are likely to exhibit a bit more volatility than others on this list. But for the enterprising, long-term investor, Slack's increasing market penetration is not to be ignored.

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