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), Microsoft (MSFT), West Pharmaceutical Services (WST), Advanced Micro Devices (AMD) and NXP Semiconductors (NXPI) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflected rising confidence that the economy will eventually recover from the coronavirus.
Worries around Covid rose with the emergence of the omicron variant, but there are hopes that this coronavirus strain tends to result in mild cases.
The Federal Reserve recently held its final meeting of the year. Stocks traded choppily after the central bank moved to speed up tapering and offer more clarity on when it will increase interest rates. Stocks made good progress heading into the Christmas holiday as the Santa rally got underway.
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.
New Covid worries have taken a toll on the market, but a rebound following the latest Fed meeting saw the IBD market outlook switch to a confirmed uptrend. While it came under pressure for a spell, an early start to the Santa Claus rally helped the stock go back into a full uptrend on Christmas Eve. The Nasdaq, S&P 500 and the Dow Jones Industrial Average are all back above the key 50-day moving average. They are also trading around record highs.
With the market uptrend back in force, this is the best time to buy fundamentally strong stocks that are breaking out of proper base patterns. The stocks below are ideal candidates. Nevertheless, it remains crucial that investors stay disciplined and stick to sound buy and sell rules.
Remember, 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
- West Pharmaceutical Services
- NXP Semiconductors
Now let’s look at Google stock, Microsoft stock, West Pharmaceutical Services stock, AMD stock and NXP Semiconductors stock 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 stock has also retaken its 50-day moving average and its 10-week line. These are encouraging signs.
The relative strength line has been moving sideways for the past few months after a strong advance. The RS line gauges a stock’s performance compared to the S&P 500.
GOOGL stock has a near-perfect IBD Composite Rating of 96. That puts it in the top 4% of stocks tracked overall. Earnings outshine stock market performance, with its EPS Rating a very strong 98 out of 99.
Analysts see strong growth ahead, with Google earnings per share expected to explode 105% in 2021, and then growing by a further 5% in 2022.
The tech giant has a Relative Strength Rating of 92. That means it has outperformed 92% of stocks tracked over the past 12 months in terms of price performance.
Recent performance is strong, with Google stock rising almost 69% so far in 2021. This far outstrips the S&P 500’s gain of around 27%
Big money has unloading Alphabet stock of late, though this comes amidst a broad sell-off. This is reflected in its Accumulation/Distribution Rating of D- which reflects slightly more selling than buying over the past 13 weeks.
Alphabet in April announced a new $50 billion GOOGL stock buyback. On its June quarter earnings call, Google announced a modification of the share repurchase agreement allowing the company to repurchase either class A or class C shares.
Late on Oct. 26, Alphabet posted Q3 earnings. EPS jumped 71% to $27.99, including gains on equity investments. Gross revenue rose 41% to $65.12 billion in the quarter ended Sept. 30.
Analysts had estimated Google earnings of $23.73 per share on gross revenue of $63.5 billion.
Internet search and other revenue rose 44% to $37.93 billion vs. estimates of $36.41 billion. Google said cloud-computing revenue rose 45% to $4.99 billion vs. estimates of $5.17 billion. Despite the revenue miss, Google cloud cut its operating loss almost in half to $644 million.
YouTube advertising revenue rose 43% to $7.2 billion. Analysts had estimated YouTube ad revenue of $7.42 billion.
While Google has expanded into cloud computing and consumer hardware, digital advertising still makes up the lion’s share of revenue. Google announced in early March that it will stop employing web browser-tracking technology for the purpose of selling advertising. Earlier, Google said it would phase out third-party cookies.
Google plans to utilize “contextual” technology that enables advertisers to target aggregated groups of consumers with similar interests, such as travel, sports or fashion.
Microsoft is eying a new flat base entry of 349.77. It remains extended past an old flat buy point of 305.94. Last week it made a show of strength by regaining its 50-day line.
The relative strength line for Microsoft stock is near record highs. MSFT stock has gained over 53% since the start of the year.
Microsoft is one of a handful of U.S.-listed stocks with trillion-dollar market caps. It was the second stock to achieve the feat, after old rival Apple (AAPL). Both now have valuations above $2 trillion.
Microsoft stock’s strong price action has boosted its IBD Composite Rating to a very strong 95. The biggest key to Microsoft‘s high score is its excellent earnings performance, which is reflected in its EPS Rating of 93.
The firm earned $2.27 a share on sales of $45.3 billion in the quarter ended Sept. 30. Analysts had predicted Microsoft earnings of $2.08 a share on sales of $44 billion. On a year-over-year basis, Microsoft earnings rose 25% while sales increased 22%.
“We delivered a strong start to the fiscal year with our Microsoft Cloud generating $20.7 billion in revenue for the quarter, up 36% year over year,” Chief Financial Officer Amy Hood said.
For the December quarter, Microsoft expects to generate sales of $50.6 billion, up 17% from the same period last year. That’s based on the midpoint of its guidance. Wall Street had predicted $49 billion in sales for Microsoft‘s fiscal second quarter.
Institutional investors remain big backers of Microsoft stock overall. In total, 40% of its stock being held by funds. It boasts eight consecutive quarters of increasing fund ownership.
On Sep. 14 the company announced a $60 billion MSFT stock buyback and also raised its dividend by 11%.
Microsoft has introduced Windows 11, the biggest upgrade to its PC operating system in six years. Windows 11, due for a release in time for the holiday shopping season, features a refreshed design with a new user interface and Start menu. It also provides PC performance improvements and integrates the Teams videoconferencing app. Windows 11 is the successor to Windows 10, which came out in July 2015.
Meanwhile, the firm’s successful pivot into cloud computing has been driving growth. It also 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.
West Pharmaceutical Services Stock
The relative strength line is trying to move higher again following a pause. It has performed solidly overall for the year. West Pharma is up over 64% so far in 2021.
West Pharmaceutical earnings held solid in the most recent quarter, which was slightly disappointing.
A number of notable funds own WST stock, including Baron Asset Retail Fund (BARAX) and the T. Rowe Price New Horizons Fund (PRNHX).
The company is a leader in integrated containment and delivery of injectable medicines. It is not itself a drugmaker, but its vials, syringes and other products and services help customers deliver drug products to patients.
Its biotech and pharmaceutical customers include many, if not most, of the companies working to develop Covid-19 vaccines and treatments. With Covid looking likely to become endemic going forward, this could make a lasting contribution to its business.
It’s unclear how West Pharma will respond to omicron variant news.
WST stock is currently an IBD Long-Term Leader. This is means it is part of a portfolio of select high-performing stocks that could potentially be held for years.
AMD found support at its 10-week moving average for the first time after a breakout from a base in October. It is in the buy zone from a rebound entry. Its buy point here is 140.00 and it is actionable as high as 154.00.
The stock managed to break a trend line as it turned in a strong weekly gain heading into Christmas. It’s Dec. 16 high of 147.93 will be another key hurdle going forward.
The chip leader triggered the eight-week hold rule after a quick 20% gain its most recent base buy point; but this period is now over.
The relative strength line has been trying to regain lost ground following a recent dip. Overall though it has handily outperformed on this score in 2021.
In fact, AMD stock has spanked the broader market so far this year, gaining about 69%.
Earnings are another cornerstone of the chip giant’s success. It boasts a perfect EPS Rating, and earnings have risen by an average of 172% over the past three quarters.
Wall Street has boosted its earnings forecasts. On consensus, analysts see profit up 105% this year to $2.64 a share and rising another 27% in 2022.
Indeed, a number of heavyweight funds are holder of AMD stock. This includes the highly-rated Fidelity Contrafund (FCNTX).
AMD continues to grab market share in the datacenter market as the firm forges ahead with its efforts to innovate its chip designs
The firm announced Nov. 8 it has won Meta Platforms, formerly known as Facebook, as a data center chip customer.
It also revealed the MI200 accelerator chip, which aims to speed up tasks such as machine learning and artificial intelligence.
The completion of its proposed buy of Xilinx would broaden its product offerings in system-on-a-chip circuits.
NXP Semiconductors Stock
NXPI has been trading around its buy point for a couple of weeks after breaking past a 227.60 buy point in a cup-with-handle base.
The fact it has been holding clear of the 50-day moving average should encourage investors. It turned in a solid 4% gain last week.
The chip stock did give up strong gains after UBS gave NXP stock a sell rating, but is battling back. It has held up well overall, rising over 46% so far this year.
The stock’s relative strength line slipped back a bit after nearing August highs, but looks to be trying to regain momentum.
The IBD Stock Checkup shows that earnings are picking up steam as the firm looks to get its profitability back on track. In the most recent quarter earnings came in at $1.91 per share, improving on a loss of eight cents per share a year ago.
The largest share of Netherlands-based NXP’s revenue comes from sales of chips to the automotive industry.
It also makes chips for industrial uses, Internet of Things, mobile and communications infrastructure applications.
With demand for autos seen ramping up as the economy gets back on its feet following the coronavirus pandemic, the future could be bright for the firm.
Automotive semiconductors have been in short supply this year because of tight capacity at chip foundries. The situation has forced some carmakers to idle factories.
The firm’s CEO Kurt Sievers was keen to point out the broadness of the firm’s offerings during its most recent earnings call at the start of November.
“For NXP, it’s of course, not just automotive driving our performance, within the Industrial and IoT market, we see our ability to provide complete turnkey connected edge processing solutions consisting of processes, connectivity, security and analog, all leading to increased customer traction,” he said. “These are all just a few examples that underpin our confidence in our Company-specific growth.”