Top ASX shares to buy in May 2023

A group of older people wearing super hero capes hold their fists in the air, about to take off.A group of older people wearing super hero capes hold their fists in the air, about to take off.

As we rocket faster than a speeding bullet to the halfway mark of 2023, we asked our Foolish writers which ASX shares they reckon could be set to soar up, up and away!

Here is what the team came up with:

7 best ASX shares for May 2023 (smallest to largest)

  • Universal Store Holdings Ltd (ASX: UNI), $360.59 million
  • Beach Energy Ltd (ASX: BPT), $3.35 billion
  • Altium Limited (ASX: ALU), $5.02 billion
  • Allkem Ltd (ASX: AKE), $7.81 billion
  • Treasury Wine Estates Ltd (ASX: TWE), $10.06 billion
  • James Hardie Industries Plc (ASX: JHX), $14.80 billion
  • Telstra Group Ltd (ASX: TLS), $50.49 billion

(Market capitalisations as of market close 28 April 2023).

Why our Foolish writers love these ASX stocks

Universal Store Holdings Ltd

What it does: Universal Store is a retailer focused on premium youth apparel. It operates three different brands – Universal Store, Thrills and Perfect Stranger.

By Tristan HarrisonI think this ASX All Ords share could deliver good returns over the next few years.

In its FY23 half-year result, the company delivered statutory profit growth of 31.7% and declared an interim dividend of 14 cents per share.

Using the forecast numbers on Commsec, Universal Store shares are valued at just 11x FY23’s estimated earnings with a potential grossed-up dividend yield of 8.1%.

I believe the business can continue to grow as it opens more stores, expands the Perfect Stranger brand nationally, benefits from increased scale and achieves greater efficiencies through its new distribution centre.

Motley Fool contributor Tristan Harrison does not own shares in Universal Store Holdings Ltd.

Beach Energy Ltd

What it does: Beach Energy is an oil and gas producer based in South Australia. The company has numerous onshore and offshore projects in New Zealand and Australia. It’s a key gas supplier to Australia’s east coast markets.

By Bernd Struben: Beach Energy shares are down 6% in 2023, which I think presents a good entry point.

Oil and gas prices have come off the boil, but I believe energy prices will rebound once global interest rates peak and recession fears ebb.

While Beach reported a 5% decline in third-quarter production, that was mostly due to expected and unexpected outages, and the company did maintain its guidance.

Looking ahead, Beach has significant potential to increase production, with first gas from its Waitsia Gas Plant targeted by the end of 2023.

The company’s balance sheet is strong, with total liquidity of $504 million as at 31 March.

Beach pays a trailing dividend yield of 2.0%, fully franked.

Motley Fool contributor Bernd Struben does not own shares in Beach Energy Ltd.

Altium Limited

What it does: Founded in 1985, Altium provides software for designing printed circuit boards (PCBs). Think of the company as the digital toolkit for designing the technology responsible for powering modern-day devices – from electric vehicles to smart vacuum cleaners.

By Mitchell LawlerDespite Altium making strides in growing the business over the past few years, the share price is still fluctuating between $25 and $40. This is probably due to the lack of earnings growth over this period. However, I believe this could be set to change. 

Earnings margins ultimately come down to pricing power. In the PCB design space, there are two big names: Altium and Cadence. Both companies are growing their revenue aggressively and maintaining profit margins above 20%. 

This leads me to think there could be a duopoly forming in the industry, which would allow both companies to lift their prices. Mastercard and Visa are prime examples of this, now touting margins greater than 40%.

Motley Fool contributor Mitchell Lawler does not own shares in Altium Limited.

Allkem Ltd

What it does: Allkem is the lithium mining giant formed by the merger of Galaxy Resources and Orocobre in 2021.

By James MickleboroAlthough lithium prices have taken a tumble in recent months and look likely to keep falling for some time, I’m still positive on Allkem shares. This is due to the company’s production growth plans for its massive projects across the Americas and Australia.

Management aims to grow Allkem’s lithium carbonate equivalent (LCE) production by >4x over the five years to FY 2028. I expect this production growth to help offset lithium price declines and keep the company’s profits strong for the foreseeable future.

Another reason I would buy Allkem stock is its valuation. At 0.9x net asset value (NAV), the ASX 200 share looks meaningfully cheaper than rivals, which trade on a peer average of ~1.3x NAV. It is partly for this reason that Goldman Sachs currently has a buy rating and a $12.90 price target on Allkem shares.

Motley Fool contributor James Mickleboro owns shares of Allkem Ltd.

Treasury Wine Estates Ltd

What it does: Treasury Wine is the company behind iconic Australian wine labels such as Penfolds, Wolf Blass, and 19 Crimes.

By Brooke CooperThe Treasury Wine share price has been on a roll lately.

It’s lifted more than 50% from the lows it reached in 2021 amid wine tariffs imposed by China in response to political tensions. And I think it has scope to continue gaining.

Treasury Wine reported a 17% jump in earnings before interest, tax, SGARA, and material items for the first half of the financial year.  Not to mention, there looked to be positive news on the tariff front last month.

I’m not alone in my bullishness. Goldman Sachs has a buy rating and a $14.70 price target on Treasury Wine shares.

Motley Fool contributor Brooke Cooper does not own shares in Treasury Wine Estates Ltd.

James Hardie Industries Plc

What it does: James Hardie is the world’s leading producer and marketer of fibre-cement wall and floor products used in new residential, commercial, and industrial construction.

By Bronwyn AllenJames Hardie shares steadily tumbled throughout 2022.

This was due to rising inflation and interest rates, as well as global supply disruptions and labour shortages that created significant delays in housing construction activity.

But, it appears all that could be now turning around, providing tailwinds for an ASX 200 share that many experts believe has been oversold.

Brokers have been recommending James Hardie as a buy since the start of 2023, and its share price is now up by almost 30% in the year to date.

It may not be too late to buy, though. Citi says the company is trading on an attractive FY24 “trough earnings” multiple of 19, and the stock price is still a long way off its historical peak of $58.07, reached in December 2021.

Motley Fool contributor Bronwyn Allen owns shares in James Hardie Industries Plc.

Telstra Group Ltd

What it does: Telstra is a company almost all Australians would be familiar with. It is the largest and most dominant telco in Australia, offering a range of mobile and fixed-line internet and telephony services.

By Sebastian Bowen: I believe Telstra is an ASX 200 share worth a second look in May. This telco has been on a bit of a tear this year, rising from under $4 a share at the start of the year to the $4.30 range we are seeing more recently. Telstra also hit several new 52-week highs at the end of April too.

I like Telstra because of its inelastic customer demand and strong brand. This is a blue-chip stock that should do well in all economic climates.

Many brokers think Telstra stock has further to run as well. Last month, Morgans had Telstra on its best buys list, with a share price target of $4.70.

Motley Fool contributor Sebastian Bowen owns shares in Telstra Group Ltd.

The post Top ASX shares to buy in May 2023 appeared first on The Motley Fool Australia.

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Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now…

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Altium, Cadence Design Systems, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool Australia has positions in and has recommended Telstra Group. The Motley Fool Australia has recommended Mastercard and Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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