Here are the 4 best ASX stocks for May 2024

Here are the 4 best ASX stocks for May 2024!

Each month, we look at the best ASX stocks of the month. We like to look at companies with upcoming catalysts, be it good results (as forecasted by consensus estimates), or other expected news such as clinical trial results. We have found a handful of stocks with upcoming catalysts, or that are worth holding for a few months if you have the patience.

Universal Store (ASX:UNI)

Universal Store is a chain of casual fashion stores aimed at Millennial and Gen Z customers (think 18-35 year olds). Universal Store has 79 stores across Australia, which tend to be in major shopping centres, as well as a further 20 or so stores exclusive for particular brands like Perfect Stranger, and the group makes 14% of its sales online. Both curated third-party products and private brand products are sold in-house, although the former dominates.

It is a good business, but has been hit by perceptions that its customers will cut back their spending because they feel the brunt of the cost of living crisis. We think the recent Taylor Swift shows and the merchandise spent by them (estimated to be over $60m at the concerts alone) show that they will still spend when they perceive value.

More growth to come

In FY23, total Sales were up $263.1m, up 26.5% overall, although like for like sales were only up 1.2%. It made underlying EBIT of $40.4m, up 24%) and an NPAT of $23.6m, up 15%. Not bad in the rising interest rate environment. This was because the company was better able to manage inventory and offset costs of doing business. We are optimistic for further growth in the next 12 months as the Stage 3 Tax cuts come into effect. The revised package will put more money into the pockets of Universal Store’s customer base.

De Grey Mining (ASX:DEG)

We think gold stocks will continue to perform well in the months ahead. And De Grey Mining is one of our favourite ASX stocks in the gold space.

It has never looked back since the discovery of the Hemi deposit in WA that has over 10Moz and is set to be a top five Australian gold mine. Unlike other major discoveries around that time, De Grey hasn’t lost momentum with investors because gold has held stable in a way that battery metals have not.

Hemi is set to be in production in the second half of CY26. Consensus estimates suggest gold sales of over $1bn in the first year and the current share price is just 7.2x P/E for FY27. Even before then, there’ll be upside for investors as it expands the resource and seeks project financing. The Final Investment Decision is expected this year.

Xero (ASX:XRO)

Xero has been a favourite of ours for years, so we’ve often included it whenever we’ve published a list of the best stocks to buy for a particular month. Whilst most companies’ reporting season has come and gone, Xero’s is set to happen in May because it uses the New Zealand financial year.

If the company’s first half results are anything to go by, it is set to be a good result. The company increased its revenues by over 20% to NZ$799.5m and a net profit of NZ$54.1m, up from a NZ$16.1m loss. Consensus estimates suggest NZ$1.7bn in revenue and a NZ$148m profit.

Why has Xero done so well? Because it has four things:

• A solid and loyal customer base
• A track record of long term growth,
• Dominant positions in the market, and
• Growth potential going forward.

JB Hi-Fi (ASX:JBH)

While reporting season has come and gone for this company, we think this one has growth in it even as investors await its full year results in August. As we noted earlier this month, many investors seem to miss the fact that it owns The Good Guys and the few that do see it as a laggard on the business.

Indeed it has been, with sales only rising 0.8% in FY23 and falling nearly 10% in 1HY24. In our view, the Stage 3 tax cuts could be a catalyst for the company, providing more disposable income to spend on white goods. Of course, its core electronics business has remained solid throughout the pandemic and its high-inflationary aftermath and it could hold the business in good stead even if our thesis on the Good Guys does not hold up.

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