Buying a stock is deceptively easy, but purchasing the right stock at the right time without a proven strategy is incredibly hard. So what are the best Robinhood stocks to buy now or put on a watchlist?
At the moment, Microsoft (MSFT), Apple (AAPL) and Zoom Video Communications (ZM) are standout performers. Unlike GameStop (GME), which has been hitting the headlines of late, these stocks offer a mix of solid fundamental and technical performance.
Best Robinhood Stocks To Buy: The Crucial Ingredients
There are thousands of stocks trading on the NYSE and Nasdaq. But to generate big gains you have to find the very best. The best Robinhood stocks for investors will be those that offer a mix of earnings and stock market performance.
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.
The Market Is Key When Buying Robinhood Stocks
A key part of the CAN SLIM formula is the M, which 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 Dow Jones Industrial Average, Nasdaq and the S&P 500 are all near all-time highs. After falling towards or below their 50-day moving averages, they have rebounded powerfully. This is a bullish indicator.
With the market in an uptrend it is a good time to buy stocks showing fundamental and technical strength as they move past entry points.
One caveat: The Nasdaq is once again looking extended, raising the risks of another market pullback.
Best Robinhood Stocks To Buy Or Watch
Now let’s look at Microsoft stock, Apple stock, and Zoom stock in more detail. An important consideration is that these stocks all boast solid relative strength. This means they are outperforming the broader S&P 500 index. They are also part of the Robinhood Top 100 Stocks, the platform’s most popular stocks among traders.
Microsoft stock is in buy zone after passing a consolidation pattern buy point of 232.96, according to MarketSmith analysis. It has been surging away from its 50-day moving average in recent sessions.
The relative strength line for Microsoft stock has also been making strides of late. The RS line, the blue line in the charts below, tracks a stock‘s performance vs. the S&P 500. Its RS line performance is reflected in the fact MSFT stock has gained 14% over the past four weeks.
Microsoft is one of only four U.S.-listed stocks with trillion-dollar market caps, and is nearing $2 trillion. In this case big is beautiful as Microsoft stock has a strong, but not ideal, IBD Composite Rating of 92. The Composite Rating is designed to give an instant overview of a stock’s fundamental and technical performance.
A key to Microsoft’s high rating is its excellent earnings performance, which is reflected in its EPS Rating of 96. Microsoft earnings growth has accelerated for the past two quarters, reaching 34% growth in the most recent quarter.
The software giant easily beat Wall Street’s targets for its fiscal second quarter thanks to growth from its cloud computing businesses. It also guided higher on current-quarter revenue.
Microsoft‘s successful pivot into cloud computing has been driving growth. It has benefited from the work-from-home and learn-at-home trends during the Covid-19 pandemic. Microsoft‘s cloud software and services are aiding at-home workers and students.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” CEO Satya Nadella said.
Apple stock is close to reclaiming a 138.89 buy point from a cup-with-handle base. However it has been rallying from its 10-week moving average, which can be used as entry point. Further up, the Jan. 25 all-time high of 145.09 + 10 cents could serve as an alternate entry.
Apple stock gained 3.6% last week, and can now focus on moving back above Jan. 25’s all-time high. Shares reclaimed the 21-day exponential moving average, but were turned away at the 10-day.
Apple is another of the select band of firms worth more than a trillion dollars in the U.S. stock market. It is worth even more than Microsoft, with a market cap of $2.3 trillion. Apple stock has a good, but not ideal, Composite Rating of 88 out of a best-possible 99.
The IBD Stock Checkup tool shows earnings growth was hit amid the pandemic in recent quarters. Apple has averaged 16% growth over the past three quarters, which is shy of the 25% earnings growth sought by CAN SLIM investors. However EPS grew by a strong 34% in the most recent quarter.
One reason to be bullish on Apple is it continues to produce new products, which is a major success factor in the CAN SLIM system. The firm recently introduced its first Mac computers with processors the company designed itself rather than those supplied by longtime partner Intel (INTC).
Apple executives showed off a lineup of Mac computers running the company’s new M1 processor. The M1 chip delivers up to 3.5-times-faster central processing unit performance than Intel-based Macs. Chip foundry Taiwan Semiconductor Manufacturing (TSM) will make the chips for Apple, using its 5-nanometer process technology.
The M1 news comes after the firm revealed its iPhone 12 lineup of 5G-enabled smartphones as well as the HomePod Mini smart speaker. Apple has also introduced its sixth-generation Apple Watch smartwatches, new iPad tablets, Apple Fitness+ service and Apple One subscription service bundles.
Zoom stock is worth watching after clambering back above its 50-day moving average. This is a bullish sign. Aggressive investors could use this as an opportunity to take a small position.
A more prudent approach may be to add ZM stock to your watchlist. This means you can be ready to pounce if it forges a more traditional entry point.
The RS line for Zoom stock is offering encouraging signs. It has been making progress since the start of January. However it remains well off the highs it reached in mid-October.
Zoom stock holds a near-perfect Composite Rating of 98. Both earnings and stock market performance are strengths.
The Stock Checkup shows how earnings have exploded amid the coronavirus pandemic. EPS has grown by an average of 872% over the past three quarters. Zoom posted earnings per share growth of 1000% in the most recent quarter.
The recent Stock Of The Day reports fourth quarter earnings on March 1. Management’s 2021 guidance could be a catalyst.
The company has been busy improving products and adding features to its video platform. In January, the company said “Zoom Phone” had over 1 million cloud users. That was up from 500,000 cloud users that the company had noted at its October user conference called Zoomtopia.
Zoom Phone lets customers set up group internet phone calls without video. Zoom cross-sells the Zoom Phone tools to business customers that already use its Meetings software.
The big question around Zoom stock is how growth will be affected once economies normalize. It could still be a high-growth software stock when the coronavirus emergency subsides, especially as the work from home trend could become entrenched.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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