General Motors

This company is in the automobile sector, and shares look to be very inexpensive at current levels. Despite all the recall troubles and litigation issues, hedge funds and mutual funds are continuing to stick with General Motors Co. (NYSE: GM), as many view the stock as very undervalued. GM trades just below ad incredible 5.75 times estimated 2016 earnings. The company, like competitor Ford, has benefited from incredible sales in China to boost revenue. GM invested heavily in China decades ago, and it grabbed a big chunk of what is now the world’s largest auto market.

With the company facing continued possible punitive damages over ignition switches, there will continue to be a headline risk cloud over the stock. Long-term patient investors that can look beyond current issues may stand to make outstanding money on the auto giant, especially as the oil price plummet and low gasoline prices continue to push new buyers into showrooms.

The company reported very solid first-quarter earnings last week, and with gas prices staying at the lowest levels in years, and GM producing some of the best new models in years, the future for the battered stock looks very good.

Investors are paid a 4.73% dividend. The $44 Merrill Lynch price target is higher than the consensus target of $38.25. Shares closed Thursday at $32.44.

Royal Dutch Shell

This company has survived the plunge in oil pricing plunge as good as or better than any other major integrated. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide. The company explores for and extracts crude oil, natural gas and natural gas liquids (NGLs).

Royal Dutch Shell also converts NGLs to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy. In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

The company’s $50 billion acquisition of BG Group finally closed in February, and a reported 2,800 jobs will be cut. This continues the reorganization efforts that began last year with 7,500 job cuts. The company has not reported first quarter earnings yet, so investors should be aware of that.

Royal Dutch Shell investors receive a huge 6.02 % dividend. The Merrill Lynch price target is $61.90. The consensus target was not posted. Shares closed Thursday at $53.08.

It’s not the easiest thing to sell in May and go away, unless you don’t pay commissions, which few of us have the luxury of not doing. However, rotating to safer areas for the next six months or so does make good sense, especially in what could be a volatile election year.