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Should You “Sell in May” or Buy 5 Top Coronavirus-Immune Stocks?

Wall Street is off to a weak start to May 2020 after the 82-year best April, reminding investors of the old adage “sell in May and go away.” The proverb is ingrained in the S&P 500’s awful historical run for the May-to-October period. May has been a subdued month with average gains of 0.09% since 1950, per moneychimp.com.

In fact, since 1950, the S&P 500 has been up only 1.5% on average for the May-October period. November to April is the best six-month period, with an average return of 7%, per LPL Research. But the saying did not hold well in recent times. Per an article published on CNN.com, the proverb proved itself wrong in the past few years with the May-October period turning pretty profitable.

Wall Street has not seen a decline in the May-to-October period post President Trump’s election in November 2016. The period has been rewarding in each year with 2017 seeing the highest market return of 8%, followed by 2019’s 3.1% and 2018’s 2.4% advancements.

Can Coronavirus Make “Sell in May” Saying a Reality?

Fear to invest this year is understandable with uncertainty looming around the COVID-19 incident. But one should not forget massive monetary and fiscal stimulus in 2020 too, which should help us navigate through the engineered-recession caused by the widespread lockdowns.

The S&P 500 has added 12% past month, but is still down 16.6% from the 52-week high. So, we do not have many reasons to panic about a likely May selloff after an April rally. Yes, stocks slumped to start May on President Trump’s renewed threat of tariffs on Chinese goods due to mishandling of the novel coronavirus event and a sharp drop in shares of Amazon AMZN, one of the key contributors of the recent rally.

However, none of the factors look sturdy enough to cause prolonged market disruptions in the coming days. America is likely to be busier in fighting coronavirus and bringing the economy back into its normal mode than in flaring up trade tensions with China at this moment and causing a global market crash. While President Trump thinks imposition of tariff is “certainly an option,” no timeline is mentioned yet.

Coming to the Amazon incident, it is entirely case-specific and should not derail market momentum as we already had a bunch of inspiring big tech earnings this season from the likes of Facebook FB, Microsoft MSFT and Alphabet GOOGL.

Only coronavirus can spoil the market mood. If these is any flare-up in COVID-19 cases after the reopening of economies, things in the market will definitely worsen. But then, research on treatments and vaccines is going on at an unprecedented speed and testing is being done. Most importantly, we all have to learn to adjust in a global economy, which is not going to be virus-free very soon.

Investing in Some Jewels That Look Immune to Coronavirus

These stocks have seen full-year earnings estimates going up by at least 10% in the last four weeks. Their price as a % of 52-week high-low (H-L) range remains greater than or equal to 50%. A value of 100 indicates that the stock is trading at a 52-week high and zero vice versa. The stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Gold Mining — Osisko Gold Royalties Ltd OR

The gold mining company has a Zacks Rank #2. It hailsfrom a favorable Zacks industry (placed at the top 2% of total 250+ industries in the Zacks universe). Earnings estimate went up by 13.56% in the past four weeks. Price as a % of 52-week H-L range is 51.81%, indicating quite an upside possible for the stock.

Online Retail — Chewy Inc. CHWY

Chewy Inc., which operates as an online pet retailer, has a Zacks Rank #2. Itcomes from a favorable Zacks industry (placed at the top 15% of total 250+ industries in the Zacks universe). Earnings estimate went up by 14.38% in the past four weeks. Price as a % of 52-week H-L range is 86.36%.

Software — VeriSign Inc. VRSN

The provider of Internet infrastructure services that include domain name registry services and infrastructure assurance services has a Zacks Rank #2. It comesfrom a favorable Zacks industry (top 30%). Full-year earnings estimate went up by 22.7% in the past four weeks. Price as a % of 52-week H-L range is 77.07%.

Semiconductor — AXT Inc AXTI

The Zacks Rank #1 company manufactures high-performance compound semiconductor substrates. It belongs toa favorable Zacks industry (top 14%). Earnings estimate went up by 203.75% in the past four weeks. Price as a % of 52-week H-L range is 97.43%. Though the stock appears to be approaching its 52-week high level, upbeat earnings estimate makes us bullish on it.

Schools — Universal Technical Institute Inc UTI

The Zacks Rank #2 provider of technical education training in automotive, diesel, collision repair and marine and personal watercraft technologies hails from a favorable Zacks industry (top 10%). Earnings estimate went up by 12.50% in the past four weeks. Price as a % of 52-week H-L range is 51.73%.

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