Buy These 3 Stocks Before May Ends (& Sell These 3 NOW)

Added: 2026-05-28

[00:00:00]Some of the hottest stocks in the market these days could be setting investors up for a huge disappointment. Meanwhile, a few of the most ignored ones might offer the strongest chances in 2026.

[00:00:08]Today, we're looking at three stocks that Morningstar recommends selling before May ends, and three others they suggest buying instead. So, let's dive right in. Stock number one is Ciena, ticker CEN.

[00:00:22]Ciena produces the fiber optic gear that data centers rely on to transfer massive volumes of data quickly. Right now, demand for this equipment is exploding since nearly every major company is racing to expand its AI infrastructure all at once. The stock has shot up dramatically. Keep in mind, one of our main principles of sound investing, and probably the fifth and most critical one, is that even a fantastic story turns into a poor investment when the price is too high. So, here's the catch.

[00:00:47]Ciena is now trading at 173 times what Morningstar projects the company will earn for all of 2026. And even stretching out to 2030, it's still valued at 74 times those expected earnings. Simply put, you're paying a huge amount today for earnings that won't arrive for years. And if something goes even slightly off track, like slower AI investment, increased competition, or a pause in data center construction, the stock could drop sharply. Second stock Morningstar advises selling is SanDisk. They manufacture memory chips, the short-term storage that computers and AI systems require to operate. Currently, there's a severe shortage of these chips due to the AI surge. Demand is so strong that buyers are willing to pay nearly any price. The stock has climbed more than 400% yet this year.

[00:01:39]But, the problem is memory chips are a commodity product. That means when supply and demand balance out, and they always do eventually, prices will fall.

[00:01:50]Manufacturers are already upgrading their plants to produce even more. So, when that added supply reaches the market in the coming year or two, the same firms enjoying high prices now could face serious pressure. If you're purchasing the stock expecting today's conditions to continue indefinitely, that's taking on real risk. The stock is valued as if the shortage will never end. History shows it won't. We'll run this through our process later in the video to check how it holds up. Stock number three to sell is iron.

[00:02:17]This is a data center firm specializing in powering Bitcoin mining and AI with clean energy. Morningstar has called it almost a perfect mix of everything popular in the market right now. Data centers, Bitcoin, and AI combined. That said, analysts note the company lacks any lasting edge over its rivals, and it carries a very steep valuation.

[00:02:36]Remember, in the short term, the market acts like a voting machine, but over the long term, it's a weighing machine. This means popular stocks can rise quickly while unpopular ones fall, but eventually business fundamentals determine true value. Now, let's move to the stocks everyone wants to hear about, the ones Morningstar recommends buying.

[00:02:52]I want to be very clear and direct here.

[00:02:53]Don't buy or sell any stock just because Morningstar suggests it. Don't act because I like or dislike a company, either. Never do it simply because someone else recommends it. The investors who suffer big losses are those who hear a name, get excited and purchase without knowing the business's true worth or the right price to pay.

[00:03:13]That's how serious money gets lost.

[00:03:15]What we aim to provide on this channel is a starting point. We're teaching a method, a reason to investigate further, and then doing our own analysis. That's the main lesson I want you to take from this video and every other one on our channel. Stock number one is Alphabet.

[00:03:29]Most people recognize this as Google. Or if you follow this channel, I sometimes call it the Googly Moogly. Contrary to what many expected recently, Google Search isn't being hurt by AI. It's actually getting stronger because of it.

[00:03:40]More helpful search results lead to greater user engagement, which drives higher advertising income.

[00:03:46]YouTube, the world's second biggest search engine and owned by Google, is seeing big gains in both ad volume and rates.

[00:03:54]Google Cloud, their service that provides computing resources to other firms, is expanding rapidly as a major platform for AI work. Morningstar's view is that Alphabet gains from AI on several fronts at once. Internally with improved offerings, externally through cloud needs, and within its ad business.

[00:04:16]What's notable is that just a few years back Google shares were at $84. Even 1 year ago they sat around $150.

[00:04:22]Here's what's strange about markets. It was an unloved stock back then, offering a better price and stronger upside than now. Today at two or three times higher, people are much more enthusiastic, but we don't want that to influence our view of it as an investment today. We need to stay as objective as possible. So, let's check if the current price is reasonable. And after this video, I suggest you review our earlier Google videos. You'll notice a steady approach in how we discuss Google remains a solid balance sheet business with a $4.7 trillion market cap and similar enterprise value, plus strong cash flow.

[00:05:01]But, here's something worth noting.

[00:05:03]Their cash flow was $64 billion last year and around $67 billion annually for the past 5 years. Now, look at net income, $160 billion comes from heavy capex spending. All these big tech firms are investing heavily in capital expenditures. The question is whether it will keep going and whether they'll earn good returns on that money. That's tough to predict right now. They offer a small 2% dividend, but it amounts to $10 billion yearly given the massive market cap. Return on invested capital is solid and improving. Their profit margin has been 26% annually for the last 10 years, 29.5% for the last 5 and 38% last year.

[00:05:48]That's impressive. With a 60% gross margin and this growth pace, margins could keep rising. This is remarkable, a 38% net profit margin. Let's review the eight pillars. Everything looks good except valuation measures, but remember net income has grown a lot over the last 5 years, so I'm not too concerned. I'll set those aside. If they can sustain 30 or 40% profit growth for years, this looks attractive. Everything else, cash flow growth, net income growth, revenue growth, low debt, share buybacks, which could be negative, and high returns on capital make me think this is a well-managed business that might be slightly overpriced. Let's check analyst forecasts for earnings growth, 6%, 16%, 11.5%, 26%, and 17%. Not quite as strong as expected, but nearly doubling in 4 years. Revenue growth looks similar from $485 to $772 billion. Not quite doubling, but still reaching a nearly $780 billion revenue company soon with excellent growth and margins. So, what price is fair for this business? My assumptions, 7%, 9%, and 13% revenue growth. A bit below analysts, but I'm comfortable. Profit margins at 25%, 30%, and 35%. I'm a little unsure here. I wonder if I'm being too cautious since their revenue seems quite stable. I'm not concerned about cloud revenue dropping, mainly about CapEx levels.

[00:07:12]We'll leave it for now. For future PE and price to free cash flow in 10 years, I use 20, 23, and 26. Honestly, higher numbers would make sense, too. This is Google and YouTube, after all. Finally, my 9% required market return for intrinsic value. I ran the analysis. The stock sits at $385. My low price is $215, high is $581, and middle is $330.

[00:07:39]Using middle assumptions, I see about a 7% discounted cash flow return. Even with higher top assumptions, I don't reach the return I need. Stock number two is DAO, ticker DO. This one is much less thrilling, but offers an intriguing concept, and many in our community liked it before the recent increase. DAO is a US chemical firm. They produce oil-based chemicals used in plastics, packaging, coatings, and many industrial goods.

[00:08:02]Here's the main idea. According to reports, the conflict in Iran and issues with uh with the Strait of Hormuz have made it hard for Asian chemical companies to secure enough oil for their operations.

[00:08:17]They're reducing output as a result, but US firms like DAO have ready access to local oil and aren't dealing with the same constraints. DAO can operate its facilities at full speed and capture the market share Asian rivals are giving up.

[00:08:30]Higher volume and better prices should boost revenue and margins.

[00:08:33]Plus, the stock offers a 3.5% dividend while that plays out. Many investors appreciate that steady income. Finally, stock number three Morningstar highlights for buying is Lockheed Martin, LMT. Lockheed is among the world's biggest defense contractors.

[00:08:49]They develop fighter jets, missile systems, and advanced military technology. Stock has retreated from its peak levels, and Morningstar sees this dip as a genuine chance. First quarter results were weaker with flat revenue year over year and slightly lower margins.

[00:09:02]But Morningstar notes this is typical since Q1 is usually [clears throat] the weakest period for defense firms.

[00:09:08]More importantly, the bigger picture remains unchanged. US defense spending isn't decreasing. European nations are increasing their defense budgets more than they have in many years. Now, you've seen all six stocks. As mentioned earlier, we never buy or sell just because someone recommends it, even if it's a respected name or even Warren Buffett.

[00:09:29]My first step is to understand what they see in it. So, I'm going to analyze SanDisk with our stock analyzer so you can see possible future returns from current prices and more importantly recognize why a solid fundamental approach matters for long-term success.

[00:09:42]Let's pull up SanDisk. Wow, it's down 7.5% today, but still up 420% year-to-date even after that drop.

[00:09:52]Market cap stands at $243 billion and here's something great. Their enterprise value matches it exactly. That means virtually no debt.

[00:10:01]Excellent balance sheet. The challenge is they generated $4.5 billion in free cash flow last year, but only $1 billion total over the previous 5 years.

[00:10:09]So, the recent surge has dramatically lifted cash flow, but is it lasting or just from temporary pricing? No dividend. PE ratio 54, price to free cash flow 54, 5-year average PE around 300 and price to free cash flow 240.

[00:10:28]Look at margins. 13.85% over 10 years, 11% over 5, and 34% last year.

[00:10:36]If I saw this without the name, I'd wonder what caused such a sudden jump.

[00:10:39]It seems doubtful that 10-year and 5-year margins would permanently triple.

[00:10:43]The question comes up about AI data centers needing storage, but hard drives and this type of storage are simpler to produce than advanced chips. If Nvidia, Micron, and AMD can ramp up, this should be even easier. Interestingly, return on invested capital is just 2% last year despite the strong cash flow. I don't fully understand that. Revenue growth 15% annually over 10 and 5 years, 33% over 3 years. I've shared a lot of numbers and if you're new, you might feel overloaded. That's normal. Every successful investor goes through that phase. The real question is whether you want to improve as an investor and feel confident knowing you own pieces of businesses you truly understand.

[00:11:23]I've made it simple by creating a downloadable cheat sheet with all these important metrics. Click the link below or in the pinned comment. We'll email it to you free right away. Keep it handy as you watch our videos so you can follow along better and build real knowledge about companies. Now, let's see what analysts project. They forecast profit rising from $41 to $78 with a big increase next year then easing back and revenue showing a sharp rise followed by moderation. Even they expect this won't last forever. But if correct and the company earns $78 or $80 per share in 2 years, applying 20 times earnings gives nearly $1,600 value. The stock trades at $1,430 now. We can't predict the future perfectly. Analysts might be wrong and results could exceed expectations. But assuming strong outcomes constantly makes it hard to justify. One key reason I share on YouTube is to remind everyone of the fifth and most vital principle in our investing approach. A great story becomes a bad investment if you pay the wrong price. I see so many people, including professionals, fall for the narrative without asking about the cost.

[00:12:30]That's something I really want you to remember from this channel. So, how do we figure it out? We use our stock analyzer tool and input our own assumptions about the story. We loaded SanDisk with my latest thinking. I ran a 10-year view. It's tricky because big jumps make stability uncertain. I made conservative choices. Revenue growth at -5, 7, and 15%.

[00:12:53]For profit margins, 8, 4, and 20% since last year's level probably won't hold.

[00:12:59]For future P/E, I used 14, 17, and 20.

[00:13:05]Remember these are multiples 10 years out after growth. Finally, my 9% required return for intrinsic value.

[00:13:13]What is it worth today? Keep in mind I'm not looking for just 9%. You shouldn't either. You could buy a cheap ETF for that. Your required return depends on your knowledge, goals, and more. I ran the analysis. If you're here, you know you want to invest smarter but need the right system.

[00:13:28]Market Aura created software and a community that makes intelligent investing much more straightforward. The stock analyzer shows true worth based on your own assumptions. The eight pillars evaluate business strength. Combine them and you have a reliable process you can trust because it comes from you. You become an investor who owns for genuine reasons, your reasons. You won't panic in downturns, you'll get excited instead. You'll know the difference between a bad day and a bad investment.

[00:13:51]That confidence is powerful. It changes everything. This was made for regular investors like you, not hedge funds or academics.

[00:13:59]Those folks aren't necessarily smarter than you think. It's for everyday people wanting to do it properly and sleep easier at night.

[00:14:07]Start a 7-day trial for just $7. Click the link below for immediate access.

[00:14:15]Here are the results.

[00:14:19]Low price $56, high $773, middle $260.

[00:14:23]This seems like a cyclical business that shines at peaks and struggles at lows.

[00:14:28]Even with optimistic 20% return assumptions, the top value is $773.

[00:14:33]This is tough for me to accept unless last year's performance continues strongly for years. That appears doubtful.

[00:14:39]Remember though Morningstar focuses on long-term, they discuss monthly buys and sells based on short-term conditions.

[00:14:44]That's not our style. We ask if we'd want to own this for 10, 20, or 30 years. If you'd like to see every stock I'm buying now for that long horizon, I have a video detailing the 12 recent moves in my own portfolio. Check that out next. Thank you for your time.