Top stock picks for May

Credit: Simon Cunningham

We asked our Foolish contributors to name some of their favourite shares for new money this May and below’s what they came up with:

Tristan Harrison: Class Ltd (ASX: CL1)

Class is a software provider for self-managed superannuation fund (SMSF) accounting using cloud technology. The amount of time and efficiency it generates for accountants makes it a real winner. The new reporting rules and general preference for internet-based services gives Class a real edge over competitors.

It’s expected that a large amount of SMSFs will change to cloud accounting over the next two to three years, which means today’s price of under $2.90 could be the perfect time to add Class to your portfolio.

Motley Fool contributor Tristan Harrison owns shares in Class Ltd.

Christopher Georges: Freedom Insurance Group Ltd (ASX: FIG)

Freedom Insurance is a $160 million financial services company that specialises in the design, distribution and administration of life insurance products in Australia.

The company has only been ASX-listed since December 2016, but it has already managed to upgrade its FY17 guidance twice on the back of strong growth in new business sales and rising operating margins.

Unlike other insurance companies, Freedom Insurance is not exposed to the underwriting risk of its products which allows it to have a much simpler financial structure. The shares have performed strongly since debuting, but still trade on an attractive valuation of just 11x earnings.

Motley Fool contributor Christopher Georges owns shares in Freedom Insurance Group

James Mickleboro: Japara Healthcare Ltd (ASX: JHC)

I think Japara would be a great option for buy and hold investors. Demand for aged care services is expected to increase substantially over the next decade as Australia’s population ages. In order to meet this demand, management plans to deliver over 1,100 new greenfield places by FY 2020. This will be an increase of approximately 29% on its current places. I believe this puts the company in a position to deliver strong earnings growth over the next few years, which should allow it to continue growing its generous trailing fully franked 5.4% dividend.

Motley Fool contributor James Mickleboro has no financial interest in Japara Healthcare Ltd.

Tom Richardson: ResMed Inc. (CHESS) (ASX: RMD)

This sleep therapy and general healthcare business has been struggling to translate some good revenue growth into equally healthy profit growth, although I feel it may have some better days ahead on this front leading to share price gains.

It’s founder led, a market leader, and invests heavily in research and development to ensure it retains focused on long-term success. The business also offers overseas exposure via a potentially stronger U.S. dollar which is a positive for any investors with little overseas exposure currently. The ASX scrip sells for $9.15 and I expect it will outpace the market’s growth over the next five years.

Rachit Dudhwala: RCG Corporation Ltd (ASX: RCG)

Shares in listed footwear retailer RCG Corporation have slumped over 58% since the start of 2017, despite the company delivering a record first-half result.

Driving the share price lower is management’s revision to underlying full-year EBITDA. It is now expected to be in the range of $74 million to $80 million – down from a previous forecast of between $85 million to $88 million.

Whilst the impact of Amazon’s arrival to Australia is also adding to RCG’s woes, I believe the sell off is overdone. Given RCG currently trades on a yield of 9.5% (fully-franked) and offers double-digit growth rates (if guidance is maintained), it earns my top pick for May.

The Motley Fool contributor Rachit Dudhwala does not own shares in RCG Corporation Ltd

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The Motley Fool Australia owns shares of Class Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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