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), Walt Disney (DIS), Nvidia (NVDA), Peloton Interactive (PTON) and Playtika (PLTK) are prime candidates.
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Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects a rising confidence that the economy will eventually recover from the coronavirus. Stocks have been rallying strongly again after the current uptrend came under pressure. Markets rose as Democrats made aggressive moves to pass President Joe Biden’s $1.9 trillion stimulus package.
The broader stock market got a shot in the arm after Pfizer (PFE) and BioNTech (BNTX), then rival Moderna (MRNA), announced positive coronavirus vaccine results. Both the Pfizer/BioNTech and Moderna vaccines have received FDA emergency use approval, with U.S. vaccinations ramping up. Other vaccines are on the way.
The pandemic remains a concern, though new coronavirus cases, hospitalizations and even deaths are declining. The CDC has just issued new guidance for schools to reopen as soon as possible, though they will have to adhere to strict safety precautions.
The market has moved powerfully to record highs. The Nasdaq is extended, so investors should be vigilant. But it’s still a good time to buy fundamentally strong stocks passing buy points from proper bases. It is also a good time to look for stocks nearing buy points that are showing strength compared to the rest of the market.
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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 are all near all-time highs. After falling towards their 50-day moving averages, they have rebounded powerfully. This is a bullish indicator.
With the market in an uptrend it is a good time to buy stocks showing fundamental and technical strength as they move past entry points.
One caveat: The Nasdaq is once again looking extended, raising the risks of another market pullback. Nevertheless, investors should also be on watch for the major indexes and leading stocks to rev higher amid the current bullish sentiment.
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 Microsoft stock, Disney stock, Nvidia stock, Peloton stock and Playtika 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.
Microsoft Stock
Microsoft stock is just above a zone after passing a consolidation pattern buy point of 232.96, according to MarketSmith analysis. It has been surging away from its 50-day moving average in recent sessions.
The relative strength line for Microsoft stock has also been moving in line after a recent spike strides of late. The RS line, the blue line in the charts below, tracks a stock’s performance vs. the S&P 500. Its RS line performance is reflected in the fact MSFT stock has gained more than 10% since the start of the year.
Microsoft is one of only four U.S.-listed stocks with trillion-dollar market caps, and is nearing $2 trillion. In this case big is beautiful as Microsoft stock has a strong, but not ideal, IBD Composite Rating of 88. The Composite Rating is designed to give an instant overview of a stock’s fundamental and technical performance.
A key to Microsoft’s high rating is its excellent earnings performance, which is reflected in its EPS Rating of 96. Microsoft earnings growth has accelerated for the past two quarters, reaching 34% in the most recent quarter.
The software giant easily beat Wall Street’s targets for its fiscal second quarter thanks to growth from its cloud computing businesses. It also guided higher on current-quarter revenue.
Microsoft’s successful pivot into cloud computing has been driving growth. It has benefited from the work-from-home and learn-at-home trends during the Covid-19 pandemic. Microsoft’s cloud software and services are aiding at-home workers and students.
„What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,“ CEO Satya Nadella said.
Analysts see Microsoft earnings rising by 28% in fiscal 2021 and by 9% in 2022. MSFT is on IBD’s Leaderboard and Long-Term Leaders stock lists.
Disney Stock
Disney stock is in buy range from a flat base after running past a buy point of 183.60 ahead of earnings. Shares reversed lower from a record high Friday following strong quarterly results, but were up solidly for the week
Its relative strength line is rising, and just hit a new high. Disney stock has an RS Rating of 73 out of a possible 99. Market performance is improving, with Disney stock rising almost 9% in the past four weeks.
Disney earnings have been badly hit by the coronavirus pandemic, with its EPS Rating slipping to very poor 9 out of 99.
But the Dow Jones giant is bouncing back after crushing fiscal first-quarter estimates Thursday.
The surprise profit came as the number of streaming subscribers jumped. Disney+ subscribers climbed to 94.9 million as of Jan. 2, up 9% from 86.8 million on Dec. 2.
During the pandemic, the streaming service has been a bright spot for Disney stock, and big plans are ahead. The firm has surpassed 60 million Disney+ subscribers worldwide, and 100 million subscribers overall to its streaming offerings. Its brands include Hulu, ESPN+, and Disney+.
On Thursday, Disney CEO Bob Chapek said the new Star-branded streaming service will launch 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-260 million Disney+ subscribers by 2024. That’s up from its prior estimate of 60 million-90 million for the same time frame.
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Nvidia Stock
Nvidia stock is in a buy zone after breaking out of a flat base pattern. The official buy point is 587.76, cleared on Wednesday. However, the more-actionable entry was 560.07, cleared on Monday.
The RS line for Nvidia stock looks to be turning positive again after a recent gentle decline. Such periods are common when a stock is consolidating.
Strong fundamental and technical performance has earned Nvidia stock a near perfect Composite Rating of 97.
The Stock Checkup Tool shows recent earnings growth has been impressive. Over the past three quarters, EPS has grown by an average of 81%. This is well clear of CAN SLIM requirements for 25% growth.
Further strong earnings growth could be another catalyst for the recent Stock Of The Day. The Santa Clara, Calif.-based company plans to report financial results for its fiscal fourth quarter on Feb. 24.
Analysts predict that Nvidia will earn $2.80 a share, up 48% year over year, on sales of $4.81 billion, up 55%, in the fiscal quarter ended Jan. 31.
It also could be getting a near-term lift from graphics processing units being used for cryptocurrency mining. Bitcoin is trading near record-high levels. However, GPUs are in short supply.
Elevated Bitcoin prices will „create a near-term demand driver that will soak up any excess supply of GPUs,“ Bradley Gastwirth, chief technology strategist for Wedbush Securities, said in a recent note to clients.
On Friday, Nvidia stock fell on a report that Microsoft, Apple (AAPL) and Google (GOOGL) object to the chipmaker’s planned acquisition of Arm Holdings, a major wireless chip desiger.
Peloton Stock
On Friday, shares jumped 5.6% to 154.67, rebounding from the 50-day and 10-week line, offering a buying opportunity. It reclaimed the 21-day line and just moved above a downward-sloping trend line, also offering reasons to take a position.
Several other top stocks made similar moves — rebounds from the 50-day/10-week line and moving past the 21-day and trend lines — late last week.
Peloton stock broke out from a consolidation in late December, then traded in a messy fashion in early 2021. When PTON stock fell back to around its 50-day and 10-week lines, it also came back to that late 2020 base.
Peloton’s relative strength line, which measures a stock’s performance to that of the S&P 500, is trending upward.
PTON stock holds a good, but not ideal Composite Rating of 92. Earnings performance is its key weakness, but this is not unusual for such a young stock. The firm is currently priotirizing growth.
Nevertheless, Peloton has posted three straight quarters of profits. It has an RS Rating of 94 and an EPS Rating of 74.
Demand for Peloton’s interactive exercise bikes has been high as consumers set up home gyms amid coronavirus pandemic lockdowns. In fact, demand has been so high that the company has had difficulty keeping up with deliveries.
Peloton generates the bulk of its revenue from selling exercise bike machines and treadmills, which cost between $1,900 and $4,300. All-access membership for its exercise programs runs $39 a month.
Digital memberships, which do not include access to bike or tread classes, cost $12.99 a month.
PTON stock was added to SwingTrader on Friday.
Five Stocks Flashing Buys From Bullish Rebounds
Playtika Stock
Playtika is working on an IPO base, showing a 36.16 buy point.
In a sign of stock market leadership, the relative strength line for Playtika stock has been spiking vertically. It has already hit a new high ahead of its upcoming earnings report.
Investors should remember that new IPO stocks can be volatile. As the likes of Snap (SNAP), Beyond Meat (BYND) and others have shown, many IPO stocks stumble before they find their footing.
Founded in 2010, Playtika has more than 3,700 employees in 19 offices worldwide, including in Tel Aviv, London, Berlin, Vienna, Las Vegas, Sydney, Bucharest and Santa Monica, Calif.
With titles like Bingo Blitz and Pirate Kings, Playtika mashes together art and science that are designed to deliver engaging, fully customized game experiences. For seamless play, the games are geared to synchronize across platforms and devices.
Playtika is set to release its first earnings report as a public company before the market open on Feb. 25. Analyst estimates call for a 114% spike in per-share earnings growth. While a new IPO, Playtika is no minnow, with analysts expecting $551.7 million in revenue for its latest quarter.
It’s also earned a spot on Investor’s Business Daily’s IPO Leaders.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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