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? Google-parent Alphabet (GOOGL), Fortinet (FTNT) Goldman Sachs (GS), Cleveland-Cliffs (CLF) and Albemarle (ALB) 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.
But Covid remains a concern, even as vaccinations reach more and more Americans. The rising number of cases of the new Delta variant is a worry.
The major indexes have been rallying after a spell of pressure. It is trying to shrug off inflationary worries and the possible demise of the heavily indebted China Evergrande. Increasing clarity on the Federal Reserve’s approach to tapering bond purchases has been a help.
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.
The stock market looks to have cleared a rough patch, which was spurred as inflation fears and concerns about the rise of the delta variant of the coronavirus weighed on the market.
The market is now back in an uptrend after clearing stubborn resistance. Rising energy and metals prices have been a tailwind. Higher Treasury yields have helped many financials and weighed on growth stocks, but the market has been resilient.
This Dow Jones, Nasdaq and the S&P 500 are all now well clear of the key 50-day moving average after another strong week, despite a few wobbles. Indeed, the S&P 500 and Nasdaq hit record highs.
The market is now back in a confirmed uptrend. Bear in mind that the strongest stocks tend to go their strongest price runs in the early innings of a new uptrend. This often happens within just a few days or weeks of the switch from “market in correction” to “confirmed uptrend.”
Now is a good time to be buying fundamentally strong stocks breaking out of sound chart patterns. The stocks featured below are potential candidates.
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
- Fortinet
- Goldman Sachs
- Cleveland-Cliffs
- Albemarle
Now let’s look at Google stock, Fortinet stock, Goldman Sachs stock, Cleveland-Cliffs stock and Albermarle 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
Google parent Alphabet is in a buy zone after breaking out of a flat base following strong earnings. The ideal buy point here is 2,925.18, according to MarketSmith analysis.. It is actionable as high as 3,071.44.
The relative strength line is also spiking higher once again.
GOOGL stock has a perfect IBD Composite Rating of 99. That puts it in the top 1% of stocks tracked overall. Earnings outshine stock market performance, with its EPS Rating a top notch 98 out of 99.
Earnings have grown by an average of 123% over the past three quarters. This is almost five times the 25% growth sought by CAN SLIM investors.
Analysts see strong growth ahead, with Google earnings per share expected to explode 102% in 2021, and then growing by a further 5% in 2022.
The tech giant has a Relative Strength Rating of 89. That means it has outperformed 89% of stocks tracked over the past 12 months in terms of price performance.
Recent performance is strong, with Google stock rising around 61% so far in 2021. This far outstrips the S&P 500’s gain of more than 22%
Big money has been once again snapping up Alphabet stock of late. This is reflected in its Accumulation/Distribution Rating of B-, which reflects moderate buying activity over the past 13 weeks.
On the other hand, 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.
Fortinet Stock
Fortinet stock is near the top of its buy zone after previously clearing a new flat base entry of 322.10. Aggressive investors could have also used Oct. 7’s high of 313.24 as an early buy point.
FTNT stock pulled back to below its 50-day line in late September following a long run above the key technical benchmark. It is once again pulling away from this level.
The stock has been on a tear as the market uptrend resumed, rising for eight sessions in a row. A reflection of its strong recent performance is the fact its RS line has just hit a new high.
One reason to exercise caution is that Fortinet earnings are due Nov. 4.https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=FTNT
An approach highlighted by Investor’s Business Daily is to use options as a strategy to reduce risk around earnings. It’s a way to capitalize on the upside potential of a stock’s move around earnings, while reducing the downside risk.
It is in the top 3% of stocks in terms of price performance over the last 12 months. In addition, the stock is up almost 127% so far in 2021.
Earnings have grown by an average of 29% over the past three quarters. Growth of 14% in the most recent quarter is not ideal however.
Fortinet competes with Palo Alto Networks and others in the firewall security market. Firewalls reside between private networks and the internet. They block unauthorized traffic and check web applications for malware.
As large companies shift to off-premise cloud computing services, one view is that firewall technology will play a lesser role. Fortinet has targeted software-defined wide area networks, or SD-WANs, an emerging computer networking technology.
Back in July the firm announced it was expanding its FortiCare and FortiGuard security services by adding a new security service called FortiTrust.
“FortiTrust security service offer user-based licensing that follow the user across the operations entire security platform,” CEO Ken Xie said during the firm’s most recent earnings call in July. “This enable organizations to easily manage and secure acquire our network, endpoint and cloud, which traditionally has been siloed. Initial service level are being offered for zero-trust network access and identity verification.”
Goldman Sachs Stock
Goldman Sachs offered an entry near 400 as it bounced off its 10-week line. It is also sitting just under a flat base entry of 420.86.
While it remains below its 2016 highs for now, the RS line for Goldman Sachs is looking to make a new high. If can successfully achieve this it will be a bullish indicator.
Investment bank Goldman Sachs on Oct. 15 smashed Q3 earnings views, capping a stronger-than-expected earnings week for big banks.https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=GS
While earnings growth slowed in the most recent quarter, it remains very impressive overall. Price performance is also a bright spot, with the stock up 57% in 2021.
Banks should benefit as interest rates rise, and the Fed has been signaling it is looking to dial back its current approach to stimulating the economy.
EPS has jumped by average of 212% over the past three quarters. This is well in excess of the 25% growth sought by the CAN SLIM cognoscenti over this time period.
Goldman Sachs stock is a solid all-round performer, with its RS Rating coming in out 10 of 99. Its EPS Rating of 92 is even better, reflecting the banking behemoth’s status as an earnings juggernaut.
Wall Street expects Goldman Sachs earnings to grow 78% in 2021, accelerating from a 33% gain in 2020. But the investment bank is likely to see both earnings and sales decline in 2022, according to FactSet.
Deutsche Bank analyst Matt O’Conner, who rates Goldman Sachs stock as a hold with a 365 target, praised the firm’s latest results.
“Both trading and investment banking fees were robust and much better than expected,” he said in an Oct. 15 research note. Consumer banking was stronger (on higher management and incentive fees) and asset management fees were a bit weaker (on lower equity and debt gains).”
He also said that expenses were lower, despite higher revenues, and that credit ticked up on portfolio growth.
Cleveland-Cliffs Stock
While Cleveland-Cliffs is on track to form a new handle with a 26.61 entry. It comes after the stock formed an awkward-looking cup base..
The steelmaker previously offered an early entry from a rebound off the 10-week line at around the 22.24 level, following strong earnings.
While the relative strength line is showing signs of life, it lost momentum as it starts to form a handle. Investors will want to see it power back to August’s high going forward.
CLF remains sharply above 2020 pandemic lows, but off 2012-2013 highs.https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=CLF
At the moment stock market performance is outshining earnings. While its EPS Rating sits at 65 out of 99, it is in the top 5% of stocks in terms of price performance over the past 12 months.
The firm lost 32 cents per share in 2020 amidst the coronavirus pandemic, but EPS is surging now. As the economy continues to get back on its feet demand should continue to improve for its products.
On Oct. 22, the steel producer soared nearly 13% after swinging to Q3 EPS of $2.33 as revenue more than tripled.
“We went from $2 billion annual revenues in 2019 to expected revenues of $21 billion in 2021,” CEO Lourenco Goncalves said in the earnings news release. He added that Q3’s $1.9 billion of adjusted EBITDA equals 50% of the $3.8 billion year-to-date total, “showing that our profitability continues to increase.”
Using its record free-cash flow, Cleveland-Cliffs retired $1.2 billion in preferred stock in Q3, equivalent to buying back 10% of shares.
Goncalves also touted CLF’s “successful” negotiations of annual fixed-price sales contracts with some of its most important customers.
“Differently from other steel companies more exposed to spot prices, we believe that our average sales price next year should be higher than in 2021, allowing us to continue to grow our already strong profitability and to further strengthen our balance sheet,” he said.
CLF has gotten limited help from this year’s surge in steel prices, but it stands to get a significant boost in 2022. As an example, Goncalves told analysts on the earnings call, “We are doubling the price of our steel plate,” based on rates already renegotiated with clients.
Albemarle Stock
Lithium play Albemarle cleared a cup-with-handle buy point of 244.46 last week. This is a third stage base, which is not ideal.
However, the relative strength line has just spiked to a new high, which is a bullish sign. The stock has gained a muscular 57% so far this year, and demand for electric vehicles could send it higher still.
Investors should bear in mind the firm is getting set to report earnings Nov. 4. While good results could propel it higher, there is also significant downside risk here.
At the moment earnings performance is still not ideal, but institutional investors are piling in as they see Albemarle has the inside track in the lithium race. ALB stock’s Accumulation-Distribution Rating comes in at a solid B+.
Earlier this month RBC analyst Arun Viswanathan upgraded the lithium mining play to outperform.
“As EV production growth continues to accelerate, we believe [Albemarle] will continue to benefit given its unique low cost position and global scale,” he said in a research note.
With electric vehicle sales occurring at a rapid rate it is leading outsized growth and higher prices pricing for lithium products.
Viswanthan believes prices “should result in positive contracting activity” between lithium miners and customers.
Albermarle was the biggest supplier of battery-grade lithium for electric vehicles last year. However it has a number of strings to its bow.
Lithium sales made up 40% of sales in 2020, bromine specialties were 35%, and catalysts 25%.
The company’s bromine business provides products for areas including fire safety and oilfield drilling.
Its catalysts supplies products and services to the refining and petrochemical industries.
Source: Investors.com
