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? Walt Disney (DIS), Nvidia (NVDA), Veeva Systems (VEEV), MaxLinear (MXL) and Shoals Technologies (SHLS) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects a rising confidence that the economy will eventually recover from the coronavirus. The Nasdaq retreated modestly last week, with more-speculative growth names struggling somewhat. But the overall stock market rally remains resilient.
The pandemic remains a concern, though new coronavirus cases, hospitalizations and even deaths are falling sharply.
It is still a good time to buy fundamentally strong stocks passing buy points from proper bases. It is also a good time to look for stocks nearing buy points that are showing strength compared to the rest of the market.
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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 Dow Jones Industrial Average, Nasdaq and the S&P 500 are all near all-time highs. After falling towards 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.
The Nasdaq is no longer extended after last week’s modest pullback, but isn’t far from being extended. Nevertheless, investors should also be on watch for the major indexes and leading stocks to rev higher amid the current bullish sentiment.
As you identify stocks, on a technical basis look for stocks with rising relative strength lines. Stocks that hold up amid tough conditions often bound to new highs once a market stabilizes.
Remember, 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 Disney stock, Nvidia stock, Veeva Systems stock, MaxLinear stock and Shoals Technologies 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.
Disney stock is in buy range from a flat base after running past a buy point of 183.60. Shares reversed lower from a record high following strong quarterly results, however DIS stock showed some strength as it rallied back above its entry point Friday.
Its relative strength line dipped last week but from a multiyear high. Disney stock has an RS Rating of 69 out of a possible 99. Market performance is improving however, with Disney stock rising more than 9% over the past four weeks.
Disney earnings have been badly hit by the coronavirus pandemic, with its EPS Rating slipping to very poor 11 out of 99. But this will improve as economies get back on their feet following broad lockdowns.
The Dow Jones giant showed it is bouncing back after crushing fiscal first-quarter estimates Thursday.
The surprise profit came as the number of streaming subscribers jumped. Disney+ subscribers climbed to 94.9 million as of Jan. 2, up 9% from 86.8 million on Dec. 2.
During the pandemic, the streaming service has been a bright spot for Disney stock, and big plans are ahead. The firm has surpassed 60 million Disney+ subscribers worldwide, and 100 million subscribers overall to its streaming offerings. Its brands include Hulu, ESPN+, and Disney+.
Disney CEO Bob Chapek said the new Star-branded streaming service will launch internationally Feb. 23. Star will be a sixth brand within Disney+ in some markets, joining the Disney, Pixar, Star Wars, Marvel and National Geographic brands. But it will feature edgier content from properties like FX and 21st Century.
At an Investor Day on Dec. 11, management said there are more than 100 titles in the works for Disney+. And Chapek said the company expects to have 230 million-260 million Disney+ subscribers by 2024. That’s up from its prior estimate of 60 million-90 million for the same time frame.
As coronavirus vaccinations pick up and the pandemic fades, Disney should see better revenue from theme parks and movies.
Nvidia stock is in buy zone after breaking out of a flat base pattern, closing Feb. 19 at 597.06. The ideal buy point is 587.76. An earlier entry of 560.07 may have been the more actionable.
The RS line for Nvidia stock has been making progress. It comes after a period of decline during the stock’s consolidation period.
Strong fundamental and technical performance has earned Nvidia stock a perfect Composite Rating of 99. Earnings are a key strength, which is reflected in its EPS Rating of 97.
Further strong earnings growth could be another catalyst for the recent Stock Of The Day. The Santa Clara, Calif.-based company plans to report fourth-quarter results on Feb. 24.
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.
Analysts predict that Nvidia will earn $2.80 a share, up 48% year over year, on sales of $4.81 billion, up 55%, in the fiscal quarter ended Jan. 31.
It also could be getting a near-term lift from graphics processing units being used for cryptocurrency mining. Bitcoin is trading near record-high levels. However, GPUs are in short supply.
Elevated Bitcoin prices will “create a near-term demand driver that will soak up any excess supply of GPUs,” Bradley Gastwirth, chief technology strategist for Wedbush Securities, said in a recent note to clients.
Nvidia stock has been fighting back after coming under pressure on a report that Microsoft (MSFT), Apple (AAPL) and Google (GOOGL) object to the chipmaker’s planned acquisition of Arm Holdings, a major wireless chip designer.
Veeva Systems Stock
The stock is currently trading well above its 50-day moving average, which is a bullish indicator. In addition, the relative strength line has been making progress since mid-January. The RS line compares a stock’s price performance to the S&P 500.
Veeva Systems stock has a very strong IBD Composite Rating of 94. This puts it in the top 6% of stocks tracked. Earnings are currently stronger than stock market performance, but both are solid. In fact, VEEV stock is up almost 15% so far in 2021 despite the long consolidation period.
The Stock Checkup shows earnings have grown an average 31% over the past three quarters. This is above the 25% growth sought by CAN SLIM investors. Longer term growth is even stronger, with EPS growing an average 46% over the past three years.
Veeva has an Earnings Stability rating of 5, a very strong reading where 1 is the most stable and 99 the least. Veeva earnings have grown 30%-32% in each of the last three quarters. Sales growth has been 33%-38% for the last four periods.
Another key part of the CAN SLIM jigsaw is institutional investment. Big money has been increasingly buying the stock. This is reflected in its Accumulation/Distribution Rating of B-, on an A+ to E scale with A+ best. This represents moderate buying over the past 13 weeks.
VEEV stock boasts three consecutive quarters of increasing institutional ownership, with 55% of its stock currently held by funds. Notable holders include the T. Rowe Price New Horizons Fund (PRNHX) and Artisan Mid Cap Fund (ARTMX). These are both rated as among the very best funds by IBD research.
A potential catalyst is just around the corner, with the firm set to post earnings results March 2. Once again, investors may prefer to take advantage of IBD’s options strategy, rather than buying the stock outright.
Veeva Systems’ impressive sustained performance has seen it named as an IBD Long-Term Leader.
Shoals Technologies Stock
Shoals Technologies stock has formed an IPO base since its Jan. 27 initial offering. The stock jumped 5.9% last week to 40.17, moving toward its buy point of 41.86. SHLS stock is now above an early entry just belwo 40.
The RS line has just hit a new high, which is encouraging as it attempts to chase down its buy point.
But remember, many IPO stocks stumble before they find their footing. Risks can be reduced and rewards reaped by waiting for IPO stocks to form their first base before investing.
You can greatly reduce your risk and still reap big rewards by waiting for the stock to prove itself before you invest. As a rule, look for companies that have the CAN SLIM traits of winning stocks and let it form an IPO base and break out before opening a position.
The stock currently boasts a top notch Composite Rating of 96. It boasts a good balance of stock market and earnings performance.
Unusually for an IPO stock, the solar company is profitable. Its revenue has been rising by double digits. For the nine months ended Sept. 30, Shoals reported revenue of $136.7 million, up 28% from the year-ago period. Net income was $29.5 million vs. $17.3 million.
For its IPO, the recent Stock Of The Day offered 77 million shares. Shoals stock priced at $25 each, above the expected price range of $22 to $23. It has already trading for almost double this price,
Based in suburban Nashville, Tenn., Shoals provides an array of gear needed to operate solar energy systems, according to its IPO filing.
In addition, it provides components needed to carry electric currents from solar panels to solar inverters and ultimately to the power grid. This includes cable assemblies, wireless monitoring systems, junction boxes, transition enclosures and splice boxes.
Solar stocks have rallied since the election of President Joe Biden, who made green energy initiatives a big part of his campaign. In addition, the outlook for solar stocks is bolstered by investors speculating on an environmental infrastructure boom.
MaxLinear stock is near a buy zone after breaking out of a consolidation pattern. The ideal buy point is 38.81. The stock punched above its 50-day line before passing its entry point, which is a bullish indicator.
The RS line for MXL stock has been rising of late, which is encouraging.
The stock boasts an RS Rating of 84, which puts it in the top 25% of stocks in terms of market performance over the past 12 months. It is up just shy of 400% on its 12-month lows.
The stock boasts a near perfect Composite Rating of 98. At the moment earnings are lagging stock market performance. However EPS has been accelerating for the past three quarters.
MaxLinear is a provider of RF, analog, digital and mixed-signal integrated circuits. It is a supplier for the cable and satellite broadband communications and the connected home, and wired and wireless infrastructure markets. It is benefiting from the push for 5G adoption.
Earlier this month the firm posted an earnings beat. Revenue also came in above views, increasing 178% year-on-year to $194.7 million.
Last year the firm snapped up Intel’s (INTC) Home Gateway Platform Division assets. The division’s products include Wi-Fi Access Points, Ethernet and Home Gateway SoC, which are supplied to the operator and retail markets. MaxLinear is also benefiting from last year’s acquisition of NanoSemi. Its technology enables higher throughput connections for 5G and Wi-Fi base stations and smartphones. It also reduces energy consumption
“In the fourth quarter, we posted record revenue, up 24% sequentially, due to stronger-than-expected demand for broadband access and connectivity products,” CEO . The fourth quarter represented the first full of quarter of ownership of the Intel and NanoSemi assets, with which we are making tremendous progress on the respective integration efforts.”
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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