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), Nvidia (NVDA), Amazon (AMZN), D.R. Horton (DHI) and MercadoLibre (MELI) are prime candidates.
Despite inflation worries and the Federal Reserve tightening rates aggressively, the market confounded expectations for difficulties in 2023 to turn in a strong performance so far for the year, with indexes now trying to shake off recent negative action. The Russian invasion of Ukraine continues to cast a shadow over markets while the Israel-Hamas war adds more uncertainty.
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.
CAN SLIM 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.
While a stock market rally that kicked off 2022 soon fell on its face, it has turned in stunning gains so far this year. Indexes are trying to fight back against the bears, with the Nasdaq and the S&P 500 just reclaiming the 50-day moving average. It comes after both indexes had tested the 200-day line.
The stock market is back in a confirmed uptrend. Now is a good time for investors to be making stock purchases. It’s also a good time to add to existing holdings at follow-on opportunities.
Investors be taking care to invest in high quality stocks. The selections below are among the best stocks to buy or watch now. The IBD 50 is also a rich hunting ground.
Despite the market going back into a confirmed uptrend it remains 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 while the current issues in Israel add even more uncertainty.
Things can quickly change when it comes to the stock market. Make sure to keep a close eye on the market trend page here.
Best Stocks To Buy Or Watch
- D.R. Horton
Now let’s look at Microsoft stock, Nvidia stock, Amazon stock, D.R. Horton stock and MercadoLibre stock in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
MSFT stock is actionable after clearing a cup base buy point of 366.78, MarketSmith analysis shows.
The relative strength line is at highs once again. Microsoft stock is in the top 6% of issues in terms of price performance over the last 12 months.
Overall impressive performance is reflected in its perfect IBD Composite Rating of 99.
The firm has seen EPS grow by an average of 19% over the past three quarters. In addition, earnings grow by an average of 16% over the past three years, impressive growth for such a large firm.
Big Money has been a net buyer of MSFT stock of late, with its Accumulation/Distribution Rating coming in at A-.
Late last month the Redmond, Wash.-based reported earnings per share had popped 27% to $2.99 as revenue climbed 13% to $56.5 billion for the quarter ended Sept. 30.
Microsoft Cloud revenue rose 24% year over year to $31.8 billion in the September quarter. That was better than expected. That also outpaced the growth at Google Cloud and Amazon Web Services, which came in below views.
Microsoft Chief Executive Satya Nadella boasted about the firm’s artificial intelligence initiatives following the results.
“We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers,” Nadella said in a news release. “With copilots, we are making the age of AI real for people and businesses everywhere.”
Microsoft has been announcing its latest AI advancements at its Ignite 2023. The company unveiled its own AI chip, the Azure Maia AI Accelerator, to ease its dependence on Nvidia GPUs. It is designed to run generative AI and other AI workloads, including large language model training and inference. The firm plans to roll out Maia to its data centers early next year.
It remains to be seen whether moves to adopt a vertical integration approach by firms such as Microsoft and Apple (AAPL) could be a longer-term threat to chip makers such as Nvidia and Advanced Micro Devices (AMD) remains to be seen.
Earlier this year Microsoft showed off its new Bing search engine and Edge web browser that use AI technology. Microsoft hopes the OpenAI-based technology can help Bing chip away at Google’s dominance in the internet search market. Microsoft stock was given a flurry of price-target hikes from analysts after the presentation. ‘
The firm kept up the momentum by adding artificial intelligence tools to its popular Office productivity applications.
It comes after the Microsoft announced a investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI.
The software giant is providing its Azure cloud computing infrastructure for OpenAI. It also is adding OpenAI models to its consumer and enterprise software products.
But it remains to be seen how Microsoft stock will be affected by the sudden managerial shakeup at its now key partner. It has been reported that Sam Altman is negotiating to make a stunning return to OpenAI as CEO just days after Friday afternoon’s shock firing.
Excellent sustained performance has netted Microsoft stock a spot in the IBD Long-Term Leaders Portfolio.
Nvidia is trading above a double-bottom base with a 476.09 buy point. The 5% buy zone here tops out at 499.89.
Volume has trended lower than average for most of the the base. But the relative strength line is sitting at new highs.
Its new pattern began after the specialty chip and AI stock hit an all-time high on Aug. 24. It touched these levels due to a stellar earnings report.
NVDA stock holds the perfect IBD Composite Rating of 99. It is also in the top 1% of stocks in terms of price performance over the past 12 months. So far this year it is up more than 244%.
Over the past three quarters, EPS has grown by an average of 125%. This is well clear of CAN SLIM requirements for 25% growth. Earnings have also been accelerating.
Fiscal Q2 2024 sales surged 101% from the prior-year quarter while earnings of $2.70 a share was up over 400% from last year’s quarter.
Q3 earnings are due Nov. 21, something for investors to keep in mind. 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.
Analysts expect explosive profit growth of 194% in fiscal 2024 and 62% in 2025. The AI stock has already gained more than 220% this year.
Nvidia stock is a member of the prestigious IBD 50 list. This is an objective, computer-generated list based solely on time-tested criteria.
OpenAI, whose backers include Microsoft, reportedly is exploring its own AI chips as well.
But Nvidia is certainly not resting on its laurels amid rising demand. At the SC23 supercomputing conference in Denver this month, Nvidia introduced its HGX H200 AI computing platform and GH200 Grace Hopper Superchip.
The H200 is the first AI accelerator to use an advanced memory technology called HBM3e. The system provides nearly double the capacity and 2.4-times more bandwidth compared with its predecessor, the Nvidia A100.
Rival chipmakers Advanced Micro Devices (AMD) and Intel (INTC) promoted their own AI products at SC23. Intel showcased its Data Center GPU Max Series, Gaudi 2 AI accelerators and Xeon processors while AMD touted its Epyc server processors and Instinct AI accelerators.
The mega cap is extended past a short double-bottom base ideal entry point of 134.48. It can also be interpreted as a cup base, which offers a higher entry point of 145.86. It has been testing this level.
Either way, the base is first stage. This means it has a better chance of netting big gains.
Price action has been improving lately, with the stock retaking the key 50-day moving average, a bullish sign.
Overall strong performance is reflected in its IBD Composite Rating of 87 out of 99. It is the top 6% of stocks in terms of price performance over the past 12 months.
For the quarter ending in September, Amazon reported EPS had grown 236% to 94 cents. Revenue increased 13% year over year to $143.1 billion. Analysts expected Amazon to post adjusted earnings of 59 cents per share on revenue of $141.5 billion.
For its closely-watched Amazon Web Services Cloud business, Amazon posted a 12% year-over-year sales increase to $23.1 billion. That missed analysts’ expectations for sales of $23.2 billion.
Amazon said it expects sales between $160 billion and $167 billion for the current fourth quarter. Analysts were looking for $167.1 billion, according to FactSet.
CEO Andy Jassy acknowledged that companies were still undertaking “cost optimizations” to lower their cloud software spending. But he added that deal-making for AWS had picked up late in the quarter and this month.
“Companies have moved more slowly in an uncertain economy in 2023 to complete deals,” he said. “But we’re seeing the pace and volume of closed deals pick up. We’re encouraged by the strong last couple of months in new deals signed.”
Jassy highlighted that customers are using its generative AI products—an important point given that top cloud rival Microsoft is spending big on the buzzy technology.
“In our best estimation, the amount of growth we’re seeing and the absolute amount of generative AI business we’re seeing compares very favorably with anything else I’ve seen externally,” Jassy said.
Amazon struck a deal in September to invest up to $4 billion in Anthropic, a rival to ChatGPT-creator OpenAI. Further, Amazon in April launched Amazon Bedrock, a service that allows users of Amazon’s AWS to build generative AI applications.
D.R. Horton Stock
DHI stock is closing in on a cup base buy point of 132.30. The base is a bit lopsided, a flaw, but the fact it is an early stage pattern is a bonus. A handle may also soon develop, which will offer a lower entry.
The right side of the cup has been forming at a quick pace following the stock’s 24% pullback. Shares are extended from the 50-day line, however.
The homebuilder stock has been surging as Treasury yields gave up ground, and is now trading above its major and short-term moving averages.
D.R. Horton’s relative strength line has raced to fresh heights, which is also a bullish sign.
Earnings and revenue growth has been spotty in recent quarters. Nevertheless, the homebuilder is coming off two straight quarters of increasing revenue.
D.R. Horton has operations in 118 markets in 33 states across the U.S. It operates in 45 of the top 50 markets in the U.S..
Products include single-family detached homes and attached homes, such as town homes, duplexes and condominiums.
While the stock market as a whole has rallied in 2023, homebuilders have been standing out. DHI stock is also up around 44% since the start of the year.
D.R. Horton stock has a strong IBD Composite Rating of 92. Stock market performance is its strongest suit, with DHI among the top 8% of stocks in terms of price performance over the past 12 months. .
Earnings are seen growing 3% in 2024, before ramping up to 9% growth in 2025. For fiscal 2024 management guided for $36 to $37 billion in total sales, better than analyst views, and for 86,000 to 89,000 closings.
Another key part of the IBD investing formula is institutional investment. Big Money has been snapping up the stock of late. This is reflected in its Accumulation/Distribution Rating of B, which represents more buying than selling over the past 13 weeks.
Notable investors include the Fidelity Contrafund (FCNTX), which is rated as being one of the very best funds by IBD research.
MercadoLibre is trading in the buy zone above a cup with handle entry of 1,398.59. This is a second stage pattern, which counts as early stage.
The relative strength line is getting close to highs, though it took a but of a breather as the handle formed.
MELI has an Accumulation/Distribution Rating of A-, which reflects more buying than selling among funds of late.
The company recently reported Q3 profit rocketed 180% to $7.16 per share. Revenue jumped 40% to $3.76 billion. Both showed accelerating growth.
Total unique buyers on its e-commerce marketplace grew 18% year over year to more than 50 million in the third quarter, the company said.
The Argentina-based company also reported that gross merchandise volume, considered a key e-commerce metric, came in at $11.4 billion. This topped expectations of $1.03 billion. Total payment volume handled by the firm’s Mercado Pago fintech division climbed 47% year over year to $47.3 billion.
Based in Buenos Aires, Argentina, MercadoLibre is the largest provider of e-commerce services in Central and South America. It has a big leg up on industry behemoth Amazon in its own backyard.
The company operates online commerce and payments in Argentina, Brazil, Mexico, Colombia and other countries in Latin America.
In addition to providing an e-commerce marketplace for buyers and sellers, with 127 million active users, MercadoLibre hosts platforms where users can create online stores.
Its financial business, called Mercado Pago, allows users to make contactless payments, pay utility bills, make peer-to-peer transactions and pay for transportation tickets, among other things. It has more than 40 million users.
“The underlying business showed broad-based strength in (the third quarter) with growth accelerating sequentially across e-commerce and Fintech,” wrote Wedbush analyst Scott Devitt in a research note following earnings.
Devitt, who maintained a buy rating on MELI stock, was among eight analysts to raise their target price for MELI following the report, according to FactSet.
MELI stock has surged into first place in IBD’s competitive Retail-Internet industry group. Other high fliers include China e-commerce giant Pinduoduo (PDD) and Amazon.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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