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? Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Snowflake (SNOW) and Steel Dynamics (STLD) 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, with indexes roaring back after shaking off recent negative action. Signs of a Fed pivot have given the rally even more thrust. However 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. IBD is currently recommending 80% to 100% market exposure.
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
- Steel Dynamics
Now let’s look at Microsoft stock, Nvidia stock, Amazon stock, Snowflake stock and Steel Dynamics stock in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
MSFT stock is trading just above a cup base buy point of 366.78, MarketSmith analysis shows. The stock has also formed a five-weeks tight pattern, with a higher buy point of 384.30. It’s due to turn into a flat base after this week.
Investors also could use the Dec. 13 high of 377.65 as another entry.
The stock is testing support at the 21-day exponential moving average. MSFT stock is now about 4% above its 50-day line, which means it is no longer extended.
The relative strength line has backed off highs. Microsoft stock is in the top 13% of issues in terms of price performance over the last 12 months.
Overall impressive performance is reflected in its strong IBD Composite Rating of 94 out 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 has been standing pat of MSFT stock of late, with its Accumulation/Distribution Rating coming in at C-.
Late last 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.
Earnings and sales growth have accelerated for the past three quarters.
CEO 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.”
Microsoft recently unveiled its own AI chip, the Azure Maia AI Accelerator, to ease its dependence on Nvidia GPUs. It is designed to run generative AI and other AI workloads, including large language model training and inference. The firm plans to roll out Maia to its data centers early next year.
It remains to be seen whether moves to adopt a vertical integration approach by firms such as Microsoft and Apple (AAPL) could be a longer-term threat to chip makers such as Nvidia and Advanced Micro Devices (AMD) remains to be seen.
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.
Microsoft may have strengthened its OpenAI position after the AI startup ousted and then brought back CEO Sam Altman in a five-day span.
Excellent sustained performance has netted Microsoft stock a spot in the IBD Long-Term Leaders Portfolio.
Nvidia has a flat base with a 505.48 buy point, with a possible early entry of 504.33. The flat base is right at the top of a double-bottom base.
Volume has trended lower than average for most of the the base, but finally showed above-average trade on the upside last week. The relative strength line also sits near highs.
Its new pattern began after the specialty chip and AI stock hit a then all-time high on Aug. 24.
NVDA stock holds a perfect IBD Composite Rating of 99. It is also in the top 2% of stocks in terms of price performance over the past 12 months. So far this year it is up around 237%.
In the most recent quarter Nvidia’s earnings per share surged 593% to $4.02. Revenue soared more than 200% to $18.12 billion.
“Our strong growth reflects the broad industry platform transition from general-purpose to accelerated computing and generative AI,” CEO Jensen Huang boasted following his firm’s quarterly report.
Nvidia also offered strong guidance once again, though it wasn’t as strong as some “whisper” numbers. Meanwhile, Reuters reported that Nvidia will push back until early 2024 an AI chip for the China market that complies with U.S. restrictions.
Nvidia stock is a member of the prestigious IBD 50 list. This is an objective, computer-generated list based solely on time-tested criteria.
Nvidia leads in artificial intelligence chips, but competition is rising. Key customer Microsoft (MSFT) is among firms developing its own solutions.
OpenAI, whose backers include Microsoft, reportedly is exploring its own AI chips as well.
But Nvidia is certainly not resting on its laurels amid rising demand. At the SC23 supercomputing conference in Denver this month, Nvidia introduced its HGX H200 AI computing platform and GH200 Grace Hopper Superchip.
The H200 is the first AI accelerator to use an advanced memory technology called HBM3e. The system provides nearly double the capacity and 2.4-times more bandwidth compared with its predecessor, the Nvidia A100.
Rival chipmakers Advanced Micro Devices (AMD) and Intel (INTC) promoted their own AI products at SC23. Intel showcased its Data Center GPU Max Series, Gaudi 2 AI accelerators and Xeon processors while AMD touted its Epyc server processors and Instinct AI accelerators. Earlier in December AMD touted its Instinct MI300 Series accelerator family at a special launch event.
Snowflake stock is actionable above a 192.66 cup-with-handle buy point. The 5% buy zone runs up to 202.93.
The relative strength line has been ticking upwards as it approaches a potential breakout, encouraging sign. It also sits clear of its 50-day line and its short-term moving averages.
Overall performance is excellent, which is reflected in its IBD Composite Rating of 95 out of 99.
The company has posted multiple quarters of triple-digit or better earnings growth in fiscal 2023.
In the most recent quarter EPS popped 127% to 25 cents and in the quarter before that it exploded 1900% to 22 cents.
The firm is seen swinging to a 79 cents profit per share in 2024 before turning in 40% EPS growth in 2025.
Snowflake sells data analytics software that runs on cloud computing platforms. It is also evolving into a cloud data-management platform.
Amazon Web Services, the cloud unit of Amazon.com (AMZN), is a key Snowflake partner.
Some analysts see the firm as a player in generative artificial intelligence, a key investing theme of 2023.
The stock soared following 2020 IPO but enthusiasm soon thawed, which to a SNOW stock melt down.
It is rebounding strongly following a multiyear slump, with institutional demand also rising due to a sharp turnaround in earnings growth.
In total, 42% of SNOW stock is currently held by funds. Its Accumulation/Distribution of A- reflects solid buying among institutions of late.
Berkshire Hathaway (BRKB), which is led by investing icon Warren Buffett, is a noteworthy SNOW backer.
Weatherford stock is in a buy zone after clearing a cup base entry of 100.93. It previously offered an early entry as it cleared the 50-day moving average.
The relative strength line has been progressing as the stock crafts the right side of a pattern. It has soared around 100% so far this year.
The firm provides equipment and technology for oil and gas drilling and production worldwide. It operates in roughly 75 countries, with nearly 18,000 team members across 340 operating locations.
A competitor of industry giant Halliburton (HAL), Weatherford International provides services for an array of oilfield types.
The stock got a boost after U.S. crude oil prices jumped, passing the $75 per barrel mark, amid tensions in the Red Sea. It was backing off these levels today, though. Houthi militants are attempting to disrupt global trade, and the U.S. has launched a task force to protect the trade route.
While it is incorporated in Ireland, Weatherford’s primary offices are in Houston. The company has been going from strength-to-strength since emerging from bankruptcy in 2019 and was relisted on the Nasdaq in June 2021.
Weatherford stock resisted downward pressure even as crude prices began retreating in late September. But after hitting a record high of 110.93 on Nov. 6 it went on to build a base.
Earnings performance is good, with the stock holding an EPS Rating of 83 out of 99. In the most recent quarter, earnings jumped 315%. Profits are seen rising a further 28% in 2024.
In October it guided for full-year adjusted EBITDA margin expansion of 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, with adjusted free cash flow exceeding $400 million in 2023.
There has been slightly more buying than selling among funds of late while the stock boasts eight consecutive quarters of increasing fund ownership.
Steel Dynamics Stock
And while the relative strength line remains well off highs, it is now spiking. It sits at its best levels since April.
At the moment, overall performance is not ideal. This is reflected in its IBD Composite Rating of 75 out of 99.
Earnings is the main weakness, with the stock boast an EPS Rating of 66 out of 99. Its relative strength is very good though, with the stock in the top 13% of stocks in terms of price performance over the past 12 months. It is up more than 27% so far in 2023.
STLD stock was boosted after management touted steel price increases heading into 2024 and indicated that Q4 earnings will top current forecasts.
Steel Dynamics said on Dec. 15 that Q4 earnings should be $2.60-$2.64 a share. That’s down 24% from Q3 and 27.5% from a year ago, but above $2.40 analyst estimates.
U.S. Steel (X) also gave its own well-received earnings update earlier his month.
Near-month Midwest domestic hot-rolled coil steel futures pricing has climbed to nearly $1,100 per metric ton, up from a low around $700 in September and the first half of October. Settlement of the United Auto Workers strike has been among the factors leading to firmer pricing.
U.S. Steel said on Thursday that it is “successfully negotiating annual auto contracts for incremental volumes.”
On Tuesday, JPMorgan analysts hiked their STLD stock price target to 98 from 95, noting that the coming update for Q4 earnings wouldn’t see much benefit from recent price increases due to lagged contract pricing. But the firm said that benefits of mill discipline, meaning the avoidance of oversupply, and price gains should be realized in Q1.
Another factor benefiting Steel Dynamics stock is the fact Fed Chair Jerome Powell has signaled his determination to pivot and nail a soft landing. With inflation close to the Fed’s 2% goal on a six-month annualized basis, Powell has shifted focus to not keeping policy tight for too long.
Risk of an economic downturn has largely dissipated, with the S&P 500 hitting a new high, the 10-year Treasury yield falling below 4%, and markets pricing in 1.5 percentage points of rate cuts next year. That will brighten the outlook for big steel industry customers, like the auto and construction industries.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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