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? Adobe (ADBE), Microsoft (MSFT), Amazon (AMZN), Walmart (WMT) and Weatherford International (WFRD), are prime candidates.
Despite inflation worries and the Federal Reserve tightening rates aggressively, the market confounded expectations for difficulties in 2023 to turn in a strong performance so far for the year, though indexes gave up some gains amid recent negative action. The Russian invasion of Ukraine continues to cast a shadow over markets while the Israel-Hamas war adds more uncertainty.
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.
CAN SLIM 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.
While a stock market rally that kicked off 2022 soon fell on its face, it has turned in stunning gains so far this year. Indexes are trying to fight back against the bears, with the Nasdaq and the S&P 500 just reclaiming the 50-day moving average. It comes after both indexes had tested the 200-day line.
The stock market is back in a confirmed uptrend. Now is a good time for investors to be making stock purchases. It’s also a good time to add to existing holdings at follow-on opportunities.
Investors be taking care to invest in high quality stocks. The selections below are among the best stocks to buy or watch now. The IBD 50 is also a rich hunting ground.
Despite the market going back into a confirmed uptrend it remains 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 while the current issues in Israel add even more uncertainty.
Things can quickly change when it comes to the stock market. Make sure to keep a close eye on the market trend page here.
Best Stocks To Buy Or Watch
Now let’s look at Adobe stock, Microsoft stock, Amazon stock, Walmart stock and Weatherford stock in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
Adobe stock formed a flat base with an ideal buy point of 570.24. Shares briefly broke out on Oct. 12 but tumbled back with the market. ADBE stock has decisively reclaimed its 50-day moving average is a good sign and is close to 570.24 buy point again. Investors also could use the Oct. 12 intraday high of 574.40 as an entry.
The relative strength line is impressing. It is rising again and right at recent highs. This reflects outperformance vs. the broader S&P 500.
Long known for its design and publishing software, Adobe has become a major player in cloud computing and data analytics.
In addition, artificial intelligence, one of the hottest investing themes of 2023, is a strength for the California company. It is benefitting after announcing a slew of new AI initiatives.
It recently announced more than 100 new generative AI features and updates for its creative software. The company added three new image generators to its Firefly family of products and released scores of AI features for its Creative Cloud suite of applications.
Wall Street analysts were dazzled by the smorgasbord of features, with some rewarding the stock with price target hikes. Morgan Stanley analyst Keith Weiss said the announcements had a “wow factor” due to the breadth and quality of capabilities shown.
Overall performance for ADBE stock is strong, with its IBD Composite Rating coming in at a near-perfect 98.
It is in the top 3% of stocks in terms of price performance over the past 12 months. So far in 2023 alone it has surged more than 67%.
Earnings performance is also impressive, with the stock holding an EPS Rating of 97 out of 99. Profits have accelerated over the past four quarters.
Over the past five quarters, revenue growth has ranged from 9% to 14%.
Institutional investors have been increasing their holdings of the stock of late. This is shown by its Accumulation/Distribution Rating of B-. Notable holders include Fidelity Contrafund.
The stock is also showing leadership vs. its peers, currently sitting at the summit of the competitive IBD Computer Software-Desktop industry group.
MSFT stock has formed a cup base with a 366.78 buy point, MarketSmith analysis shows. It’s actionable from the Oct. 25 high of 346.20 as an early entry.
The relative strength line is at highs once again. Microsoft stock is in the top 7% of issues in terms of price performance over the last 12 months.
Overall impressive performance is reflected in its perfect IBD Composite Rating of 99.
The firm has seen EPS grow by an average of 19% over the past three quarters. In addition, earnings grow by an average of 16% over the past three years, impressive growth for such a large firm.
Big Money holding steady on MSFT stock of late, with its Accumulation/Distribution Rating coming in at C.
Earlier this month the Redmond, Wash.-based reported earnings per share had popped 27% to $2.99 as revenue climbed 13% to $56.5 billion for the quarter ended Sept. 30.
Microsoft Cloud revenue rose 24% year over year to $31.8 billion in the September quarter. That was better than expected. That also outpaced the growth at Google Cloud and Amazon Web Services, which came in below views.
Microsoft Chief Executive Satya Nadella boasted about the firm’s artificial intelligence initiatives following the results.
“We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers,” Nadella said in a news release. “With copilots, we are making the age of AI real for people and businesses everywhere.”
Earlier this year Microsoft showed off its new Bing search engine and Edge web browser that use AI technology. Microsoft hopes the OpenAI-based technology can help Bing chip away at Google’s dominance in the internet search market. Microsoft stock was given a flurry of price-target hikes from analysts after the presentation. ‘
The firm kept up the momentum by adding artificial intelligence tools to its popular Office productivity applications.
It comes after the Microsoft announced a investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI.
The software giant is providing its Azure cloud computing infrastructure for OpenAI. It also is adding OpenAI models to its consumer and enterprise software products.
Excellent sustained performance has netted Microsoft stock a spot in the IBD Long-Term Leaders Portfolio.
The mega cap is in the buy zone of a short double-bottom base with an ideal entry point of 134.48. The pattern is flawed though, as it is one session short of being the optimal length. The most successful double bottoms tend to form over a minimum period of seven weeks, or 35 sessions.
On the plus side, the base is first stage. This means it has a better chance of netting big gains.
A consolidation pattern has also emerged, which would offer a higher entry point of 145.86.
Price action has been improving lately, with the stock retaking the key 50-day moving average, a bullish sign.
Overall strong performance is reflected in its IBD Composite Rating of 88 out of 99. It is the top 6% of stocks in terms of price performance over the past 12 months.
For the quarter ending in September, Amazon reported EPS had grown 236% to 94 cents. Revenue increased 13% year over year to $143.1 billion. Analysts expected Amazon to post adjusted earnings of 59 cents per share on revenue of $141.5 billion.
For its closely-watched Amazon Web Services Cloud business, Amazon posted a 12% year-over-year sales increase to $23.1 billion. That missed analysts’ expectations for sales of $23.2 billion.
Amazon said it expects sales between $160 billion and $167 billion for the current fourth quarter. Analysts were looking for $167.1 billion, according to FactSet.
CEO Andy Jassy acknowledged that companies were still undertaking “cost optimizations” to lower their cloud software spending. But he added that deal-making for AWS had picked up late in the quarter and this month.
“Companies have moved more slowly in an uncertain economy in 2023 to complete deals,” he said. “But we’re seeing the pace and volume of closed deals pick up. We’re encouraged by the strong last couple of months in new deals signed.”
Jassy highlighted that customers are using its generative AI products—an important point given that top cloud rival Microsoft is spending big on the buzzy technology.
“In our best estimation, the amount of growth we’re seeing and the absolute amount of generative AI business we’re seeing compares very favorably with anything else I’ve seen externally,” Jassy said.
Amazon struck a deal in September to invest up to $4 billion in Anthropic, a rival to ChatGPT-creator OpenAI. Further, Amazon in April launched Amazon Bedrock, a service that allows users of Amazon’s AWS to build generative AI applications.
Walmart stock is in a buy zone after clearing a cup with handle ideal buy point of 164.33.
WMT stock has been finding support at the 10-week line. The relative strength line is surging with gusto of late, hitting new highs.
Since the start of the year Walmart stock is up nearly 15%. It has now overtaken the S&P 500’s gain of about 14%.
It is in the top 13% of stocks in terms of price performance over the past 12 months.
Overall performance is strong, with WMT holding an IBD Composite Rating of 85 out of 99. Earnings in particular are solid, with its EPS Rating coming in at 83 out of 99.
Walmart earnings growth slowed to 4% for Q2 2024 results after two quarters of accelerating, double-digit gains. Revenue growth hovered in the mid- to upper-single digits the past five quarters. Still, the results beat expectations of a 3.4% earnings decline on 4.8% revenue growth.
Walmart U.S. e-commerce sales jumped 24% for the quarter. Comparable sales excluding fuel rose 6.3% and beat Wall Street estimates of 4.3% growth. Same-store sales at Sam’s Club rose 5.5% while Walmart U.S. stores saw a 6.4% increase in comparable traffic.
Walmart lifted its outlook on results and guided full-year adjusted earnings of $6.36-$6.46 per share on 4% to 4.5% net sales growth. The outlook was ahead of analyst forecasts of $6.30 per share and in-line with revenue predictions of $637.93 billion. The company previously expected EPS of $6.10-$6.20 on 3.5% sales growth.
Wall Street analysts see the firm’s Walmart+ program as a potential benefit for the firm. Walmart+ costs $12.95 a month, or $98 a year. The program’s benefits can be used, in one way or another, at more than 4,700 stores. The service will offer free delivery on items, at in-store prices, with 2,700 stores capable of offering same-day delivery.
Weatherford stock is in a buy zone above a cup with handle base entry of 97.88.
The relative strength line has been making impressive strides of late, and now sits at fresh heights. In addition, the stock is trading above its major moving averages.
Weatherford International provides equipment and services for drilling, evaluation, well construction, completion and production in the oil and natural gas industry. Weatherford reports it has operations in more than 70 countries.
The firm is incorporated in Ireland and has its primary offices in Houston. The company entered Chapter 11 bankruptcy protection in July 2019 but emerged from bankruptcy five months later. It relisted on the Nasdaq in June 2021.
Last week the company posted a Q3 revenue increase of 17% to $1.31 billion, above Wall Street views. EPS also soared more than 315% to $1.66 per share.
The firm also raised its 2023 outlook with expectations that revenues will continue to grow in the fourth quarter.
Weatherford also forecasts full-year adjusted EBITDA margins, earnings before interest, taxes, depreciation and amortization, will expand over 400 basis points year over year, with more than $450 million in adjusted free cash flow.
It previously predicted EBITDA margin expansion of more than 350 basis points year over year with adjusted free cash flow exceeding $400 million in 2023.
Piper Sandler analyst Luke Lemoine recently hiked his WFRD price target to 135 from 116. He also maintained an overweight rating on the shares.
He sees Weatherford earnings continuing higher as the company moves toward mid-20% EBITDA margins.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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