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? Axon Enterprise (AXON), Meritage Homes (MTH), Intuitive Surgical (ISRG), ServiceNow (NOW) and Palo Alto Networks (PANW) are prime candidates.
With inflation worries high, and the Federal Reserve tightening rates aggressively, market action was challenging in 2022, with more difficulties expected 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.
A stock market rally that kicked off 2022 soon fell on its face. The market overall has been choppy since then, with bear market rallies often being undercut by painful drawdowns. Recent bullish action has seen the Nasdaq and the S&P 500 move back above their major moving averages.
This means the stock market is back in a confirmed uptrend. Now is a good time to be buying stocks and to add to existing holdings at follow-on opportunities.
Focus on fundamentally strong stocks coming out of sound chart patterns, such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks below are good candidates.
Nevertheless, the choppiness of the market means it is 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.
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
- Axon Enterprise
- Meritage Homes
- Intuitive Surgical
- ServiceNow
- Palo Alto Networks
Now let's look at Axon Enterprise stock, Meritage Homes stock, Intuitive Surgical stock, ServiceNow stock and Palo Alto Networks stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Axon Enterprise Stock
AXON stock is just below a short consolidation entry which is modestly above a prior base. The ideal buy point here is 221.79, but investors could also use 226.10.
It comes after its most recent breakout went awry amid wild market volatility.
It shows strong overall performance by its perfect IBD Composite Rating of 99. Both earnings and stock market performance are stellar.
A strong Accumulation/Distribution Rating B underlines the fact institutions have been picking up shares. This is a positive for AXON stock.
Formerly known as Taser, Axon Enterprise has taken advantage of the business opportunity offered by public demands for more police oversight.
Its lines of body cameras and related software are market leaders. Analysts point to a high chance the company will beat its long-term revenue guidance.
Credit Suisse made it a top pick for 2023, citing management's commentary on price increases that went into effect in January.
On Jan. 24, Axon launched the Taser 10, which has new de-escalation features including 1,000-lumen pulsing light, loud audible alerts and “LASER-painting” to warn individuals to comply before the Taser deploys electric probes.
Even before the Taser 10, Axon had seen revenue-growth acceleration. Its Q4 sales shot up 54.5% to $336.1 million. Profit margins also are widening as Axon puts a period of heavy investment behind it and efforts to tap federal government and international markets pay off.
Axon's products are an important tool for law enforcement agencies. Meanwhile, cloud-based software for managing police evidence, records and communications makes officers more productive.
A key metric for how indispensable police departments see its Axon contracts: In Q4, Axon saw 121% net revenue retention. That means that expanded contracts far more than offset minimal customer attrition.
Meritage Homes Stock
Meritage Homes is building the right side of an enormous cup base. A new handle has formed, and it sits comfortably in the upper half of the overall pattern. Investors also could view the handle as its own, two-month consolidation.
Either way, the ideal buy point here is 117.32. MTH stock broke on April 3, but has pulled back below the entry.
Its latest base is a second stage pattern, a good sign. The relative strength line is just off highs, but still looks mighty.
MTH has been working to clear overhead supply. Its progress is reflected in the fact it is back above its 50-day moving average.
Meritage stock has been making progress as homebuilders return to favor after a spell in the doldrums.
Sales of new U.S. single-family homes rose to a six-month high in February and have now increased for three straight months. Analysts say that the housing market may be stabilizing after being pressured due to high mortgage rates.
Fundamentals for MTH stock are impressive. The homebuilder has seen its earnings vault from $3.86 a share in 2017 to $26.74 in 2022, up 39% vs. the prior year. Analysts see profits plunging 52% this year to $12.97 amid a challenging environment.
Nevertheless, sales grew 11%, 6%, 19%, 10%, 25% and 33% in the past six quarters. Earnings jumped 85%, 57%, 68%, 55%, 35% and 13% over the same time frame.
This means it faces difficult year-over-year comparisons over the next several quarters. Analysts call for a nearly 8% earnings rebound in 2024 as sales bounce 4%.
Intuitive Surgical Stock
ISRG stock has formed a cup base with an official buy point at 285.19. But it's also formed a handle that's not quite proper because the midpoint is slightly below the midpoint of the base. Investors could still use 259.12 as an early entry after it tested that level on Thursday.
The relative strength line is trying to turn higher again after a recent dip. This is encouraging. It is also clear of its major moving averages.
Intuitive Surgical is in the top 23% of stocks in terms of price performance over the past 12 months. If it maintains its current uptrend it could soon be positive for the year.
At the moment earnings are lagging stock market performance, with its EPS Rating sitting at 64 out of 99. Analysts expect robust earnings growth of 15% in both 2023 and 2024.
The company develops and manufactures robotic products that improve clinical outcomes of patients through minimally invasive surgery.
A recent survey suggests robotic surgery adoption will ramp through next year, though that comes amid slower capital expenditure spending at hospitals.
“Intuitive Surgical's fundamentals are strong and we see sustainable double-digit growth ahead,” UBS analyst Danielle Antalffy said in a recent note to clients.
And the firm looks to be gearing up for the release of new products, which is key for further growth.
Recent rumors suggest Intuitive Surgical could be nearing a next-generation robotic surgery system, adding to its current da Vinci platform.
Last month, the Federal Communications Commission — which inspects robotics — gave Intuitive Surgical the go-ahead for an unnamed piece of equipment. The company then asked that the user manual be removed from public inspection.
If Intuitive Surgical is close to completing work on a next-generation robotic surgery system, the company will have to run clinical studies, Evercore ISI analyst Vijay Kumar said in a note to clients. This puts the timeline for approval in 2024.
ServiceNow Stock
Enterprise software play ServiceNow has formed a cup base with an ideal buy point of 494.72. It could also be in the process of forming a handle. On March 31, NOW stock reclaimed the 50-day line, broke above a trendline and topped short-term resistance, offering an early entry.
The relative strength line is trying to move higher again after a recent pause. This gauges its performance vs. the S&P 500.
Strong overall performance is reflected in a perfect IBD Composite Rating of 99. Earnings performance is particularly strong, with its EPS Rating also a rare, perfect 99.
Wall Street sees continued good performance on this front. In 2023 full year earnings are seen rising 18% and then rising a further 20% in 2024.
Back in January the Santa Clara, Calif-based firm reported quarterly earnings had jumped 46% to $2.28 per adjusted share, better than Wall Street expectations. Revenue climbed 20% to $1.94 billion. Subscription revenue rose 22% to $1.86 billion, just above estimates.
The enterprise software maker said it expects full-year 2023 subscription revenue in a range of $8.44 billion to $8.5 billion. Analysts predicted subscription revenue of $8.36 billion.
ServiceNow software tracks and manages services provided by information-technology departments. Also, its self-service tech portal enables company employees to access administrative and workflow tools.
The firm has been adding new products, with the firm expanding from its core business into software for human resources, customer service management and security.
“ServiceNow has the potential to be a relatively defensible business in the event of a macroeconomic slowdown, in our view,” NOW stock analyst Kash Rangan of Goldman Sachs said in a note.
Palo Alto Networks Stock
Palo Alto Networks sits in a buy zone after previously clearing a 192.94 entry. It has been performing well since it gapped up on Feb. 22 on earnings. The buy point also roughly corresponds to resistance from last August.
The stock made a big move off the January lows, so some sideways action from here as it digests gains would not be surprising.
Its relative strength line has just hit fresh highs, reflecting outperformance vs. the S&P 500 of late. PANW stock is up nearly 39% so far in 2023.
The cybersecurity giant announced very good results for the January-ended quarter that saw earnings hit $1.05 a share, up 81% vs. a year earlier, on a 26% jump in revenue to $1.7 billion.
CEO Nikesh Arora said in a news release that investments made over the last several years have “enabled us to raise our billings and NGS ARR guidance.”
CFO Dipak Golechha noted the company is raising cash flow margin and operating profitability targets.
For the current quarter ending in April, Palo Alto projected earnings of 92 cents a share on revenue in a range of $1.69 billion to $1.72 billion. Analysts had estimated profit of 79 cents a share on revenue of $1.74 billion.
Palo Alto also raised its revenue outlook for next-generation cloud-based software products to a range of $2.75 billion to $2.8 billion. That topped its earlier outlook of $2.65 billion to $2.7 billion.
Meanwhile, the company has spent over $3.4 billion making 10 acquisitions over the past three years. With roots in the “firewall” network security market, Palo Alto aims to build a broad cloud-based security platform. Firewall appliances protect computer networks by blocking online intrusions and monitoring web-based apps.
