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), Adobe (ADBE), Snap (SNAP), Vale (VALE) and Magna (MGA) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.
The coronavirus pandemic remains a concern, but vaccinations are ramping up. Mixed economic data of late has led to some choppy action, but the market is looking increasingly bullish.
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Investors feared inflation earlier this year, but the stock market rallied on a hotter-than-expected May CPI report. Many economists believe the Fed’s thesis that current inflation trends are transitory remains intact.
So why do the stocks chosen stand out? Before turning to that question, it is important to consider how one goes about choosing a stock in the first place. Superior fundamentals and technical action, and buying at the right time, are all part of a shrewd investing formula.
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
Never forget that the M in CAN SLIM stands for market. Most stocks, even the very best, will tend to 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.
The stock market is rallying again after being shaken by inflation fears. The market actually rose higher last week despite the latest CPI report coming in slightly above views. The Dow Jones, S&P 500 and the Nasdaq are now all back above the key 50-day moving average.
The uptrend has kicked back into gear, with the S&P 500 sitting at a record high. The Nasdaq composite is also inching closer to new highs.
Now is a good time to be buying fundamentally strong stocks coming out of sound chart patterns. The stocks featured below are potential candidates. However, make sure you increase your exposure gradually, in case the stock market changes course once again.
As the past week showed, things can quickly change when it comes to the stock market. Make sure you don’t miss out on a rally by keeping a close eye on the market trend page here.
Best Stocks To Buy Or Watch
Now let’s look at Google stock, Adobe stock, Snap stock, Vale stock and Magma stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Google parent Alphabet is in a buy zone after staging a rebound of the 10-week line. It is also near a 2,431.41 flat base buy point.
The relative strength line for GOOGL stock is around record highs. This gauges a stock’s performance compared to the S&P 500.
GOOGL stock has a perfect IBD Composite Rating of 99. That puts it in the top 1% of stocks tracked overall. Earnings outshine stock market performance, with its EPS Rating a top notch 94.
Earnings have grown by an average of 50% over the past three quarters. This is double the 25% sought by CAN SLIM investors.
Analysts see strong growth ahead, with Google earnings per share expected to explode 65% in 2021, and then growing by a further 8% in 2022.
The tech giant has a Relative Strength Rating of 81. That means it has outperformed 81% of stocks tracked over the past 12 months in terms of price performance. Recent performance is strong, with Google stock rising by almost 39% so far in 2021.
Google stock was boosted after the firm posted first-quarter earnings and revenue that crushed analyst estimates. YouTube advertising revenue topped expectations, while the company also authorized additional GOOGL stock buybacks.
In the March quarter, Alphabet repurchased $11.39 billion of its GOOGL stock, up from $8.5 billion in the year-earlier period. Alphabet had roughly $4 billion left in a share repurchase program. The new buyback authorization brings that to about $54 billion.
The internet giant’s core search advertising business also continued to rebound, though the coronavirus pandemic still pressures sectors such as travel.
The Leaderboard stock and IBD Long-Term Leader is in a buy zone after it passed a new cup base entry of 525.54. It is actionable up to 551.82. Adobe stock cleared a longer-term consolidation on May 11 with a 536.98 entry.
The relative strength line for Adobe stock making progress, but remains off all-time highs. This suggests it has some room to run.
Adobe stock has a strong, but not ideal, IBD Composite Rating of 84. The shows earnings are the cornerstone to this, with a strong EPS Rating of 96.
The Stock Checkup tool shows that Adobe earnings growth has averaged 28% past three quarters. This exceeds CAN SLIM requirements.
Earnings accelerated in the most recent quarter, reaching 38% growth. Analysts see full year EPS growth of 18% in 2021, and growth of 14% in 2021.
On caveat is that Adobe earnings are due Thursday. But ADBE stock tends not to move much around earnings.
Adobe previously guided for an adjusted $2.81 a share on sales of $3.72 billion for the quarter. Wall Street is expecting Adobe earnings of $2.81 per share on sales of $3.7 billion, according to Zacks Investment Research.
For the full fiscal 2021, Adobe has forecast adjusted earnings of $11.85 a share on sales of $15.45 billion.
Adobe has three cloud computing businesses. Its largest, Creative Cloud, includes software for creative professionals such as Photoshop and Illustrator. Document Cloud includes its Acrobat and e-signature offerings. Experience Cloud provides marketing software and services.
Through expansion of its creative cloud strategy, data analytics, and customer experience businesses, Adobe is looking to enhance its long-term growth. In recent years, it has boosted recurring revenue by transitioning to a subscription model for its creative and analytics software solutions.
Cowen analyst Derrick Wood has just reiterated his outperform rating on ADBE stock with a price target of 600. He expects a “solid” performance by Adobe in the second quarter and a “marginal bump to guidance.”
“A mix of growth, profitability, market leadership and sustainable competitive advantage make ADBE an attractive stock for a wide variety of investors,” he said in a research note.
Market Rally Takes Big Step; 5 Stocks With Accelerating Growth
Snap stock has just cleared a cup with handle base inside a larger pattern. The Snapchat parent passed an ideal buy point of 63.94, and is buyable up to 67.14.
The relative strength line has been rising nicely and is approaching the highest level since the cup portion began to form.
It is currently clear of the 50-day moving average, as well as its shorter-term 10-day and 21-day lines.
Snap stock has a strong Composite Rating of 93. However its stock market performance is far superior to earnings. Its EPS Rating is currently a lackluster 69 out of 99.
Big money has been getting behind the stock of late however. It holds an excellent Accumulation/Distribution Rating of A.
Snap now has 281 million daily active users, as reported in the company’s first quarter earnings report. That was 16 million new users compared to the prior quarter.
Revenue was up 66% on the year-ago period to $770 million, topping estimates. It was Snap’s best quarterly sales growth in three years.
User growth of 22% was also the best in years. Also, it reported a break-even quarter, or adjusted earnings of zero cents a share. Analysts expected Snap to report a loss of 21 cents.
For its second quarter, Snap expects revenue in the range of $820 million to $840 million. The midpoint of $830 million is above analyst estimates of $827.3 million.
The firm is trying to improve its performance with new offerings. In mid-May, Snap introduced its first augmented reality smart glasses called Spectacles. The company previously released camera-embedded sunglasses under the same name.
The new Spectacles aren’t for consumers yet, instead being given to software developers to see what sorts of applications they can create with them. Applications for AR technology include navigation, education, games and commerce.
Snapchat also introduced a new page called Discover. This is a feed that provides original content from news publishers. It now includes programming that feature pop culture, celebrities, doctors, teachers, workers and others citizens who share their experiences. Long gone are the days of Snapchat being used just to connect friends.
Vale stock is looking to break out of a flat base with an ideal buy point of 23.12, according to MarketSmith analysis.
It comes soon after the stock managed to find support at the 10-week line, a positive sign for the mining stock.
The RS line is trading at 12-month highs, though it has been uneven over the longer term.
Mining stocks tend to be volatile, but Vale stock currently holds a perfect Composite Rating of 99. One caveat is earnings are lagging stock market performance.
Vale is another stock that is finding favor among institutions. Its Accumulation/Distribution Rating of A- represents heavy buying over the past 13 weeks. In total, 19% of its stock is held by funds.
Vale stock has been benefiting from rising commodity prices as countries reopen. China last year boosted infrastructure spending to prop up its economy, after locking down due to the coronavirus pandemic. That helped spur demand for steel, for which iron ore is a key ingredient.
Steel demand — for things like appliances and automobiles — in the U.S. has also picked up, keeping supply tight after the pandemic halted a big chunk of production.
On April 27, Vale reported record first-quarter earnings of $8.5 billion, despite a seasonally weak period and the pandemic’s acceleration in Brazil. The coronavirus outbreak had forced Vale to restrict operations to essential workers at its sites. Now only a quarter of its workforce is still working remotely, Vale said.
In Q1, iron ore output rose 14% and nickel production rose 7%.
“Our beginning of the year was stronger than 2020,” CEO Eduardo Bartolomeo said on an earnings call. “We produced in this first quarter, which is seasonally weaker, the same as we produced in the second quarter of 2020. This gives us a lot of confidence in reaching our production guidance for this year.”
For 2021, Vale issued production guidance of 315 million-335 million tons.
Earlier this year Vale agreed to a $7 billion settlement over the collapse of a mining dam in the town of Brumadinho, in the state Minas Gerais in Brazil.
Magma stock is near a buy zone after previously clearing a short consolidation buy point of 99.82. Shares are still above a short trend line break and finding support around its 21-day line.
It has been boosted amid speculation it could manufacture the rumored Apple (AAPL) Car.
There are a number of bullish technical factors in its favor. It remains clear of its 50-day moving average. In addition, the relative strength line is near highs.
Magma stock has a strong, but not ideal, Composite Rating of 79. This puts it in the top 21% of stocks tracked overall.
At the moment stock market performance is outpacing earnings. This is reflected in its RS Rating of 89, this puts it in the top 11% of stocks in terms of price performance over the past 12 months.
The Ontario-based firm has just seen earnings accelerate for a third straight quarter. It also raised guidance for all of 2021. It expects stronger sales in China to offset a slowdown in North America, its largest market.
Magna provides parts such as mirrors, truck frames, driveline systems, fascias and seat systems.
It is a key supplier for General Motors (GM). It also makes entire vehicles for brands such as BMW and Jaguar.
Magna stock broke out on May 27 as GM said it would reopen four North American plans as its chip shortage fades.
The recent IBD Stock of The Day has inked a deal with Fisker (FSR) to make that EV startup’s upcoming Ocean SUV starting in 2023.
That manufacturing expertise and growing EV know-how is a key reason why Magna is a likely candidate for building a possible Apple Car.
In April, the Korea Times said LG Electronics and Magna were “very near” to signing a deal with Apple to build its initial electric cars. An LG-Magna JV, set up last December, develops e-motors, inverters, onboard chargers and e-drive systems for electric vehicles (EVs).
As a result, Magna’s seen to offer strong EV exposure, as automakers including GM and Ford accelerate their shift away from combustion cars.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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