3 of my top stocks to consider buying in May

With parts of the market looking expensive, Stephen Wright thinks a focus on quality is the way to go for investors buying stocks this month.

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Sell in May and go away? Not for me – I think there are some great stocks that investors should consider buying this month. 

With some corners of the stock market starting to look expensive, I think focusing on quality businesses is the way to go. And I think there are still opportunities out there for investors.

Taylor Wimpey

Encouraging UK inflation data recently has investors thinking about interest rate cuts. And Taylor Wimpey (LSE:TW) could be a big beneficiary of that. 

Lower interest rates are likely to make mortgages more affordable, causing demand in the housing market to rise. And I don’t think the current share price factors this in.

As with the other major UK housebuilders, Taylor Wimpey is being investigated by the Competition and Markets Authority. Exactly what will come of that is uncertain – and is therefore a risk. 

The company has a good reputation in terms of build quality, though. And with a 7% dividend that I don’t believe is in much danger, I think the stock is worth careful consideration.

Porvair

At a price-to-earnings (P/E) ratio of 18, industrial filtration business Porvair (LSE:PRV) is at the top end of where I’d like to buy the stock. But I think it still looks decent value for a quality operation.

Porvair’s success is built on repeat orders – it’s difficult (and in some cases, impossible) for customers to change supplier. This keeps them coming back, resulting in strong revenues.

This means the biggest risk is a downturn in its end markets. And demand for lab equipment, which accounts for 35% of revenues, has been weak due to high inventory levels built during the pandemic.

I’m expecting this to normalise soon, though, as Porvair’s sample filters are replaced after each use. With things back to normal, I’m expecting this to be a great stock to own for the long term.

MercadoLibre

MercadoLibre (NASDAQ:MELI) is an e-commerce company operating across Latin America. It consists of an online marketplace, a payments platform, a logistics business, and a loans division.

With 25% of the firm’s revenues coming from Argentina, inflation is a risk. But the company has a strong competitive position that I expect to drive strong investment returns over the long term.

The key to MercadoLibre’s dominance is the way all its components work together. An efficient shipping business makes the marketplace more attractive for buyers and sellers. 

In turn, this generates volume for the payments processor. The bigger the company gets, the more difficult it becomes to displace and its impressive recent growth puts it on my list of stocks to buy.

Quality

I don’t think there’s ever a bad time to buy shares in high-quality companies. Over the long term, I expect owning more of these businesses in my portfolio to prove valuable.

As I see it, May is just another opportunity to keep adding to my investments. And that’s what I’m looking to do with businesses that have significant potential and strong competitive positions.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in MercadoLibre and Porvair Plc. The Motley Fool UK has recommended MercadoLibre and Porvair Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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