5 of the Best Stocks to Buy for April
In the first quarter, the S&P 500 got off to its best start to a year since 1998, surging 13.1 percent. After a lousy fourth quarter of 2018, a "reversion to the mean" wasn't all too surprising in a solid economy facing few obvious obstacles.
After a killer start to the year, which stocks are best positioned to outperform in the month ahead and beyond? Here's a look at five of the best stocks to buy for April:
-- JPMorgan Chase & Co. (ticker: JPM)
-- Boeing (BA)
-- Stitch Fix (SFIX)
-- Pershing Square Holdings (PSH.L, PSH.AS)
-- Facebook (FB)
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JPMorgan Chase & Co.
For bank stocks, many of the key metrics lie in the profitability ratios like return on assets (ROA) and return on equity (ROE). JPMorgan, the largest U.S. bank by assets, comes out well on both of those fronts, edging rival Bank of America Corp. ( BAC) in a side-by-side comparison.
JPMorgan's ROE (12.68 percent) is far better than Bank of America's (10.57 percent), while ROA is a closer race at 1.25 percent versus 1.21.
The international banking behemoth is also cutting hundreds of jobs in its asset- and wealth-management division, trimming costs and slimming down as the era of low fees forces the industry to get lean.
JPM is to report earnings on April 12, but even if earnings disappoint the bank is well-positioned to prosper for years on end. Warren Buffett has been upping his position recently, and combined with a 3 percent dividend, the stable and efficient JPMorgan looks like one of the best stocks to buy for April.
Boeing Co.
Fellow Dow 30 component Boeing had a tough March, as shares plunged after the tragic crash of Ethiopian Airlines Flight 302 outside Addis Ababa killed 157 people on board. The plane model was a Boeing 737 Max 8, and immediate questions arose over the plane's anti-stall system. A prior crash in Indonesia compounded worries.
Now facing global groundings of those models -- as well as the 737 Max 9 -- Boeing is working intensely on a software update to ensure the planes are safe and convince regulators to allow them in the skies again.
Having hit all-time highs of $446 per share on March 1, shares currently waver below $400, and the stock could pop when the 737 Max models are cleared to fly again. Moreover, the Air Force just proposed a purchase of 80 Boeing F-15 fighters for almost $8 billion over the next five years.
Stitch Fix
A departure from the prior two best stocks to buy for April, both of which were blue chips, Stitch Fix is a young online retailer with an innovative business model and high growth prospects.
The subscription-based service targets largely young customers accustomed to the era of the on-demand, stay-at-home economy. Based on a description of yourself and some basic style preferences, a Stitch Fix stylist periodically mails subscribers a package of clothing items custom-picked for them.
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Analysts expect 27 percent growth in 2019 and 21 percent growth in 2020, and the $2.9 billion company is already profitable. With the food and entertainment categories dominating the on-demand space, retail should be the next domino to fall, and SFIX stock is definitely poised to be a winner if that happens.
Pershing Square Holdings
Pershing Square differs from the other stocks to buy for April in a few distinct ways. First, it's a fund; it tracks the holdings of legendary hedge fund manager Bill Ackman. Second, shares don't trade on U.S. exchanges; you can still buy them through most full-service brokers via either the London or Euronext exchanges, however.
Similar to the Boeing pick, Pershing Square looks attractive as a bounce-back opportunity: Ackman, after a long period of sustained excellence picking stocks, has suffered a brutal past five years as a number of high-visibility picks -- most notably Valeant Pharmaceuticals, now known as Bausch Health Companies ( BHC), and an Herbalife ( HLF) short position -- soured.
But performance recently is turning around, with holdings up 31.9 percent year-to-date in the first quarter. In buying Pershing Square, investors are buying a portfolio of eight high-quality stocks Ackman's fund has a large stake in -- and a somewhat speculative play on Fannie Mae and Freddie Mac.
At the close of March, Pershing Square shares traded for a discount to net asset value (NAV) of 28 percent -- meaning the market value of Pershing stock was just 72 percent of its constituent holdings.
Before Ackman's losing streak began a few years ago, shares in his holding company generally traded at discounts to NAV in the low single-digits. Closing that gap alone would provide major upside, and with management owning over 20 percent of shares outstanding, Ackman's financial interest is perfectly aligned with investors.
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The last of the best stocks to buy for April is Facebook, which, along with Stitch Fix, was named as one of U.S. News' 10 best stocks to buy for 2019. Through the first quarter SFIX was up 64 percent year-to-date and FB had gained 28 percent.
After an extremely rough 2018 in which the company was lambasted on Capitol Hill and Mark Zuckerberg was dragged before Congress, the PR nightmare is dying down and the social media titan is still cranking out profits and growing like a weed.
Trading at 22 times earnings, analysts expect revenue to grow 49 percent from 2018 to 2020, although earnings growth is expected to be more muted at 17 percent. Compared to Alphabet ( GOOG, GOOGL) -- for which analysts expect top- and bottom-line growth from 2018 to 2020 of 41 percent and 25 percent, respectively -- Facebook still looks like a steal.
Alphabet shares trade for over 27 times earnings, a 23 percent premium to FB's multiple. The owner of flagship digital platforms like Instagram, WhatsApp and Messenger, Facebook's dominance shows no signs of abating.
