Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. So what are the best stocks to buy now or put on a watchlist? Google-parent Alphabet (GOOGL), Nike (NKE), West Pharmaceutical Services (WST), Lam Research (LRCX) and D.R. Horton (DHI) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflected rising confidence that the economy will eventually recover from the coronavirus.
But worries around Covid are rising again with the emergence of a contagious new strain. It has been named omicron by the World Health Organization and has been given the status “variant of concern.”
Stocks were also severely punished last week after the November U.S. job growth came in much weaker than expected.
Best Stocks To Buy: The Crucial Ingredients
Remember, there are thousands of stocks trading on the NYSE and Nasdaq. But you want to find the very best stocks right now to generate massive gains.
The CAN SLIM system offers clear guidelines on what you should be looking for. Invest in stocks with recent quarterly and annual earnings growth of at least 25%. Look for companies that have new, game-changing products and services. Also consider not-yet-profitable companies, often recent IPOs, that are generating tremendous revenue growth.
IBD’s CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
In addition, keep an eye on supply and demand for the stock itself, focus on leading stocks in top industry groups, and aim for stocks with strong institutional support.
Once you have found a stock that fits the criteria, it is then time to turn to stock charts to plot a good entry point. You should wait for a stock to form a base, and then buy once it reaches a buy point, ideally in heavy volume. In many cases, a stock reaches a proper buy point when it breaks above the original high on the left side of the base. More information on what a base is, and how charts can be used to win big on the stock market, can be found here.
Don’t Forget The M When Buying Stocks
A key part of the CAN SLIM formula is the M, which stands for market. Most stocks, even the very best, follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when the stock market goes into a correction.
New Covid worries have taken a toll on the market. The IBD market outlook is now “market in correction.” Last week the Nasdaq and the S&P 500 fell back below the key 50-day moving average, a bearish sign. The Dow Jones Industrial Average fared even worse, dipping towards its 200-day moving average. Indexes are coming under pressure again after trying to rally.
With the stock market now in a correction, investors should avoid making new stock purchases and take some profits to reduce market exposure. Also keep a close eye on your holdings in case sell signals are triggered.
But it is critical to remain engage for when a new uptrend emerges. Now is the time to be building a robust watchlist of fundamentally strong stocks forming sound chart patterns. This makes one ready to pounce when sentiment changes. The stocks featured below are potential candidates.
Remember, things can quickly change when it comes to the stock market. Make sure you keep a close eye on the market trend page here.
Best Stocks To Buy Or Watch
- Nike
- West Pharmaceutical Services
- Lam Research
- D.R. Horton
Now let’s look at Google stock, Nike stock, West Pharmaceutical Services stock, Lam Research stock and D.R. Horton stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Google Stock
Google parent Alphabet has back in its buy zone after previously breaking out of a flat base. The ideal buy point here is 2,925.18, according to MarketSmith analysis. It is actionable as high as 3,071.44.
The stock has been testing its 50-day moving average. If it can bounce from here it would offer up a new rebound entry. The 50-day/10-week line is a good place to start a position in a Long-Term Leader like GOOGL stock. But the market correction raises the risks for all new buys.
The relative strength line is just below record highs. It has been moving sideways as it consolidates. This gauges a stock’s performance compared to the S&P 500.
GOOGL stock has a near-perfect IBD Composite Rating of 97. That puts it in the top 3% of stocks tracked overall. Earnings outshine stock market performance, with its EPS Rating a very strong 98 out of 99.
Earnings have grown by an average of 123% over the past three quarters. This is almost five times the 25% growth sought by CAN SLIM investors.
Analysts see strong growth ahead, with Google earnings per share expected to explode 105% in 2021, and then growing by a further 5% in 2022.
The tech giant has a Relative Strength Rating of 92. That means it has outperformed 92% of stocks tracked over the past 12 months in terms of price performance.
Recent performance is strong, with Google stock rising more than 68% so far in 2021. This far outstrips the S&P 500’s gain of over 24%
Big money has getting rid of Alphabet stock of late, though this comes amidst a broad sell-off. This is reflected in its Accumulation/Distribution Rating of D+, which reflects slightly more selling than buying over the past 13 weeks.
Alphabet in April announced a new $50 billion GOOGL stock buyback. On its June quarter earnings call, Google announced a modification of the share repurchase agreement allowing the company to repurchase either class A or class C shares.
Late on Oct. 26, Alphabet posted Q3 earnings. EPS jumped 71% to $27.99, including gains on equity investments. Gross revenue rose 41% to $65.12 billion in the quarter ended Sept. 30.
Analysts had estimated Google earnings of $23.73 per share on gross revenue of $63.5 billion.
Internet search and other revenue rose 44% to $37.93 billion vs. estimates of $36.41 billion. Google said cloud-computing revenue rose 45% to $4.99 billion vs. estimates of $5.17 billion. Despite the revenue miss, Google cloud cut its operating loss almost in half to $644 million.
YouTube advertising revenue rose 43% to $7.2 billion. Analysts had estimated YouTube ad revenue of $7.42 billion.
While Google has expanded into cloud computing and consumer hardware, digital advertising still makes up the lion’s share of revenue. Google announced in early March that it will stop employing web browser-tracking technology for the purpose of selling advertising. Earlier, Google said it would phase out third-party cookies.
Google plans to utilize “contextual” technology that enables advertisers to target aggregated groups of consumers with similar interests, such as travel, sports or fashion.
Nike Stock
Nike stock is currently sitting below a cup base buy point of 174.48. It has twice met resistance above this level, which means its recent all time high of 179.20 could be used as an entry point. It closed last week up 1.3%, outperforming amidst a broad pullback.
The relative strength line has choppy in recent weeks after a period of solid momentum. Investors will want to see it turn higher again going forward.
Shares were given a boost after the shoe and athletics gear firm notched its 20th straight year of dividend hikes. It has boosted its quarterly dividend by 11% to 30.5 cents per share.
The firm recently revealed that it has created Nikeland. This is a virtual world on the Roblox (RBLX) gaming platform. Nikeland lets players customize their avatar with Nike products.
NKE stock investors shrugged off supply-chain concerns for the holiday quarter from Foot Locker (FL), a major Nike seller.
The pattern formed as investors assessed whether the holidays will test Nike’s supply chain. The RS line for the Dow Jones giant has improved since late September. It’s now just below early August highs.
Nike stock has a strong Composite Rating of 87, which puts it in the top 13% of stocks overall. Earnings need to improve going forward, with its EPS Rating sitting at 74.
Analysts expect Nike earnings to grow 1% in 2022 before exploding to 31% growth in 2023, MarketSmith data says. In 2019, Nike earnings fell 20% amid the coronavirus pandemic, which originated in China.
On Sept. 24, Nike earnings modestly beat estimates but sales missed and guidance was weak, amid supply headwinds.
West Pharmaceutical Services Stock
WST stock has formed a new cup-with-handle base with an ideal buy point of 445.91. It tested this entry before slipping back amid a broader pullback. It dipped about 1% last week as it continues to trade tightly.
The relative strength line is offering reason for optimism. It has slipped slightly after a period of outperformance that started early November. The stock is up nearly 52% so far in 2021.
WST stock has a very strong IBD Composite Rating of 94. At the moment earnings are even better than stock market performance, with its EPS Rating coming in at 98.
West Pharmaceutical earnings held solid in the most recent quarter, which was slightly disappointing.
But the Stock Checkup shows EPS growth has come in at an average of 67% over the past three quarters. This is well clear of the 25% growth sought by the CAN SLIM cognoscenti.
A number of notable funds own WST stock, including Baron Asset Retail Fund (BARAX) and the T. Rowe Price New Horizons Fund (PRNHX).
The company is a leader in integrated containment and delivery of injectable medicines. It is not itself a drugmaker, but its vials, syringes and other products and services help customers deliver drug products to patients.
Its biotech and pharmaceutical customers include many, if not most, of the companies working to develop Covid-19 vaccines and treatments. With Covid looking likely to become endemic going forward, this could make a lasting contribution to its business.
It’s unclear how West Pharma will respond to omicron variant news.
WST stock is currently an IBD Long-Term Leader. This is means it is part of a portfolio of select high-performing stocks that could potentially be held for years.
Lam Research Stock
Semiconductor equipment maker Lam Research is in its buy zone above a consolidation pattern entry of 673.90, according to MarketSmith analysis. It managed to rise 3% last week amid challenging action.
The stock is trading above its fast-rising 10-day moving average and sits well clear of its its 50-day moving average. This comes amid broad strength in chip stocks.
The relative strength line is particularly impressive, and has been sharply climbing since late October. LRCX stock has made muscular gains overall so far in 2021, rising just over 48%.
Lam Research stock has a very strong Composite Rating of 97. While stock market performance is good, earnings are even better. Its EPS Rating of 93 puts it in the top 7% of stock tracked.
There is rising demand for the stock among institutional investors, with its Accumulation/Distribution Rating coming in at B.
Notable holders include the Fidelity Contrafund (FCNTX) and the Janus Henderson Enterprise T Fund (JAENX). These are rated as among the very best funds by IBD.
Lam Research is a global supplier of wafer fabrication equipment and services to the semiconductor industry.
The firm was hit after beating analyst estimates for earnings in its most recent quarter but missing on sales. Its outlook also came up short. It has rallied back strongly however.
Earnings at the Fremont, Calif.-based company rose 47% to an adjusted $8.36 per share. Sales grew 35% to $4.3 billion. Analysts had forecast Lam earnings of $8.23 a share on sales of $4.32 billion, according to FactSet.
For the current quarter ending Dec. 26, Lam expects to earn an adjusted $8.45 a share on sales of $4.4 billion. That’s based on the midpoint of its guidance. Wall Street had predicted Lam earnings of $8.47 a share on sales of $4.41 billion, FactSet said. In the year-earlier period, Lam earned $6.03 a share on sales of $3.46 billion.
“Driven by strong demand and solid execution, Lam delivered its sixth consecutive quarter of record revenue and earnings per share,” Chief Executive Tim Archer said in a news release. “In a robust wafer fabrication equipment environment, Lam is delivering the innovation needed for the success of our customers’ semiconductor manufacturing roadmaps.”
D.R. Horton Stock
DHI stock is extended from a long double-bottom base. The ideal buy point is 99.75.
In addition, there is a handle entry that offer a higher alternative entry of 104.44. It is actionable from this buy point.
The relative strength line is now forging ahead once more, and has been gaining since late October.
The stock boasts a robust Composite Rating of 98. Earnings in particular stand out, with its EPS Rating of 98 putting it in the top 2% of stocks in this metric.
But market performance is also noteworthy, with the stock gaining more than 55% so far this year.
The housing market soared during the pandemic as demand rose out of a push for more space as many worked from home. On the supply side, lumber and other supply chain shortages along with a labor crunch sent home prices rising.
Pending home sales were up over 7% in October month-over-month, according to a National Association of Realtors report on Nov. 29. Low interest rates are helping buoy housing stocks.
In addition confidence is growing in the industry, according to the November National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index.
Homebuilder sentiment rose to 83, with anything above 50 seen as positive. Analysts had seen it holding steady at 80.
Current sales conditions rose 3 points to 89, buyer traffic gained 3 points to 68 and sales expectations in the next six months held firm at 84.
But the Covid-19 pandemic isn’t over yet. Much is unknown about the new omicron variant of the coronavirus. If it hits consumer confidence it could depress home sales.
It omicron worries fade it could lead to a rebound in mortgage rates, which would hurt demand for housing and related stocks.
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