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? Boeing (BA), Walt Disney (DIS), Target (TGT) Scotts Miracle-Gro (SMG) and the VanEck Vectors Semiconductor ETF (SMH) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus. The stock market has managed to get back on track after a brief correction, when all the major indexes all dipped below their 50-day moving averages.
Over the past week, rally breadth was unusually bullish. Growth stocks are now rebounding after several weeks of underperformance. The S&P 500 is at record highs while the Nasdaq reclaimed its 50-day line.
The coronavirus pandemic remains a concern, though new cases and deaths are well off highs while vaccinations are ramping up. President Joe Biden has signed the $1.9 trillion coronavirus stimulus bill. Fed Chairman Jerome Powell has said that the central bank is committed to an “all-in” approach as it tries to nurse the economy back to health.
There are concerns that aggressive fiscal and monetary policy could spur too-much inflation and hurt stock prices long-term.
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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 rallied strongly after recent pressure. The S&P 500 has just hit a new high, while the Nasdaq has managed to clamber back above its 50-day moving average. The tech-heavy index needs to now make a decisive move above that key technical benchmark.
It is now is a good time to get back into the market and buy fundamentally strong stocks coming out of proper chart bases.
And while this is no longer the powerful, growth stock rally of 2020, the stocks featured below are potential candidates.
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 Boeing stock, Walt Disney stock, Target stock, Scotts Miracle-Gro stock and SMH 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.
Boeing stock is in buy range after reclaiming a 244.18 buy point, MarketSmith analysis shows. The stock has also managed to break a short-term downtrend.
BA stock has been climbing away from its 50-day line, and has is now flying above its 10-day and 21-day moving averages to boot.
The relative strength line is also showing signs of life after a recent decline. This is a key gauge that compares a stock’s performance to the S&P 500.
However there are still significant fundamental challenges, which is why the stock has a poor IBD Composite Rating of 36. Earnings are the key weakness, with its EPS Rating sitting at an abysmal 5 out of 99.
Big money is backing the stock however. Institutional investment is a key gauge for the CAN SLIM cognoscenti, as professional investors account for about 75% of all market activity. Boeing stock scores highly here. Its Accumulation/Distribution Rating of A- represents heavy buying among institutions over the past 13 weeks.
Boeing stock was hit badly by the 737 Max scandal. They jet was grounded after 346 people were killed in two deadly crashes. However it is starting to recover. Analysts see the firm posting a loss of three cents per share in 2021, before bouncing back with EPS of $5.42 in 2022.
Boeing is a play on the improving economy. Travel stocks have been continuing to recover from lows as the coronavirus pandemic eases. Airlines have been making orders as they look to improve their fleets.
Southwest said it would add 100 orders for the Boeing 737 Max 7. The first 30 of those are scheduled to be delivered next year. The Max 7 has fewer seats than the Max 8 but a slightly longer range.
The carrier also converted 70 Max 8 firm orders to Max 7 orders. And it added 155 options for the Max 7 or Max 8 for 2022 through 2029.
The changes, in total, will give Southwest 349 Max orders and 270 options for Max 7 or Max 8 aircraft for 2021 through 2031.
The carrier will also speed the retirements of its 737-700 aircrafts. The deal between the airline and the jet maker comes as the 737 Max begins to return to the skies, after the U.S. and other nations grounded the plane in 2019 following two fatal crashes.
Last month it was also reported that Southwest was close to a deal with Boeing for a big order of the 737 Max jets. Boeing, in February, saw more orders than cancellations, after the grounding of the Max and the coronavirus pandemic upended demand.
Walt Disney Stock
Disney stock is in buy range from a flat base after running past a buy point of 183.60. DIS stock had managed to climb above its buy zone, but has fallen back. It is now looking to rebound after finding support at its 50-day line. Investors may want to buy Disney stock from a 50-day/10-week line bounce, especially as it has just managed to clear its 21-day line.
Its relative strength line has dropped back slightly after spiking to a new high. Disney stock has an RS Rating of 69 out of a possible 99. Market performance is improving in general, despite its recent dip.
Disney stock got a boost after it was announced California will allow theme parks to reopen somewhat from April 1. The firm is aiming to reopen Disneyland Park and Disney California Adventure Park on April 30. However capacity will be “significantly limited.”
Disney earnings have been badly hit by the coronavirus pandemic, with its EPS Rating slipping to very poor 13 out of 99. But this will improve as economies get back on their feet following broad lockdowns.
Disney is a recent IBD Stock Of The Day.
Wall Street is expecting full year earnings to be flat in 2021, before ramping up to 145% growth in 2022.
The Dow Jones giant showed it is bouncing back after crushing fiscal first-quarter estimates.
The surprise profit came as the number of streaming subscribers jumped. Disney+ subscribers have raced above 100 million.
A new Star-branded streaming service launched 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 to 260 million Disney+ subscribers by 2024. That’s up from its prior estimate of 60 million to 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.
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Target stock is at the top of its buy zone after breaking out of a double-bottom base. The ideal buy point here is 196.35. The stock aggressively sprinted away from its 10-week line as it broke out.
In fact TGT stock has broken clear of all its major technical benchmarks, including its 21-day exponential moving average.
The RS line offers further reasons for enthusiasm among Target investors. It is spiking higher once more, and could soon hit a new high. So far this year Target stock is up by almost 17%.
Target stock has a good Composite Rating of 85, putting it in top 15% of stocks tracked. Earnings in particular are a strength, with EPS rising by an average of 83% over the past three quarters. Earnings rose by a less impressive, but still strong, 58% in the most recent quarter.
Institutional sentiment is also strong, with its Accumulation/Distribution Rating coming in at B-. This reflects moderate buying among institutions. Notable holders include the Fidelity Select Retailing Portfolio Fund (FSRPX), which ranks as one of the very best funds according to IBD research.
Target recently announced it will invest $4 billion a year for several years to accelerate its shift to e-commerce
During a virtual investor day, management said the massive investment campaign would include 30-40 new stores each year, new distribution centers and technology aimed at speeding up shelf restocking.
Target will also test new package-sorting hubs and look for ways to design more efficient delivery routes.
The company’s focus on revamping its stores to serve more as fulfillment centers for online orders was well under way before Covid-19 hit. It is working to regain market share lost to online retail giant Amazon (AMZN).
Scotts Miracle-Gro Stock
Scotts Miracle-Gro stock has broken out of a cup-with-handle base, clearing the 238.91 buy point on March 26. It is currently just above its buy zone. SMG stock has been rebounding from its 50-day line.
On a weekly chart it formed a cup base, which offers an alternative entry point of 250.10. This gives those keen on the stock a second bite of the cherry.
The relative strength line for Scotts Miracle-Gro stock has been recovering strongly from recent dip. Indeed, it has just hit a new high, which is a bullish sign for its breakout.
So far in 2021, the stock is up almost 27%. In the last four weeks alone it has gained more than 7%.
SMG stock has a good balance of earnings and price performance. This has earned it a top notch Composite Rating of 97. This puts it in the top 3% of stocks tracked.
Scotts Miracle-Gro stock is particularly noteworthy for marijuana enthusiasts. The lawn care specialist has been investing in R&D for better plant genetics and nutrient formulations for both cannabis and hemp plants.
SMG took part in the marijuana stock rally that followed the Jan. 5 runoff elections in Georgia, granting a de facto majority in the U.S. Senate to the Democratic Party.
Big money is getting behind SMG stock, with its Accumulation/Distribution Rating coming in at C+. The Federated Hermes Kaufmann Fund (KAUFX), rated as one of the best funds by IBD, is a noteworthy holder. In total, 49% of its stock is held by funds.
Management holds a further 27%. A large management stake in a company is often seen as a sign of strong future prospects.
Five Stocks Flashing Buys From Bullish Rebounds
As the economy reopens, demand for semiconductors is only going to rise. A large and growing number of chip-equipment and semiconductor makers have broken out in the past two weeks. Rather than try to pick a winner, and take on company-specific risk, you can get broad exposure by buying shares of the VanEck Vectors Semiconductor ETF.
SMH is currently closing in on a 258.69 buy point after a seven week consolidation. It has just bullishly broken through its 50-day moving average, which is encouraging.
The RS line is picking up steam again following a dip. It has been outperforming the S&P 500 since mid-March.
Overall the SMH ETF has gained around 17% since the start of 2020. This is well clear of the S&P 500’s gain of 8.7%. Its RS Rating of 73 puts it in the top 26% of stocks tracked.
Institutional support is a good way to gauge the prospective fortunes of an ETF. Here SMH scores with an Accumulation/Distribution Rating of B.
It also holds a Sponsorship Rating of A. This unique rating helps investors know if a stock is owned by the better performing mutual funds, and if more mutual funds have bought the stock recently. The Berkshire Focus Fund (BFOCX) is among the best funds to currently hold SMH stock.
Chip stocks have been the big story in the Nasdaq’s recovery. Many names in that sector made strong moves in the shortened trading week, during which SMH stock notched a 4.3% gain.
Evercore ISI analyst C.J. Muse highlighted that chipmakers are seeing rising earnings estimates. He has predicted a “decade-long investment cycle ahead as semiconductor manufacturing moves to a strategic national priority in both the U.S. and Europe.”
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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