Top 4 Stock Picks for May 2025: The Pyramid Diversification Strategy

Throughout May, we've been focusing on the Pyramid Diversification strategy with a growth mindset to outperform the market again in 2025.

The key to sustainable success is controlled risk allocation—10% for most investors (or 15-20% if you're under 35)—blended with a balanced mixture of high growth, mature growth, and staple stocks. This strategic approach helps us consistently outpace benchmark indices.

What I love about this systematic investing method is that it frees us from daily trading stress. Instead of being glued to charts every weekday, you can implement a disciplined strategy that delivers results while giving you more quality time with your family.

Let's dive into our top picks for this month that embody this balanced approach.

Successful growth investing requires balancing greed and stability. Your portfolio should follow a pyramid structure:

This balanced approach helps beat market returns consistently year after year.

BuyTrigger: My proprietary blend of technical analysis, fundamentals, and valuation metrics that indicates the optimal buy point. Similar to finding an undervalued house in a good neighborhood - maximum risk/reward efficiency.

ValueTrigger: The intrinsic value calculation infused with macro-economic data, powered by Refinitiv Wall Street data. My algorithm determines dynamic valuation based on current market conditions.

United Health presents a fascinating opportunity in the current market environment. Trading at $291.91 with a "B" grade, UNH is currently 45% below our calculated valuation of $534. This significant disconnect between market pricing and intrinsic value stems from ongoing concerns about healthcare policy changes and margin pressures in their insurance segments.

The technical indicators reveal a consolidation pattern that's been developing since March, with declining volume suggesting seller exhaustion. Our proprietary BuyTrigger point of $347 represents the level where momentum indicators would confirm a trend reversal. The MACD is showing early signs of positive divergence, while the RSI at 42 indicates neither overbought nor oversold conditions.

UNH's diversified business model—spanning traditional insurance, Optum Health services, and pharmacy benefit management—provides substantial revenue diversification. Their Q1 2025 earnings revealed membership growth of 4.3% year-over-year, exceeding analyst expectations of 3.2%. The company's substantial cash reserves ($21.4B as of last quarter) position them well for potential acquisitions in the health tech space, which could accelerate growth beyond our projected 9% rate.

Risk factors to monitor include regulatory challenges to their PBM business model, Medicare Advantage reimbursement rate adjustments, and rising medical loss ratios. However, these concerns appear largely priced in, creating an asymmetric risk/reward profile with downside likely limited to the $270-280 support zone while upside potential remains significant. Investors should consider dollar-cost averaging into this position given the elevated risk level of 71.2.

From a technical perspective, LLY formed a cup-and-handle pattern throughout April, breaking out above the $740 resistance level on above-average volume. The stock has consistently outperformed the broader healthcare sector, with relative strength maintaining an upward trajectory. Our BuyTrigger point of $790 represents the next significant resistance level where momentum indicators would confirm the primary uptrend's continuation.

Fundamentally, Lilly's exceptional 40% projected growth rate stems primarily from Mounjaro (tirzepatide) and Zepbound, their GLP-1 receptor agonists for diabetes and weight loss. Q1 2025 sales for these medications reached $3.4B, beating consensus estimates by 15%, with prescription data showing accelerating adoption. While manufacturing capacity has been Lilly's main constraint, their $7.2B investment in new production facilities is easing supply limitations, with full capacity expected by Q4 2025.

Beyond their GLP-1 franchise, Lilly's pipeline is remarkably promising. Donanemab for Alzheimer's disease received FDA approval in March 2025, targeting a $3B+ market opportunity. Their early-stage obesity pipeline features dual and triple receptor agonists showing potential for over 25% weight loss in early trials, potentially securing their leadership position for years. Key risks include Medicare negotiation pricing pressures, Novo Nordisk competition, and manufacturing execution. With a moderate risk score of 49.6 and exceptional performance metrics (90.184), Lilly serves as the growth engine of our Pyramid Diversification strategy—though position sizing should reflect its higher valuation risk compared to our other selections.

Technical analysis shows JPM in a rising wedge pattern since February, with support holding steadily at the 50-day moving average. Volume patterns show healthy accumulation during pullbacks, reflecting institutional confidence. With the price above our BuyTrigger of $234, investors should consider establishing initial positions and adding during pullbacks to the $240–245 support zone.

JPM's fundamental strength stems from its diversified business model across consumer banking, investment banking, trading, and asset management. The First Republic acquisition has integrated smoothly, bringing high-quality deposits and wealthy clients. Net interest income has stabilized at $22.7B in Q1 2025 (up 2.4% quarter-over-quarter) despite interest rate challenges, showcasing the bank's superior asset sensitivity management.

The bank's efficiency ratio has improved from 62% to 59% year-over-year, demonstrating disciplined expense management while maintaining heavy technology investment (2025 tech budget: $15.3B). Return on tangible common equity at 20.2% significantly outperforms peers. A robust share repurchase program ($15B authorized through 2025) should support the stock price, while the 2.5% dividend yield pairs income with 5% projected EPS growth. Key risks include commercial real estate exposure ($43B) and potential regulatory capital requirements, though JPM maintains ample excess capital with a CET1 ratio of 15.1%—well above its 11.5% requirement.

The technical picture shows Google trading in a steady upward channel since January, with consistently higher lows establishing a reliable support trend. Volume patterns indicate steady institutional accumulation, particularly after their Q1 earnings beat where cloud revenue growth exceeded expectations at 27% versus 23%. The stock maintains its position above both the 50-day and 200-day moving averages, demonstrating strong underlying support.

Google's fundamental strength stems from its diversified revenue streams and dominant market positions. Search advertising remains the core business at 57% of revenue, while YouTube ad revenue grew 17.3% year-over-year in Q1. Google Cloud achieved profitability two quarters ahead of analyst projections. Their AI integration across products—particularly Gemini in search and Google Workspace—positions them to monetize AI capabilities more effectively than competitors.

The company's stellar balance sheet ($108B in cash and short-term investments with minimal debt) provides ample flexibility for continued share repurchases, which reduced outstanding shares by 3.2% over the past year. With an 11% projected growth rate, low 20.2 risk score, and forward P/E of 19.4 (below their 5-year average of 24.3), Google forms the foundation of our Pyramid Diversification strategy. Regulatory concerns around antitrust issues appear manageable and are reflected in the current valuation, creating an attractive risk/reward profile.

When integrated into a balanced portfolio following our Pyramid Diversification approach, these four selections create a complementary framework. Google provides the stable foundation with minimal correlation to economic cycles, while JP Morgan offers moderate growth with sensitivity to interest rate normalization. United Health provides exposure to the secular growth of healthcare spending with event-driven upside potential, while Eli Lilly delivers pharmaceutical innovation exposure with exceptional growth characteristics.

The macroeconomic backdrop for these selections remains supportive, with inflation moderating to 3.2% (April 2025 data) and the Federal Reserve signaling potential rate cuts in the second half of 2025. Corporate earnings have remained resilient despite margin pressures, with S&P 500 companies reporting 7.3% year-over-year growth in Q1 2025. Our Recession Probability Model currently shows a 34% chance of recession within the next 12 months, down from 43% in January, creating a favorable environment for our balanced approach to growth investing.

Join the BuyTrigger Club for our comprehensive May analysis where we'll dive deeper into these four stocks and discuss optimal entry points, position sizing, and long-term growth projections!

Regards,

Alex

This blog post is for informational purposes only and does not constitute financial advice. The views and opinions expressed in this post are solely my own and are based on my personal analysis and experience. All information is provided on an as-is basis, and while I strive to ensure accuracy, I make no guarantees regarding the completeness, reliability, or accuracy of the information provided.

Investing in stocks and financial instruments involves risk, including the potential loss of principal. Always conduct your own research and consult with a qualified financial advisor before making any investment decisions. This blog is intended as a personal journal to document my thoughts and strategies, and should not be taken as a recommendation to buy or sell any securities.

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