Five of the top ASX stocks for May

Australia's listed companies could come under further pressure in May, following another rate hike from the Reserve Bank of Australia (RBA) that has caused shock and dismay for both businesses and households.

On 3 May the RBA caught markets by surprise, announcing that it would resume its hiking of the benchmark cash rate following a brief respite from hawkish monetary policy in April.

The RBA's latest 25 basis point rate hike brings the cash rate target to 3.85%, for its highest level since April 2012.

The interest rate hike will put pressure on the Australian economy by increasing the costs of borrowing for both households and businesses, potentially reducing levels of consumption and investment.

Its impacts could be especially acute given the Covid-era housing boom, which saw scores of Australian families take out mortgages to enter the housing market. These households will see their bottom lines come under further stress as interest rates rise further, due to the predominance of variable loans on the Australian market.

Should the Australian economy come under pressure due to further rate hikes, ASX-listed companies that truck in essential goods and consumer staples should hold up well compared to their peers. Chief amongst such stocks would be the operators of major retail chains, such as Woolworths Group and Wesfarmers.

Other stocks that could also perform well include companies in the Australian resources sector, which along with the financial sector comprises the two mainstays of the ASX.

Exports of key raw materials – in particular energy resources – could remain strong irrespective of the health of Australia's domestic economy. This could especially be the case should the conflict in Ukraine continue to stymie global energy supplies, or China keep the pedal on growth in fixed-asset investment to buoy sluggish consumption in the wake of the Covid-pandemic

Here is a list of five of the top ASX-listed stocks that investors should consider in the month of May, 2023.

1. Wesfarmers (ASX: WES)

2. Woolworths Group (ASX: WOW)

3. Beach Energy (ASX: BPT)

4. Airtasker (ASX: ART)

5. Telstra (ASX: TLS)

1. Wesfarmers (ASX: WES)

First founded over a century ago in 1914 as a farmers' cooperative in Western Australia, WESS has since evolved into one of the biggest listed companies in Australia, with diversified operations encompassing a broad range of sectors.

WES has an especially strong portfolio of key retail operations, with major brands including Kmart, Target, Bunnings, Officeworks, Priceline and Beaumont Tiles.

WES's' share price has risen over 12% year-to-date, as well as nearly 4.5% over the past year.

Based on forecasts from Commsec, WES could generate earnings per share (EPS) of $2.14 in FY23 and $2.25 in FY24. Should the retail operator hit these targets, Wesfarmers' shares would be 24-times FY23's estimated earnings and 23-times FY24's estimated earnings.

2. Woolworths Group (ASX: WOW)

Retail giant Woolworths operates more than 1,400 stores across both Australia and New Zealand. In addition to its self-branded supermarket chain, WOW also owns the Big W chain of stores in Australia and several supermarket chains in New Zealand.

The company's half-year results were ahead of expectations, with a 4% year-on-year increase in sales to $33.17 billion. WOW's net profit after tax (NPAT) posted a 14% rise to hit $907 million, while its fully-franked interim dividend of 46 cents per share, for an increase of 17.9% compared to the previous interim dividend.

WOW's share price has risen over 17% since the start of the year, with a gain of nearly 1.5% over the past month.

3. Beach Energy (ASX: BPT)

Adelaide-headquartered Beach Energy is an oil and natural gas company with exploration and production operations scattered across five basins in Australia and New Zealand.

These include the Cooper Basin in South Australia and Queensland; the Bass Basin in Victoria, the Otway Basin in Victoria and South Australia; the Perth Basin in Western Australia and the Taranaki Basin in New Zealand.

According to its FY22 annual report, BPT saw sales revenues rise 15% to $1.749 billion in the last financial year. Underlying EBITDA rose over 16.5% to breach the billion-dollar threshold, reaching $1.111 billion in total.

BPT could continue to benefit from the adverse impacts on global energy supplies of the war in Ukraine, which has now raged into its second year.

4. Airtasker (ASX: ART)

Airtasker is Australia's market leader for online marketplace local services, with a huge $600 billion total addressable market across Australia, the US and the UK.

The company bills itself as a 'trusted community platform' for the local outsourcing of tasks and services such as home cleaning, handyman work, web development and graphic design.

ART also has considerable room for growth, with a gross marketplace volume of just $189.6 million in FY22, up 23.8% compared to FY21.

Given that people are always on the hunt for work or local services - perhaps even more so during periods of economic downturn, ART's share price could remain resilient even if rate hikes from the RBA persist.

5. Telstra (ASX: TLS)

Telstra is a blue-chip stock and one of Australia's most iconic big-name companies, having its origins as the federal government's main telecommunications operator throughout the 20th century.

Following a privatisation and listing process that commenced at the end of the 1990s, TLS remains Australia's largest telecommunications company in terms of market share, as well as the largest wireless carrier in the country.

Demand for the company's services is inelastic, given the fundamental role that the Internet and mobile telecommunications play in a modern economy like Australia. For this reason, TLS's share price should be well-positioned to weather the impacts of any further rate hikes on the Australian economy.

In April, analysts from Morgans put TLS on its best buys list, with a target share price of $4.70. The company's share price currently stands at around $4.30, for a year-to-date increase of over 8.7%.

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