Editorial StaffBuying 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?
With inflation worries growing, and the Federal Reserve taking a more hawkish approach to interest rates and bond purchase tapering, market action has been challenging so far in 2022. The Russian invasion of Ukraine continues to weigh on 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.
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.
A stock market rally that kicked off 2022 soon fell on its face. The market tried to rally but has just fallen back into correction territory. The S&P 500, the Nasdaq and the The Dow Jones Industrial Average are all trading near 52-week lows. The S&P 500 briefly touched official bear market territory on Friday.
The market is in bad shape. This means you should avoid buying stocks altogether. Instead, it is a good time to start raising cash — start by selling your weakest performing stocks first. If you have great conviction about a stock and have a profit cushion, consider holding through the correction. You also move entirely off margin.
But you should stay engaged with the market and get to work on building a robust watchlist. Looks for stocks contracting less than others or less than the main indexes. These will tend to have rising relative strength lines. The names below are good candidates.
Remember, there is still significant headline risk going forward. Inflation remains a key issue while the Russia-Ukraine conflict is a wild card that has proved its ability to shake the market.
But 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
- Merck
- Exxon Mobil
- CF Industries
- Lantheus
- WWE
Now let’s look at Merck stock, Exxon Mobil stock, CF Industries stock, Lantheus stock and WWE stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Merck Stock
Merck stock is in its buy zone from a cup-with-handle base. The buy point here is 89.58. MRK has held up better than most amid the pullback.
The relative strength line has already hit a 16-month high.
The stock currently boasts outstanding all-around performance. This is reflected in its near-perfect IBD Composite Rating of 98.
Big money has been investing heavily in the stock of late, which is why it holds a powerful Accumulation-Distribution Rating of A+.
Earnings in particular are a strength, with its EPS Rating coming in at 93 out of 99. Nevertheless, the stock is up around 21% over the past 12 months.
The stock was boosted following its latest earnings report. Merck earned $2.14 per share, minus some items, on $15.9 billion in sales. Earnings soared 84% and beat analysts’ call for $1.83. Sales were $15.9 billion, up 50% year over year. Merck stock analysts expected $14.56 billion, according to FactSet.
Excluding the impact of exchange rates, earnings and sales popped a respective 89% and 52%.
Merck’s biggest moneymaker, cancer treatment Keytruda, raked in $4.8 billion. Its sales advanced 23%. Human papillomavirus vaccine Gardasil generated $1.5 billion in sales, up 59%. In constant currency, Keytruda sales rose 27% and Gardasil sales rocketed 60%.
The Ridgeback Biotherapeutics-partnered Covid-19 treatment called Lagevrio generated more than one-fifth of Merck’s sales during the quarter. It rivals Pfizer’s Paxlovid. Overall sales surged by half in the first quarter. Excluding Lagevrio’s impact, Merck reported 19% sales growth.
Now, the recent IBD Stock Of The Day expects the Covid pill to bring in $5 billion to $5.5 billion in full-year sales.
For the year, Merck now expects to earn $7.24-$7.36 per share on $56.9 billion to $58.1 billion in sales. At the midpoints, both metrics are above Merck stock analysts’ forecast for adjusted earnings of $7.28 a share on $57.25 billion in sales.
Exxon Mobil Stock
Exxon Mobil stock is also worth considering. It previously managed to break above a cup-with-handle base buy point of 89.90 buy point, according to MarketSmith analysis. It currently sits in the buy zone just above this level.
In addition, the relative strength line sits near new highs, an encouraging sign.
XOM stock has a perfect Composite Rating of 99. Stock market performance is increasingly bullish, with the stock rising 43% since the start of the year.
Improving earnings performance gives added credibility to a bullish outlook on Exxon Mobil stock. The most recent quarter saw earnings per share jump by 218%, its second straight profitable quarter following the Covid pandemic.
Oil prices have surged in recent months as the West turns away from Russian supply.
After spiking above $120 a barrel, crude briefly retreated below $100. U.S. crude oil futures are back to around $110.
The stock held up despite a recent earnings miss. Exxon earnings per share jumped to $2.07 a share while analysts polled by FactSet expected EPS of $2.20.
Revenue was better than expected though, jumping 53% to $90.5 billion. Wall Street expected revenue of $82.838 billion.
The Q1 EPS excludes $3.4 billion, or 79 cents per share, related to Exxon’s planned exit from the Russia Sakhalin-1 project as a result of the Ukraine war.
Another booster for the stock is the fact management hiked its stock buyback program to as much as $30 billion through 2023.
The firm resumed buybacks in January, announcing $10 billion at the time.
Capex totaled $4.9 billion for the quarter, in line with its full-year guidance of $21 billion to $24 billion.
On April 26, Exxon said it hiked its recoverable resource estimate for its Stabroek Block in offshore Guyana to 11-billion oil-equivalent barrels, thanks to three new discoveries at the site. The previous estimate was for 10 billion barrels.
But Exxon, like other oil companies, is appealing to ESG investors by earmarking funds to develop new business models to address climate change.
Exxon has announced $15 billion in investments in its Low Carbon Solutions business.
CF Industries Stock
CF Industries is on track to form a new base in another week. The ideal buy point here would be 113.58. Aggressive investors could consider 110.46, just above the May 16 high as an early entry.
After a huge run, CF and other fertilizer stocks pulled back in April to around their 50-day lines. They’ve continued to trade around that key level.
The relative strength line for CF Industries stock is sitting near a 52-week high. In fact, the RS line has risen to a nearly seven-year high though it remains below all-time highs, according to MarketSmith chart analysis.
On May 4, CF disclosed that profits soared 526% in the March quarter while sales surged 174%, accelerating from a 131% gain the prior quarter.
Analysts polled by FactSet forecast CF earnings per share will nearly triple in all of 2022 as sales leap 78%. In 2023, both CF’s earnings and sales are seen falling by double digits.
CF stock boasts five quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of March, 1,730 funds owned CF Industries stock, up from 1,344 funds in March 2021.
The agricultural chemicals industry group ranks a dazzling No. 9 out of 197 industry groups tracked by IBD.
CF Industries is the top stock among 14 stocks in its group, which also includes Mosaic (MOS) and Nutrien (NTR).
Fertilizer companies produce a vital product with durable demand, especially amid the ongoing Russia-Ukraine crisis. Both of these countries are key exporters.
CF Industries is the world’s largest ammonia producer, Green hydrogen and ammonia are key elements as companies and countries alike try to move toward net-zero carbon emissions.
By 2050, hydrogen will meet 20% of the world’s energy needs, according to some forecasts. That would be up from less than 1% today. Ammonia is three parts hydrogen and one part nitrogen. It’s used as a means to transport hydrogen, as well as being a fuel in its own right, CF says.
Deerfield, Ill.-based CF Industries produces 10 million tons of ammonia per year and nearly 2 million tons of hydrogen annually.
Lantheus Stock
Lantheus stock is clear of its short-term moving averages after holding support at its 10-week line after a bullish breakout in February.
LNTH has proven itself one of the strongest stocks in the market after rocketing out of a double-bottom base in February.
A huge gain from the 30.83 buy point within three weeks triggered the eight-week hold rule. It netted those who held a rewarding return.
Due to the scope of the stock’s gains, it’s best to wait for another test of the 10-week line or a new base to form.
LNTH stock has a near-perfect IBD Composite Rating of 98. It is among the top 1% of stocks in terms of price performance over the past 12 months.
Earnings are not quite as strong. Nevertheless, they have been accelerating for the past four quarters.
EPS has grown by an average of 732% over the past three quarters, the IBD Stock Checkup shows.
The stock has won a place on the Leaders Watchlist due to its strong recent performance.
Lantheus makes diagnostic imaging agents and products that help healthcare professionals identify disease and improve patient treatment and care.
Two straight quarters of accelerating sales growth indicates strong demand for the company’s products. When the company reported Q1 results in late April, revenue surged 126% to $208.9 million.
Lantheus develops and manufactures diagnostic and therapeutic products that assist clinicians to diagnose a variety of disease, including cancer.
Products include Definity, which is a microbubble ultrasound enhancing agent. It is used in ultrasound examinations of the heart and Neurolite, which is used to identify the area within the brain where blood flow has been blocked or reduced due to stroke.
WWE Stock
World Wrestling Entertainment stock climbed back above the 50-day moving average. It has a flat-base buy point of 63.81. But it’s above the 50-day line and right on a downward-sloping trendline. Any sort of gain Monday would offer an early entry.
The base is one of the cleanest among growth stocks lately. It is first stage pattern, which means it is more likely to result in rich gains.
The relative strength line is at highs and has been gaining ground since January.
While stock market performance is strong, earnings are even better. This is reflected in its near-perfect EPS Rating of 98.
The live-entertainment titan served up a piledrive of a first-quarter earnings report. It turned in revenue of $333.4 million and earnings of 77 cents per share. That beat analyst estimates for $325 million in revenue and net earnings of 65 cents per share.
The firm, whose CEO Vince McMahon is a major character both in front of the cameras and behind the scenes, saw revenue and earnings jump 27% and 33%, respectively. Various streaming deals, international expansion and the return of live events bolstered its numbers.
“WWE generated strong first quarter results that reflected robust demand for our events and increased consumption of programming across platforms,” Chief Financial Officer Frank Riddick said during the May 5 earnings call.
For the second quarter, WWE estimates adjusted operating income between $80 million and $90 million. That’s an increase of 17% to 32% from the same period last year.
The company suspended its live events due to the Covid-19 pandemic, and returning to the ring in July 2021 has been a major boost for WWE stock. Domestic and international ticket sales and sponsorships generated $23.1 million in revenue in the first quarter alone. That compares with $57.8 million for all of 2021.
While WWE’s ratings have varied between relatively stagnant and slightly down over the past year, executive leadership isn’t concerned.
“This entire past quarter ratings were up on Raw, ratings were up on SmackDown,” Nick Khan, WWE president said on the latest earnings call. “So we’re confident ratings have been strong.”
And while the U.S. remains its bedrock, the company has seen a 54% increase in international viewership over 2021. That was due to previously-announced deals in the U.K., Latin America, China, India and Germany.
Source: Investors.com
