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? Visa (V), On Holding (ONON), Salesforce (CRM), Cloudflare (NET) and HubSpot (HUBS) are prime candidates.
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Despite inflation worries high and the Federal Reserve tightening rates aggressively, the market has confounded expectations for difficulties in 2023 and has just turned in remarkable performance for the first half of the year. 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. But recent bullish action has seen the Nasdaq and the S&P 500 move back above their major moving averages, with the passage of the debt-ceiling deal helping to push indexes higher.
The stock market is back in a confirmed uptrend. This means it is the best time to be buying fundamentally strong stocks breaking out of proper base patterns, such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks below are good candidates. It’s also a good time to add to existing holdings at follow-on opportunities
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
- Visa
- On Holding
- Salesforce
- Cloudflare
- HubSpot
Now let’s look at Visa stock, On stock, Salesforce stock, DexCom stock and HubSpot stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Visa Stock
The payment processor stock is actionable after clearing a flat base official buy point of 235.57.
That comes after rebounding back above its 50-day line and breaking a trendline, both offering early entries. Visa stock remains in range of its 50-day line as well.
The relative strength line is moving higher again after slipping during its consolidation period.
All-around performance here is stellar, with its IBD Composite Rating coming in at 93 out of 99.
Earnings growth is also impressive, with EPS rising by an average of 19% over the past three quarters.
Gains are seen moderating somewhat. EPS is expected to climb 15% in 2023 before rising an additional 14% in 2024
Institutional investors certainly seem impressed with its prospects, with its Accumulation/Distribution Rating coming in at B+. In total, 51% of its stock is currently held by funds with a further 2% being held by banks.
In the most recent quarter Visa posted earnings of $2.09 a share on revenue of $7.98 billion, topping analyst views. A resilient U.S. consumer and strong travel trends worldwide are fueling transaction growth. It next reports earnings on July 25.
International transaction revenue surged 24% to $2.75 billion, just above forecasts of $2.73 billion. Data processing revenues jumped 10% to $3.82 billion, slightly lower than views for $3.77 billion. Visa has posted eight straight quarters of sales and earnings gains.
The credit card giant looks to have emerged unscathed from the recent banking crisis sparked by the failure of Silicon Valley Bank. The event sent shock waves through financial markets, with midsize banks bearing the brunt of losses during the March mayhem.
The key point here for investors is that payment processors Visa and Mastercard do not carry card balances on their books. This is in contrast to American Express and Discover Financial (DFS).
Instead it is the issuing banks such as JPMorgan Chase (JPM) and Wells Fargo (WFC) that carry the upside and downside on the provision of credit. Visa and Mastercard make money on credit and debit card transaction fees.
For now, at least, the U.S. economy continues to defy gloomy expectations. The Commerce Department recently reported that real GDP grew 2% in Q1, revised up from 1.3%.
In a May 31 appearance at a Bernstein investor conference, outgoing Visa CFO Vasant Prabhu highlighted big opportunities ahead, thanks to three growth engines. While traditional consumer payments continue to see solid growth, “new flows and value-added services can grow faster” than payments for a long time to come.
The new flows comprise new-use cases for Visa’s network, including peer-to-peer payments, payroll and cross-border remittances.
On Stock
On Holding stock sits just below a cup-with-handle buy point of 33.67 after it briefly tested the entry.
The 3-month RS Rating of 91 exceeds its 12-month score of 73. In addition the stock has seen its relative strength line spike hard on its weekly chart as it moves toward its buy point.
On dropped very sharply after an attention-grabbing IPO, but is now battling back well. The stock has gained a remarkable 94% so far in 2023.
The firm’s running, hiking and athletic shoes have shot to prominence due to their lightweight designs and extreme comfort. They boast superfoam soles, which are said to both feel good and boost performance.
On July 12 Piper Sandler analyst Abbie Zvejnieks touted ONON stock as a “top growth idea” and bumped up her price target to 39 from 38.
“ONON continues to lead on innovation with new performance product such as Cloudsurfer driving demand,” she said in a note to clients. “We think the brand is taking more share with runners and lifestyle customers alike.”
The Swiss running-shoe company caused a lot of early buzz by signing a deal with retired tennis star Roger Federer, who helped the firm launch eco-friendly sneakers made from vegan leather. It recently added to its roster by signing up ladies’ tennis champion Iga Swiatek, who was crushed by Ukraine’s Elina Svitolina at this year’s Wimbledon.
On’s product lines include the On Cloud, Cloud X, Cloudnova and The Roger Pro, in collaboration with Federer. In addition to shoes, the company produces training gear such as shorts, pants and jackets.
On Holding reported positive earnings and revenue growth the past five quarters. During its most recent results, earnings jumped 203% to 16 cents per share while revenue vaulted 80% to $459 million.
North America accounts for more than half of On’s sales, with 48% coming from the U.S., according to FactSet data. An additional 8.2% of revenue comes from Canada. Other important markets are Germany and the United Kingdom, which account for 5.1% and 3.9% of sales respectively.
Analysts see swift earnings growth ahead, with EPS expected to grow by 80% in 2023 and jumping a further 23% in 2024.
Fidelity Contrafund and the Invesco Discovery Fund Class A are two noteworthy holders of ONON stock. In total, 35% of shares are held by funds.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Salesforce Stock
Salesforce is in a buy zone above a flat base entry of 225. This is a second-stage base, which still counts as early stage. These are more likely to net big gains.
CRM is bouncing from its 10-week/50-day moving average, while its move above a short-term trendline offered an early buy point, with 214.62 the specific ideal entry here. Salesforce is close to extended from the 50-day line, so keep that in mind.
Overall performance is strong, netting the stock a near-perfect IBD Composite Rating of 98.
Earnings are its biggest strength, with its EPS Rating an outstanding 98 out of 99. Stock market performance is certainly slouch though. CRM stock is up about 70% so far in 2023.
In the most recent quarter, Salesforce earnings per share rose 72% to $1.69. Revenue climbed 11% to $8.25 billion, boosted by improved results at the MuleSoft business.
For the current July quarter, Salesforce said it expects revenue of $8.52 billion, edging by estimates of $8.49 billion.
Earlier this year Salesforce announced a $20 billion buyback for CRM stock. The company approved a $10 billion buyback in 2022, before activist investors surfaced.
Those activists include Elliott Management, Starboard Value, Third Point, ValueAct Capital and Inclusive Capital. The group has been pressuring management to improve profit margins and free cash flow.
Salesforce sells software under a subscription model. Its software helps businesses organize and handle sales operations and customer relationships. The company has expanded into marketing, customer services and e-commerce.
Jefferies analyst Brent Thill sees Salesforce getting a boost from its efforts in generative artificial intelligence. He believes generative AI will enhance productivity for customers and will allow Salesforce to raise prices.
Last month, Salesforce unveiled a $360,000 annual price tag for its AI Cloud Starter Pack. Baird analyst Rob Oliver says that offering will appeal to large enterprises.
Salesforce is also rolling out its GPT Trust Layer to all customers, allowing them to use generative AI without sacrificing their data or safety. Oliver believes the firm could sweeten its revenue by north of $10 billion over several years by moving deeper into the AI space.
“We have been most impressed with the speed and thoughtfulness with which Salesforce is embracing generative AI,” Oliver, who rates the stock as neutral, said in a note to clients. “We believe that Salesforce is repositioning substantially all of its product offerings to be able to capitalize on this tectonic shift.”
Cloudflare Stock
Cloudflare is shooting for a new consolidation pattern entry of 72. The cloud computing stock is also actionable at 69.61, its intraday high on July 12. NET stock cleared that on July 14, but then reversed lower with the Nasdaq and many growth stocks.
Its relative strength line is trying to bend higher again after a pullback which started in early June.
Cloudflare has a perfect IBD Composite Rating of 99. Earnings performance is good while stock market performance is outstanding, with the stock up 55% so far in 2023.
NET finally added a key element of leading stocks in 2022: earnings. The Stock Checkup Tool shows EPS has grown by an average of 567% over the past three quarters.
Analysts expect profits to grow 163% to 34 cents per share in 2023 before jumping 20% to 41 cents per share in 2024.
As often happens with young stocks that go on to become market leaders, Cloudflare is generating strong revenue growth. Sales increases have ranged from 37% to 54% over the last eight quarters.
Big Money has been snapping up Cloudflare stock of late, with its Accumulation/Distribution Rating a healthy B+. The much-vaunted Fidelity Contrafund (FCNTX) owns a stake, raising its stake from 530,000 shares in the December quarter to 990,000 shares in the March quarter.
The enterprise software maker competes with the likes of Amazon (AMZN) CloudFront, Microsoft (MSFT) Azure and Google Cloud.
NET pulled back amid worries over Microsoft competition. MSFT is continuing to broaden its cybersecurity product offerings, pressuring NET stock, Zscaler and other companies.
Cloudflare stock dipped 5.5% on July 12 but some analysts say the sell-off was overdone. According to Morgan Stanley analyst Hamza Fodderwala most companies do not want to rely too heavily on Microsoft.
The firm has developed a global cloud platform to deliver a wide range of network services. The San Francisco-based company counts 30% of the Fortune 1,000 as customers, providing cybersecurity, streamlined content delivery, optimization of mobile apps, analytics and more.
Cloudflare has ties to generative artificial intelligence startup OpenAI, the developer of ChatGPT. Further, it provides secure links to cloud services when consumers sign up to use OpenAI’s ChatGPT, a conversational chatbot.
Second-quarter NET stock earnings are due Aug. 3.
Bull Market Runs, But This Risk Rises
HubSpot Stock
HUBS stock is in the buy zone above a four-weeks-tight entry of 535.12. A brief effort to move out faltered at the end of June, with shares finding support at 21-day exponential moving average and 10-week lines, rebounding from that level on July 10.
HubSpot broke out on July 11, the ideal time to buy or add shares. While still in range of the entry, HUBS stock is now a little extended vs. the 50-day line.
The Cambridge, Mass., firm specializes in helping businesses automate marketing and sales operations.
Its cloud-based platform also assists clients in social media, search engine optimization and website content management.
Earnings and sales have grown sharply over most of the past eight quarters. March-quarter profit soared 122% on a 27% revenue jump to $501.6 million, likely a sales record for a single quarter.
And Wall Street expects the bonanza to continue, with full year EPS expected to rocket 66% to $4.84 before spiking a further 25% in 2024.
At least eight members of the IBD Mutual Fund Index own shares. Funds own 65% of the HUBS shares, with 1,549 holding shares in June compared to 1,436 the previous year.
There is even further reason for investors to raise the champagne glasses, for the company recently reduced its workforce by 7%. This should translate to even better profitability.
“We grew head count faster than revenue in a number of teams. We were optimistic about our head count growth and underestimated the impact of the slowdown in 2022,” said CEO Yamini Rangan.
Some analysts view the software company as among AI stocks to watch. HubSpot could get a boost from “generative AI” technologies such as ChatGPT.
Generative AI technology creates text, images, video and computer programming code. The new form of AI technology already is finding applications in marketing, advertising, drug development, legal contracts, video gaming, customer support and digital art.
“HubSpot is well positioned to help go-to-market teams be even more effective with AI, and we’re incredibly excited by the opportunity it is creating to deliver even more value for customers,” Rangan boasted in the firm’s May earnings news release.
HubSpot in February announced trials of “content assistant” and ChatSpot.ai.
“A meaningful number of marketing and customer service use cases can be solved today with (generative AI),” Wolfe Research analyst Alex Zukin said in a recent research note.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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