These Were 3 of the Hottest Stocks in May: Are They Still Buys Today?

Westport Fuel Systems Inc (TSX:WPRT)(NASDAQ:WPRT) soared in May, as did these two other stocks. Let’s take a closer look to see whether they’re still good buys for June.

| More on:

The TSX had a tough month in May, with the index falling close to 3% and coming close to closing below 16,000 for the first time since March. However, that wasn’t the case for three stocks listed below, which had very strong performances during the month. Let’s take a look at what was behind their strong returns and whether they’re likely to continue rising.

Westport Fuel Systems (TSX:WPRT)(NASDAQ:WPRT) had a mammoth May with its share price rising by nearly 60%. The company released its quarterly results early on in the month, which were an improvement that saw sales rising 7% year over year and Wesport reporting a smaller loss as well. A positive adjusted EBITDA of $7.3 million also a big improvement over the $3.4 million loss incurred a year ago.

It was a very strong reaction from the markets. However, despite the stock finishing the month at $3.70, it is still nowhere near its 52-week high of $4.86. Westport is recovering from a big sell-off in the markets that happened in the latter half of 2018. And so even with the impressive result in May, there’s still more room for the stock to grow, especially if it can build on these results. The last time the stock closed above $4 was back in October.

Hydrogenics (TSX:HYG)(NASDAQ:HYG) also had a strong month, but the reasons for its rapid increase are a little mysterious. The stock was initially down when it released its quarterly results mid-month as sales were flat, and the company recorded a larger loss for the period.

However, the stock would go on to rise weeks later, getting a big boost just before the end of May and finishing the month up 44%. With Hydrogenics trading at around 10 times its book value and struggling to stay out of the red, there don’t appear to be many reasons for investors to suddenly get excited about the stock.

The sudden increase in share price put Hydrogenics at a new 52-week high. I wouldn’t bank on further increases from the stock, which gave back some of its gains on Friday, falling more than 5%. When there’s no apparent reason for an increase, there’s more of a chance for a correction to happen afterwards.

Element Fleet Management (TSX:EFN) saw a much more modest than the other two stocks on this list, jumping more than 17% during May. However, it was still a very good performance that also saw the stock reach a new 52-week high.

The reason behind the increase was that the company released a strong quarter that saw sales rise by more than 18%, while profits nearly quadrupled. A couple of key reasons for the improved quarter were the company incurred fewer restructuring costs compared to last year and had smaller investment losses.

While it was still a good quarter overall for the dividend stock, if not for the big improvement from non-operating items, it wouldn’t have been nearly as impressive. For that reason, I wouldn’t jump on the bandwagon and buy the stock just yet. I’d wait to see if the company can continue to deliver these types of results going forward before deciding to invest.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Dividend Stocks

people relax on mountain ledge
Dividend Stocks

Here’s the Average Canadian TFSA and RRSP at Age 40

If you're an investor needing extra passive income to bridge the gap for retirement, you're not alone. And this stock…

Read more »

ways to boost income
Dividend Stocks

CRA Alert: Tax Brackets to Increase by 2.7% in 2025

Holding the iShares S&P/TSX Capped Composite Index Fund (TSX:XIC) in a TFSA is a great way to avoid entering a…

Read more »

how to save money
Dividend Stocks

Top Canadian Stocks to Buy Right Now With $5,000

If you have a windfall of $5,000, few stocks out there are offering up the growth that these three do.

Read more »

dividends can compound over time
Dividend Stocks

2 High-Yield Stocks Paying Over 6% Right Now

You can expect to receive reliable income for years by adding these two high-yielding Canadian dividend stocks to your portfolio…

Read more »

ways to boost income
Dividend Stocks

2 High-Dividend TSX Stocks to Buy for Increasing Payouts

Here's why investing in blue-chip dividend stocks such as Enbridge can help you beat the TSX index over time.

Read more »

hand stacks coins
Dividend Stocks

Build Enduring Wealth With These Canadian Blue Chips

Instead of taking unnecessary risks, conservative Canadian investors want to consider buying these two dividend-paying, blue-chip stocks now and holding…

Read more »

stocks climbing green bull market
Dividend Stocks

Invest $15,000 in This Dividend Stock for $3,284.50 in Total Returns

A dividend stock can be a great portfolio addition, but don't ignore returns for a high yield. That's why we're…

Read more »

stocks climbing green bull market
Dividend Stocks

Safe Canadian Stocks to Buy Now and Hold During Market Volatility

Stock corrections provide opportunities to buy solid businesses at a discount.

Read more »