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? Advanced Micro Devices (AMD), Visa (V), Salesforce (CRM), TJX (TJX) and AeroVironment (AVAV) are prime candidates.
With inflation worries high, and the Federal Reserve tightening rates aggressively, market action was challenging in 2022, with more difficulties expected in 2023. The Russian invasion of Ukraine continues to cast a shadow over markets.
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.
A stock market rally that kicked off 2022 soon fell on its face. The market overall has been choppy since then, with bear market rallies often being undercut by painful drawdowns. Recent bullish action has seen the Nasdaq and the S&P 500 move back above their major moving averages, though recent volatility has also increased risk.
The stock market is back in a confirmed uptrend. This means it is the best time to be buying fundamentally strong stocks breaking out of proper base patterns, such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks below are good candidates. It’s also a good time to add to existing holdings at follow-on opportunities
The choppiness of the market means it is crucial to stay on top of sell signals. Any stock that falls 7% or 8% from your purchase price should be jettisoned. Also beware of sharp breaks below the 50-day or 10-week moving averages.
Remember, there is still significant headline risk. Inflation remains a key issue while the Russia-Ukraine conflict is a wild card that has proved its ability to shake the market.
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
- Advanced Micro Devices
Now let’s look at AMD stock, Visa stock, Salesforce stock, TJX stock and AeroVironment stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
AMD stock near the top of a buy zone after passing a cup standard entry of 102.53, MarketSmith analysis shows. It comes after a move above 91.64 marked a decisive move above the 50-day line and a downward-sloping trendline.
The relative strength line is looking to drive higher after a recent dip. There has also been higher volumes to the upside of late, an encouraging trend.
Overall performance is strong, which is reflected in the stock’s IBD Composite Rating of 94 out if 99.
At the moment stock market performance is its strongest suit, with AMD in the top 8% of stocks in terms of price performance over the past 12 months.
Big Money clearly sees potential, with its best-possible Accumulation/Distribution Rating of A+ reflecting heavy buying among funds of late.
AMD competes with Intel (INTC) in making central processing units, or CPUs, for personal computers and servers. It also rivals Nvidia (NVDA) in the market for graphics processing units, or GPUs, for PCs, gaming consoles and data centers.
The stock looks to be rebounding after the Santa Clara, Calif.-based company stock suffered a reversal despite beating Q1 expectations after guidance came up short for the second quarter.
For the second quarter, AMD predicted revenue of about $5.3 billion. However, Wall Street was looking for $5.5 billion. In the same quarter last year, AMD sales were $6.55 billion. Advanced Micro Devices is facing weak PC sales and a softening data center market.
“We remain confident in our growth in the second half of the year as the PC and server markets strengthen and our new products ramp,” CFO Jean Hu said in a news release.
Wall Street analysts were mostly positive in their reactions to the AMD earnings report. At least seven brokerage firms raised their price targets on AMD stock after the report. However two firms cut their price targets.
Shares tumbled May 3 on the weak guidance.
AMD stock was given a big boost May 4 after Bloomberg reported that Microsoft and AMD are teaming up to develop an alternative to Nvidia’s graphics processing units. These latter GPUs currently dominate the AI market. Microsoft denied the report, in part, but AMD kept rising the following day.
Payments giant Visa is in the buy zone from a 230.05 handle buy point within a double-bottom base. Investors could also wait for the stock to pass its recent high of 235.57 amid tight recent action.
The relative strength line has been moving sideways of late. V is currently above all its moving averages.
All-around performance here is stellar, with its IBD Composite Rating coming in at 94 out of 99.
Earnings growth is also impressive, with EPS rising by an average of 19% over the past three quarters.
Gains are seen moderating somewhat. EPS is expected to climb 15% in 2023 before rising an additional 14% in 2024.
Institutional investors certainly seem impressed with its prospects, with its Accumulation/Distribution Rating coming in at B+. In total, 51% of its stock is currently held by funds.
Visa recently posted earnings of $2.09 a share on revenue of $7.98 billion, topping analyst views. Strong travel trends worldwide are fueling transaction growth.
International transaction revenue surged 24% to $2.75 billion, just above forecasts of $2.73 billion. Data processing revenues jumped 10% to $3.82 billion, slightly lower than views for $3.77 billion.
Visa has posted eight straight quarters of sales and earnings gains.
In addition, Visa looks to have emerged unscathed from the recent banking crisis sparked by the failure of Silicon Valley Bank.
The event sent shock waves through financial markets, with midsize banks bearing the brunt of losses during the March mayhem.
Credit card rivals like Mastercard (MA) and American Express (AXP) faced more modest declines.
“Things have been completely normal,” Visa Chief Financial Officer Vasant Prabhu said at the Wolfe Research conference on March 15. “Debit and credit cards have been usable, without any disruption whatsoever. They’re settling every night. So, really, no impact whatsoever.”
The key point here for investors is that payment processors Visa and Mastercard do not carry card balances on their books. This is in contrast to American Express and Discover Financial (DFS).
Instead it is the issuing banks such as JPMorgan Chase (JPM) and Wells Fargo (WFC) that carry the upside and downside on the provision of credit. Visa and Mastercard make money on credit and debit card transaction fees.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Salesforce is above an alternative entry at 200.10. It comes after the stock previously popped past a prior 178.94 handle buy point.
The 50-day moving average recently mounted the 200-day line, a bullish sign. The relative strength line is also holding near highs.
Overall performance is strong, netting the stock a rare perfect IBD Composite Rating of 99.
Earnings are its biggest strength, with its EPS Rating an outstanding 96 out of 99. Stock market performance is certainly slouch though. CRM stock is up more than 50% so far in 2023.
In the most recent quarter, Salesforce earnings per share rose 100% to $1.68. Revenue climbed 14% to $8.38 billion, boosted by improved results at the MuleSoft business.
Salesforce also announced a new $20 billion buyback for CRM stock. The company approved a $10 billion buyback in 2022, before activist investors surfaced.
Those activists include Elliott Management, Starboard Value, Third Point, ValueAct Capital and Inclusive Capital. The group has been pressuring management to improve profit margins and free cash flow.
For the current April quarter, Salesforce said it expects revenue of $8.17 billion, topping estimates of $8.04 billion. For full-year fiscal 2024, Salesforce forecast revenue of $34.6 billion, topping estimates of $33.89 billion.
Salesforce sells software under a subscription model. Its software helps businesses organize and handle sales operations and customer relationships. The company has expanded into marketing, customer services and e-commerce.
Jefferies analyst Brent Thill sees Salesforce getting a boost from its efforts in generative artificial intelligence. He believes generative AI will enhance productivity for customers and will allow Salesforce to raise prices.
“While still early days in terms of adoption, Salesforce’s AI vision impressed both the partners and customers we spoke to,” Thill said in a research note. He rates CRM stock as buy with a price target of 250.
TJX stock is shooting for an 83.23 buy point. But it also has a handle that is fractionally too low to be a proper buy point, but 79.81 is a solid early entry. The “handle” also is a four-weeks-tight on a weekly chart. Shares have been trading above the 21-day and 50-day lines for several weeks.
TJX stock is already at a three-month closing high.
Strong overall performance is reflected in an IBD Composite Rating of 84 out of 99. The stock is roughly flat so far in 2023.
Earnings are lagging though, with its EPS Rating a mediocre 60 out of 99. A rebound is expected, with earnings seen growing 25% in fiscal 2024 and 12% in fiscal 2025.
Fiscal Q1 earnings are due May 17. An approach highlighted by Investor’s Business Daily is to use options as a strategy to reduce risk around earnings. It’s a way to capitalize on the upside potential of a stock’s move around earnings, while reducing the downside risk.
The current challenging retail environment has actually benefited TJX. That’s because lots of other online and bricks-and-mortar merchants have too much brand-name inventory to sell.
“Availability of quality branded merchandise is phenomenal,” CEO Ernie Harman said on the fiscal Q4 earnings call on Feb. 22. “We are in a great position to take advantage.”
TJX has positioned itself as offering a treasure-hunt shopping experience, with an array of brands that span good, better and best price points.
This means TJX customers are more of the middle-class variety than shoppers of other off-price retailers. That’s good news at a time when low-income households may be cutting back on discretionary purchases.
On the Q4 call, Herrman endorsed JPMorgan analyst Mathew Boss’ view that customer traffic is “at an inflection point,” turning positive for the first time in more than a year.
That’s not to say times are perfect for TJX. In Q4, its Marmaxx division, which includes T.J. Maxx and Marshalls, saw U.S. sales rise 8% from a year ago. However, HomeGoods sales fell 4%. Yet that balance still gives TJX that ability to ride through tough cycles in fine shape.
Here’s What To Do In This Dangerous Market
AVAV stock is actionable as it clears the May 3 high of 104.12. In addition, it is also eyeing a conventional handle buy point of 109.33.
The defense play has been finding support near the 21-day line.
In addition, the relative strength line is bending higher after a recent decline.
With the Ukraine war still in full force, the stock seems to be benefiting from investor appetite for defense plays in their portfolio.
This certainly seems to be the case for AVAV, which is in the top 10% of stocks in terms of price performance over the past 12 months. This is despite the fact it has a disappointing EPS Rating of 29 out of 99.
This is seen improving though, with analysts polled by FactSet expecting AeroVironment earnings to jump 65% in fiscal 2024.
Big Money certainly seems taken with the firm. It boasts a stout Accumulation/Distribution Rating of B+ on an A+ to E scale. In total, 57% of its stock is currently held by funds.
AeroVironment is worthy of consideration as it wins key contracts for “suicide drones” and recovery helicopters.
On April 26, the company said it received an additional $64.6 million contract from the U.S. Army for Switchblade 300 loitering missile systems. In 2022, the U.S. government approved the Switchblade systems for use by Ukraine after it was invaded by Russia.
The Switchblade 300 weighs less than five pounds and has been dubbed a “kamikaze drone” or “suicide drone.” It loiters in the air until a target is identified, then acts as a precision-guided missile to deliver its deadly payload.
And this month the firm announced a $10 million contract award by NASA’s Jet Propulsion Laboratory to design and develop Mars Sample Recovery Helicopter flight systems.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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