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), SLB (SLB), Visa (V), Arista Networks (ANET) and Marsh & McLennan (MMC) are prime candidates.
Despite inflation worries and the Federal Reserve tightening rates aggressively, the market has confounded expectations for difficulties in 2023 and has turned in a strong performance so far in 2023. The Russian invasion of Ukraine continues to cast a shadow over markets.
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.
While a stock market rally that kicked off 2022 soon fell on its face, it has turned in stunning gains so far this year. But indexes have pulled back lately, sending the Nasdaq and the S&P 500 back below the key 50-day moving average.
The stock market is currently in a correction. Investors should stop buying shares altogether for now. Instead look to build a robust watchlist of exceptional stocks, such as those in the IBD 50. The stocks below are near buy points and are possible candidates.
The current market conditions make it 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. It is a good time to be raising cash – start by selling your weakest performing stocks first.
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.
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
- Arista Networks
- Marsh & McLennan
Now let’s look at Google stock, SLB stock, Visa stock, Arista Networks stock and Marsh & McLennan stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Google-parent Alphabet is in a buy zone after passing a 127.10 cup with handle buy point.
The relative strength line for GOOGL stock is rising again, holding up better than most tech giants, but off recent highs. This gauges a stock’s performance compared to the S&P 500.
GOOGL stock has a near-perfect IBD Composite Rating of 98. That puts it in the top 2% of stocks tracked overall. Earnings are marginally better than stock market performance, with its EPS Rating a strong 91 out of 99.
Analysts see strong growth ahead, with Google earnings per share expected to surge by 20% in 2023 and in 2024.
The tech giant has a Relative Strength Rating of 90. That means it has outperformed 90% of stocks tracked over the past 12 months in terms of price performance. Recent performance is strong, with Google stock rising nearly 46% so far in 2023. This far outstrips the S&P 500’s gain of over 15%.
Big money has been snapping up Alphabet stock of late. This is reflected in its Accumulation/Distribution Rating of B-. This reflects more buying than selling over the past 13 weeks.
Google stock was boosted after the firm posted second-quarter earnings and revenue that beat analyst estimates. YouTube advertising revenue topped expectations, while the company also authorized additional GOOGL stock buybacks.
Google earnings popped 19% to $1.44 per share. This ended a four-quarter string of year-over-year declines. Revenue rose 7% to $74.6 billion.
“Search revenue was better than feared and accelerated vs. Q1,” Goldman Sachs analyst Eric Sheridan said in a note to clients. “End demand trends remained stable in terms of advertiser budget and product iteration.”
Analysts expect AI investments to spur advertising and cloud revenue growth. Capital spending in the second quarter rose to $6.9 billion, up from $6.3 billion in the first quarter.
“We believe Q2 demonstrated Google’s AI prowess in ads and Cloud,” Jefferies analyst Brent Thill said in a note. “We see the second half of 2023 continuing to accelerate from a Q4 (2022) bottom.”
At the Google I/O 2023 developers event on May 10, Alphabet showcased how generative AI will be integrated into search, maps, Workspace, photos, cloud computing and Android devices. Google discussed how advertising will evolve as generative AI is added to search.
SLB, formerly Schlumberger, is trading just below a cup-with-handle base buy point of 58.70 after trading above it for several sessions. Investors could choose to use 60.12 as a new handle. That would offer an early entry near the prior 58.70 entry.
The stock has been testing support at the 21-day exponential moving average and now sits just below the benchmark.
The 50-day moving average also recently cleared the 200-day line, a bullish technical move known as the “golden cross.”
Overall performance is top notch, netting it a perfect IBD Composite Rating of 99. Earnings performance is particularly impressive, with EPS growing an average 68% over the past three quarters.
The stock is also in the top 7% of issues in terms of price performance over the past 12 months
SLB is one of the world’s largest providers of on- and offshore drilling services. It also provides technology for well drilling, production, and oil and gas processing.
Energy has been rallying of late, which has fueled upward momentum for oil stocks. Oil field services giant SLB is actionable after spiking, as U.S. oil prices hit fresh heights for 2023.
On July 21, SLB narrowly topped Q2 profit expectations but missed on revenue. Despite this SLB Chief Executive Officer Olivier Le Peuch told analysts he remains optimistic about the long-term outlook.
“We continue to see positive upstream investment momentum in the international and offshore markets,” he said. “These markets are being driven by resilient long-cycle offshore developments, production capacity expansions, the return of global exploration and appraisal, and the recognition of gas as a critical fuel source for energy security and the energy transition.”
Analysts see third-quarter earnings growing 22% to 77 cents per share with sales increasing 12% to $8.34 billion.
In addition, Wall Street is expecting SLB profit to grow 37% to $2.98 per share in 2023 while it is seen jumping a further 23% in 2024.
The payment processor stock is actionable after clearing a flat base official buy point of 235.57. It is has also just forged a new flat base on which offers another, higher, official buy point of 245.37.
The relative strength line is moving higher again recently but has work to do to reclaim recent highs.
All-around performance here is strong, with its IBD Composite Rating coming in at 93 out of 99.
Earnings growth is sturdy, if not ideal, with EPS rising by an average of 15.4% over the past three quarters.
Gains are seen trending steadily higher. EPS is expected to climb 16% in 2023 before rising an additional 14% in 2024
Institutional investors have been net buyers of the stock of late, with its Accumulation/Distribution Rating coming in at B. In total, 51% of its stock is currently held by funds with a further 2% being held by banks.
In the most recent quarter Visa earnings rose 9% to $2.16 per share on 12% revenue growth to $8.1 billion, topping analyst views. A resilient U.S. consumer and strong travel trends worldwide are fueling transaction growth.
Payments volume increased 9% for the quarter while cross-border volume vaulted 17%.
Service fee revenues rose 15% to $3.66 billion, topping expectations of $3.63 billion. Data processing fees also rose 15% to $4.1 billion, beating FactSet estimates of a 10.8% gain. International transaction revenue swung 14% higher to $2.92 billion, but fell short of forecasts of $3.01 billion.
The credit card giant looks to have emerged unscathed from the recent banking crisis sparked by the failure of Silicon Valley Bank. The event sent shock waves through financial markets, with midsize banks bearing the brunt of losses during the March mayhem.
The key point here for investors is that payment processors Visa and Mastercard do not carry card balances on their books. This is in contrast to American Express and Discover Financial (DFS).
Instead it is the issuing banks such as JPMorgan Chase (JPM) and Wells Fargo (WFC) that carry the upside and downside on the provision of credit. Visa and Mastercard make money on credit and debit card transaction fees.
For now, at least, the U.S. economy continues to defy gloomy expectations. The Consumer Confidence Index is at its highest level since July 2021, according to the latest release from the Conference Board
In a May 31 appearance at a Bernstein investor conference, outgoing Visa CFO Vasant Prabhu highlighted big opportunities ahead, thanks to three growth engines. While traditional consumer payments continue to see solid growth, “new flows and value-added services can grow faster” than payments for a long time to come.
The new flows comprise new-use cases for Visa’s network, including peer-to-peer payments, payroll and cross-border remittances.
Arista Networks Stock
Arista stock is trading in a buy zone above a 178.36 entry point. It first moved above the level on Aug. 1 following its Q2 report.
It is currently trading above both its 21-day exponential moving average and its major moving averages. It has been bullishly finding support at the 21-day line.
That’s despite suffering a big downside reversal with the broader market on Aug. 24.
ANET stock has a near-perfect IBD Composite Rating of 98. Both earnings and stock market performance are excellent.
It is in the top 6% of stocks in terms of price performance over the past 12 months. Big Money have been net buyers, with its Accumulation/Distribution Rating coming in at B-.
Arista’s second-quarter earnings climbed 46% to $1.58 per share, topping estimates of $1.44 per share. Also, revenue jumped 39% to $1.46 billion vs. forecasts for $1.38 billion. ANET holds a mighty EPS Rating of 98.
For the September quarter, Arista predicted revenue in a range of $1.45 billion to $1.5 billion. That topped estimates of $1.39 billion.
Arista sells computer network switches that speed up communications among racks of computer servers packed into “hyperscale” data centers. These internet data centers are designed to ratchet up computing horsepower when demand surges.
ANET stock has been rallying recently amid the current euphoria surrounding AI. Arista stock has been on views that if tech companies are buying more AI chips, they’ll also invest in computer networking bandwidth.
At a JPMorgan tech conference on May 23, Arista‘s Chief Financial Officer Ita Brennan talked cautiously about a potential AI boost.
“I mean, I think for us it’s early,” Brennan said. “Jayshree (CEO Jayshree Ullal) talked on the (Q1) earnings call about the fact that we’re at the beginnings of understanding what AI really means and what the technology will look like.”
Brennan added: “We have deployed some AI use cases, but it’s relatively small. I think we look at it as, it’s a good underpinning of kind of future momentum and demand, particularly from some of the larger hyperscale customers.”
Following the June-quarter earnings call, ANET stock analyst Michael Ng from Goldman Sachs said in a note to clients: “ANET provided a relatively transparent roadmap in its role as a supplier in generative AI networking infrastructure with 2023 a planning year with trials, leading to pilots in 2024, and then large cluster deployments in 2025.”
William Blair analyst Sebastien Naji gave further insight into the possibilities in a research note.
“Regarding AI, Arista continues to drive product improvements to position Ethernet as a strong competitive offering for networking within GPU clusters,” he said. “Arista is seeing trials within its cloud titan customers and expects more significant AI pilot deployments to start in 2024.”
Marsh & McLennan Stock
MMC stock is just above a flat base buy point of 194.16. The RS line is also gathering momentum.
The stock has been finding support at the 21-day exponential moving average, as well as its 50-day line. These are bullish indicators.
Overall strong performance has netted the insurance play a near-perfect IBD Composite Rating of 97.
Big Money has been snapping up the stock of late, with its Accumulation/Distribution Rating coming in at a strong B.
The New York City-based firm operates in 130 countries across the globe, offering risk management, insurance and consulting services.
Marsh & McLennan completed 20 acquisitions last year as it chases growth. In 2022, MMC’s risk and insurance services business segment generated around 61% of the company’s $20.72 billion total revenue in 2022.
On July 20, the company posted better-than-expected second-quarter earnings and revenue. Earnings have accelerated for the past two quarters.
The insurance broker has averaged around average EPS growth of 12% over the past three quarters.
Analysts expect further growth going forward. Wall Street predict earnings growing 18% to $1.39 per share in Q3 with revenue increasing 9% to $5.21 billion. For the full year, Wall Street forecasts 13% EPS growth and a sales increase of 6%.
So far in 2023, Marsh & McLennan has announced a slew of new acquisitions, including Israel-based reinsurance broker Re Solutions and the Philadelphia-based risk management firm Graham Company.
The broader IBD-tracked Insurance-Brokers industry group, including MMC stock, has narrowly outperformed the S&P 500 this year
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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