Hey Investors,
Fresh month, fresh opportunities. Our Best Buys for May are here. 🎯
Each month, we look for great companies trading at attractive valuations and highlight three stocks that currently stand out to us.
Since December 2024, we’ve shared 51 Best Buys with our paid members.
They’ve delivered outstanding results so far, with multiple positions already up close to or over 100% in such a short timeframe 🔥
🚀 AMD at $97.35 (+250%)
🚀 Alphabet at $168.95 (+127%)
🚀 BE Semiconductor at €113.85 (+117%)
🚀 ASML at $662.63 (+99%)
Our selection combines valuation and fundamentals, but quality always comes first. As Warren Buffett famously said:
“It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Learn more about how we score stocks on fundamentals in our Fundamental Scoring Framework article.
To keep our process sharp and ideas fresh, we don’t pick the same Best Buy two months in a row.
Now let’s dive into our Top 3 Best Buys for May ✨👇
Disclaimer:
The information and opinions provided in this article are for informational and educational purposes only and should not be considered as investment advice. Please consult the general disclaimer for more details.
#3: Hermès (OTC: HESAY)
This is the first time we’re adding Hermès to our Best Buys list. In early 2025, the stock peaked at $303. Since then, shares have fallen to $186, leaving this world-class business more than 38% below its highs.
While the stock has corrected sharply, the quality of the business has not changed. That disconnect has created an attractive opportunity for long-term investors 🎯
What Happened?
Hermès has been building one of the strongest luxury brands in the world since 1837. Across 16 product categories (métiers), the company has built a reputation for exclusivity and craftsmanship that very few brands can match.
That is why investors have historically been willing to pay a premium valuation for the stock. But this year, even Hermès has come under pressure.
Source: Hermès investor materials, adapted by ChatGPT
The war in Iran hurt spending in the Middle East, one of the most important growth regions for luxury brands. Sales in the region fell more than 13% in the first quarter. Fewer wealthy tourists also visited Europe, which impacted sales there.
China was another weak spot. Many consumers are still spending more cautiously due to economic uncertainty, putting pressure on luxury demand. Growth in Asia-Pacific slowed to just 2.2%. On top of that, currency effects reduced reported revenue by €290 million. As a result, Hermès reported Q1 organic growth of 5.6%, below expectations of 7.1%.
Luxury as a whole is under pressure right now, and companies like LVMH and Kering are seeing an even steeper slowdown. The difference is that Hermès operates at the very top of the luxury market:
📊 Excluding currency effects, Hermès still grew in a difficult quarter
👜 Hermès still cannot keep up with demand for its most exclusive products
📈 Hermès has the highest gross and net margins of any major luxury company
That is why many investors see Hermès as a class apart within luxury.
Why Hermès Looks Attractive Now
Hermès scores 79 🟢 in our Fundamental Scoring Framework, which is an excellent score. If the company had met earnings expectations this quarter, it would have received our High-Quality label 🔵.
Hermès has always traded at a premium valuation, which makes sense given the strength of the business. Over the past 10 years, the stock traded at an average P/E ratio of 49.2x. Today, that has dropped to 36.7x, which is more than 25% below its historical average.
Its forward P/E of 34.0x is also below the lowest valuation level of the past decade (10-year low: 34.2x).
That means investors can now buy the best luxury company in the world at its most attractive valuations in years.
No luxury brand matches Hermès when it comes to brand strength, pricing power, and exclusivity. The company has been around for nearly 200 years, and if one luxury business is built to keep winning long term, it is Hermès.
The Future Investors (Vincent & Stefan) currently do not hold a position in Hermès.
Fundamental Score: 79 🟢 → Quality
Current Stock Price: $185.79
The next two? Two high-quality 🔵 businesses trading at very attractive valuations right now:
👑 One is a near-monopoly business with industry-leading margins.
🚀 The other is a fast-growing fintech leader with plenty of room to grow.
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