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? MercadoLibre (MELI), Meta Platforms (META), HubSpot (HUBS), Monolithic Power Systems (MPWR) and Lantheus (LNTH) 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 market has been rocked ahead by banking concerns ahead of the forthcoming Fed meeting. 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. While the Nasdaq looks healthy, the S&P 500 has fallen under the 50-day and 200-day moving averages amid challenging action sparked by negative action among bank stocks.
The stock market is currently in the grip of a correction. Now is a time to avoid buying stocks altogether. You should also be entirely off margin.
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.
Now is a time to prepare for the next stock market uptrend by creating a robust watchlist. 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.
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
- Meta Platforms
- Monolithic Power Systems
Now let’s look at MercadoLibre stock, Meta stock, HubSpot stock, Monolithic Power Systems stock and Lantheus stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
MercadoLibre is trading below a flat base buy point 1,250.58. It found support at the 10-week moving average amid recent market turmoil, an encouraging sign. The flat base formed just over a longer consolidation.
The relative strength line is also looking strong. This means it has outperformed the S&P 500 in recent weeks.
MELI has an Accumulation/Distribution Rating of A, which reflects strong buying among funds. It also holds 1.6 up/down volume ratio.
The company recently reported Q4 profit of $3.20 a share, reversing a year-ago loss. Revenue increased 41% to $3 billion.
Full-year 2022 EPS skyrocketed 473%. Analysts see 2023 EPS swelling 57% in 2023.
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.
Meta stock is trading just below a flat base ideal buy point of 197.26. It has already managed to clear a trendline, an aggressive entry point.
The flat base formed as the stock held support at the 21-day exponential moving average.
The social network is a turnaround story amid declining earnings and revenue. This year, annual profit is expected to rise 12%, with growth accelerating in 2024, up 21%.
Lackluster earnings are reflected in an EPS Rating of 47 out of 99. Despite this, growing bullish sentiment is reflected in the fact it is in the top 4% of stocks in terms of price performance over the past 12 months.
Meta lost roughly $10 billion in ad revenue last year due to Apple (AAPL) amending privacy policies for the iPhone. This made it more difficult to accurately target users with ads.
But Meta has made technology improvements with its new ad strategy.
Meta, like all social media companies, is struggling due to a sharp reduction in advertising. In addition, companies are squirming over macroeconomic concerns, fears of a recession and higher interest rates. This is happening as Facebook is spending billions on a risky bet to build the “metaverse,” a virtual reality world that has yet to take hold.
In November, Meta cut 11,000 employees, or 13% of its workforce. Meta stock is up 20% since then.
In mid-March, Meta announced plans to cut another 10,000 jobs, which help spur the stock’s latest advance.
Chief Executive Mark Zuckerberg, in a statement with the earnings report said, “Our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”
HubSpot is trying to recover after falling below a handle entry in a bottoming base. The buy point here is 399.65.
Encouragingly, the stock has been getting support at its 21-day exponential moving average and recently found support at the 50-day/10-week line. IBD research has found that big stock market winners tend to find support at the 21-day after a breakout for at least several weeks.
HUBS stock is on track to have another flat base after Friday’s close with a 418.49 buy point.
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. December-quarter profit soared 91% on a 27% revenue jump to $469.7 million, likely a sales record for a single quarter.
At least seven members of the IBD Mutual Fund Index own shares. Funds own 66% of the CRM shares, with 1,428 funds holding shares in December from 1,413 funds in September.
HubSpot announced in late January it would lay off about 500 employees, or 7% of the workforce, and consolidate leases as part of a cost-cutting plan.
“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 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.
Monolithic Power Systems Stock
Monolithic Power is constructing a deep cup-with-handle base. The ideal entry point is 530.85.
Early last week, MPWR stock found support at the 10-week line on Monday, then reclaimed the 21-day exponential average Thursday. A move above the March 9 high of 516.69 could offer an early entry.
The RS line has hit a record high, a bullish sign ahead of a possible breakout.
MPWR stock is a one of the best all-around stocks at the moment. This is reflected in its perfect IBD Composite Rating of 99. It also boasts a rare perfect EPS Rating.
Price performance is also very strong, with MPWR in the top 7% of stocks over the past 12 months.
Monolithic posted better-than-expected Q4 earnings. It gave Q1 revenue guidance ranging between $440 million and $460 million, with the top end close to Q4’s $460 million in sales.
Monolithic Power earnings boomed 67% in 2022. They are seen slowing to a 6% gain in 2023, then rebounding to 18% growth next year.
Consistently strong performance has netted the fabless chipmaker a spot on the IBD Long-Term Leaders watchlist.
Monolithic Power Systems makes semiconductor-based electronics power control systems.
Its technologies drive power solutions across a wide range of industries and applications, including industrial applications, telecom infrastructure, cloud computing, automotive, and consumer.
The chipmaker’s integrated solutions increase energy savings and power density for electric vehicles. Their power-saving consumer products include “smart-home” and building applications, including HVAC systems, meters, remote controls, cameras and smoke detectors.
The semiconductor stock holds the top spot out of 34 stocks in the Electronics-Semiconductor Fabless group.
LNTH stock is in a buy zone after clearing a cup with handle entry of 77.04.
It is clear of all of its moving averages while the relative strength line is spiking. This is a bullish setup.
Strong all-around performance has netted the medical products play a very strong IBD Composite Rating of 98 out of 99.
Big Money has been net buyers of the stock of late, which is reflected in its Accumulation/Distribution Rating of B-. It boasts eight consecutive quarters of increasing fund ownership.
Lantheus shot to fame after it launched Definity, a heart ultrasound enhancing agent. It followed that with Pylarify in June 2021, an injectable agent that helps doctors identify prostate cancer using a positron emission tomography (PET) scan. Since then, Lantheus’ sales have more than doubled.
SVB Securities analyst Rosanna Ruiz says Pylarify has become the “go-to” agent for enhancing PET scan images in prostate cancer detection. Doctors can use it to help diagnose prostate cancer and detect relapses.
These use cases are key for Lantheus and LNTH stock. There are more than 3.1 million men living with prostate cancer in the U.S., according to the American Cancer Society.
Future growth will benefit from the use of Pylarify to match patients with targeted therapies, SVB’s Ruiz, who rates the stock as outperform, said.
One doctor she interviewed said Pylarify is “used about 90% of the time at his institution.”
“The (doctor) expects demand for Pylarify to grow over time, and hospital/imaging center capacity could be expanded by Lantheus’ growing PET managing facility network, installing more PET/CT machines at imaging centers and increasing patient referrals to these centers,” she said.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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