A new month is just around the corner!
While it’s not the most relevant thing from a statistical standpoint, the start of a new month feels psychologically significant. Often, when discrete periods of time pass (months, years), people like to start new projects. A new month is as good a milestone as any. With that in mind, here are some places you could invest fresh money into in May 2024.
Option #1: Dividend stocks
Dividend stocks are among the best assets to buy in good and bad times alike. They provide better returns than bonds most of the time while offering dependable income that non-dividend stocks don’t have. They’re sort of a middle ground between bonds and growth stocks in that respect.
If you would like to invest in dividend stocks in May 2024 but don’t have any specific ideas, you could consider Toronto-Dominion Bank (TSX:TD). TD is a Canadian bank stock that has many of the characteristics dividend investors look for. First, it has a high dividend yield (5.05%). Second, it has a good dividend-growth track record (7% per year over the last five years). Third, it is a highly profitable company with a 24% net profit margin (i.e., net income over revenue).
One thing that distinguishes TD Bank right now is its relative cheapness compared to banks in its peer group. TD Bank trades at just 10 times earnings, while similar “money centre banks” mostly trade at 12 times earnings. The reason it’s a little behind its competitors is because its stock price largely didn’t participate in the last six-month rally in North American bank shares.
TD posted negative earnings growth over the last 12 months, which is likely why it didn’t rally like its peers. However, the earnings decline was mostly due to non-recurring factors; TD should catch up with its peers in the year ahead.
Option #2: AI and semiconductor stocks
Another pretty good idea — provided that you don’t overpay — is artificial intelligence (AI) and semiconductor stocks. AI has been the biggest theme in the markets in 2023 and early 2024. The launch of ChatGPT in 2022 showed people the potential that generative AI has to automate key business processes and make companies more efficient.
Consider Taiwan Semiconductor Manufacturing (NYSE:TSM). This is a tech stock that I owned for about two years, sold a few months ago, and then bought back recently. I consider my original sale of the stock to have been one of my biggest-ever investing mistakes. I sold it because I was sitting on a modest 18% gain while revenue was declining.
I thought that the trend of declining revenue would persist, so I sold at a small gain, and then TSM’s revenue trend abruptly reversed, causing the stock to spike in price! I realized the mistake pretty quickly, so I used the opportunity to begin buying back the shares I’d sold.
Taiwan Semiconductor is a great stock because it’s the world’s only pure-play semiconductor foundry. This means that it only builds chips for clients; it doesn’t design them. Other companies operate in this business, but they design chips as well as manufacture them, so they’re tacitly in competition with their clients. TSM is the only big player in the business that lacks this conflict of interest, so it naturally scores most of the big, important manufacturing contracts.
