3 stocks you need to buy in May

The market might be sitting at a multi-year high, but these stocks are presenting as excellent buys.

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With the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) sitting just 1% shy of its recent multi-year high, it has become more difficult for investors to find quality companies trading at reasonable prices. However, that doesn’t mean there aren’t any out there. Here are three which you should consider buying today, regardless of whether you think the overall market could fall from this level.

Collection House Limited (ASX: CLH) is a good bet for your hard-earned investment dollars at today’s price of $1.75. More and more companies are outsourcing their debt collection tasks to companies like Collection House which stand a far greater chance at recovering customers’ bad debts. Their services will no doubt increase in demand when interest rates inevitably rise and it is expanding its office space to account for this growth (this also reflects the company’s confidence of winning bigger contracts in the future). It today reaffirmed its guidance for net profit after tax (NPAT) for FY14 at $17.5 million to $18.5 million. In addition, it offers a generous 4.4% fully franked dividend yield.

Coca-Cola Amatil Ltd (ASX: CCL) seems to have lost its fizz in recent times. Most recently, it announced that it expected profit for the first half of 2014 to fall by as much as 15% which saw its share price plunge. All in all its shares have dropped 39% since May last year. However, the problems (including the pricing war with Schweppes as well as the strong Australian dollar) appear to only be short-term in nature and I expect the company’s dominance will be shown in much clearer light over the long term. The stock yields 5.4%, partially franked (75%).

Village Roadshow Limited (ASX: VRL) is also sitting well below its 52-week high and now looks like a very reasonable time to be buying. While its Gold Class business is still delivering solid growth it is also benefiting from strong crowds at its various theme parks, like Queensland’s Wet ‘n’ Wild, Outback Spectacular, Movie World and Sea World, as well as its new Wet ‘n’ Wild in Sydney. It is also exploring the possibility of expanding into Asia which would offer enormous growth opportunities. Its fully franked 4.3% dividend yield is simply the icing on the cake.

Foolish takeaway

Don’t get caught assuming these stocks will fall further before climbing back up again. They represent quality, well-run businesses and would be excellent buys at today’s prices.

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Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil Ltd and Collection House Limited.

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