May is shaping up to be a volatile month for U.S. stocks.
Coming into the month, the S&P 500 had already jumped 18% this year, but President Trump threw a wrench in the works after promising to raise tariffs on China. Stocks abruptly pulled back from all-time highs, as investors had hoped that a final deal could be worked out. Just last week, Treasury Secretary Steven Mnuchin said that a trade deal was in its "final laps."
Elsewhere, earnings season is rolling on with major retailers set to open their books, giving investors valuable insight into the state of the American consumer. With that in mind, keep reading to see why these Motley Fool contributors say Walt Disney (NYSE:DIS), General Motors (NYSE:GM), and Nordstrom (NYSE:JWN) are three stocks worth keeping an eye on this month.
What's next for the House of Mouse?
Dan Caplinger (Walt Disney): Few stocks can claim as many positive catalysts as Disney has had in recent months. Avengers: Endgame is another blockbuster for the entertainment giant's movie studios, once again proving just how big a bargain the company got when it purchased Marvel Studios for just $4 billion in 2009. And on the television front, the release of details of the company's Disney+ streaming video service sent shockwaves through the industry, raising questions about whether even streaming video's leading players will be able to withstand the onslaught of Disney content in a $6.99 per month package.
But having given investors all of that good news -- and having seen the stock price soar as a result -- it's now up to Disney to make sure it can execute on all the promises it's just made. Ventures like the opening of the Star Wars: Galaxy's Edge theme park section at both of its main U.S. resort properties represent the latest in a long series of cross-promotional efforts among Disney's primary business segments -- anything short of a feverish response from visitors will be seen as a disappointment. Future blockbusters like the final installment of the Star Wars original movies will force Disney to formulate a longer-term strategy for getting the most out of its prized content.
Disney has a lot of experience in turning dreams into reality, and there's every reason for investors to be confident that the company can do it again. But many will be looking at the stock to see if it can reflect success with further gains -- or if it falls after an impressive upward run.
Detroit diamond in the rough
Daniel Miller (General Motors): Of all the top U.S. stocks to watch this month, one of the most intriguing and ongoing stories can be found in Detroit. Its largest automaker, General Motors, is accelerating its efforts to lead in the upcoming driverless vehicle megatrend -- and recent news suggests people are optimistic about its chances to thrive.
More specifically, Cruise, the autonomous-vehicle subsidiary of GM, announced on May 7 that the company received an additional $1.15 billion in equity investments. If you're keeping track, that pegs Cruise at a hefty $19 billion valuation and brings its total secured capital commitments to $7.25 billion over the past year. This new round of investment comes barely two months after Cruise announced it plans to hire 1,000 more people over the remainder of the year, most of those being engineers, which would roughly double the size of its workforce.
Cruise's new investment and surging workforce will propel the company toward its commercial launch of a ridesharing service in San Francisco later in 2019. Management plans to eventually expand the service throughout the country, and it could be the development investors need to really get behind General Motors as a leader in driverless vehicles, as opposed to other major automakers, rideshare companies, or Silicon Valley tech giants.
At a time when new-vehicle sales are slowing in the North American cash-cow market, GM needs to execute on its driverless and electric vehicle strategies, especially considering Intel predicts mobility-as-a-service will generate roughly $3 trillion in annual revenue by 2050. That $3 trillion a year is a massive chunk of revenue that GM and its investors want their fair share of. And if you're curious about where this story goes, GM is definitely a top stock to start watching right now.
A mispriced retailer
Jeremy Bowman (Nordstrom): One stock I'll be watching this month is Nordstrom, the high-end department store chain that looks like a straight bargain today. Shares have fallen to just $40, approaching a five-year low, though there's been little actual news pushing the stock down recently.
Investors seemed disappointed in the company's fourth-quarter earnings report in February as Nordstrom reported just flat comparable-store sales in the key holiday quarter. But there are a number of tailwinds investors can look forward to over 2019.
Foremost, the company will open its flagship Manhattan women's store later this year. The 285,000-square-foot space has been in the works for seven years and will take up the first seven floors of a new skyscraper in Midtown. At the time it was announced in 2012, management said it expected the new location to be its most successful store, and if sales levels mirror those of Saks and Bloomingdale's locations in the area, the new store could add $300 million in sales for Nordstrom, growing total revenue by about 2%. That's in addition to anchoring its growth strategy in New York, since the company is also adding two new Nordstrom Local stores.
Meanwhile, the Nordstrom Rack off-price business is performing well, and e-commerce now makes up 30% of the company's sales, showing that Nordstrom has managed the shift to online sales better than most of its competitors.
The retailer now trades at a forward P/E of only 11 and offers a dividend yield of 3.6%. Just last year, the founding family offered to take the company private at $50 a share, but that was deemed inadequate by the board. That's a 25% premium over today's share price.
If Nordstrom can deliver strong numbers and guidance when it reports earnings on May 21, the stock could have significant upside considering the recent sell-off.