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? Google parent Alphabet (GOOGL), Marvell Technology (MRVL), Visa (V), Oracle (ORCL), and MercadoLibre (MELI) are prime candidates.
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Despite inflation worries and the Federal Reserve tightening rates aggressively, the market has confounded expectations for difficulties in 2023 and has turned in a strong performance so far 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.
While a stock market rally that kicked off 2022 soon fell on its face, it has turned in stunning gains so far this year. But indexes have pulled back lately, sending the Nasdaq and the S&P 500 back below their 21-day exponential moving averages. They remain well above their major moving averages for now.
The current stock market uptrend is under pressure. Investors should stop buying shares aside from exceptional breakouts in exceptional stocks, such as those in the IBD 50. The stocks below are possible candidates.
The current market conditions make it 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
- Marvell Technology
- Visa
- Oracle
- MercadoLibre
Now let’s look at Google stock, Marvell Technology stock, Visa stock, Oracle stock and MercadoLibre stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Google Stock
Google parent Alphabet is in a buy zone after passing a 127.10 cup with handle buy point.
The relative strength line for GOOGL stock is rising again but off recent highs. This gauges a stock’s performance compared to the S&P 500.
GOOGL stock has a near-perfect IBD Composite Rating of 98. That puts it in the top 2% of stocks tracked overall. Earnings are marginally better than stock market performance, with its EPS Rating a strong 91 out of 99.
Analysts see strong growth ahead, with Google earnings per share expected to surge by 20% in 2023 and in 2024.
The tech giant has a Relative Strength Rating of 89. That means it has outperformed 89% of stocks tracked over the past 12 months in terms of price performance. Recent performance is strong, with Google stock rising around 44% so far in 2023. This far outstrips the S&P 500’s gain of just over 17%.
Big money has been snapping up Alphabet stock of late. This is reflected in its Accumulation/Distribution Rating of B. This reflects more buying than selling over the past 13 weeks.
Google stock was boosted after the firm posted second-quarter earnings and revenue that beat analyst estimates. YouTube advertising revenue topped expectations, while the company also authorized additional GOOGL stock buybacks.
Google earnings popped 19% to $1.44 per share. This ended a four-quarter string of year-over-year declines. Revenue rose 7% to $74.6 billion.
“Search revenue was better than feared and accelerated vs. Q1,” Goldman Sachs analyst Eric Sheridan said in a note to clients. “End demand trends remained stable in terms of advertiser budget and product iteration.”
Analysts expect AI investments to spur advertising and cloud revenue growth. Capital spending in the second quarter rose to $6.9 billion, up from $6.3 billion in the first quarter.
“We believe Q2 demonstrated Google’s AI prowess in ads and Cloud,” Jefferies analyst Brent Thill said in a note. “We see the second half of 2023 continuing to accelerate from a Q4 (2022) bottom.”
Google aims to counter Microsoft‘s (MSFT) investment in artificial intelligence startup OpenAI by making its own generative AI tools available to software developers.
At the Google I/O 2023 developers event on May 10, Alphabet showcased how generative AI will be integrated into search, maps, Workspace, photos, cloud computing and Android devices. Google discussed how advertising will evolve as generative AI is added to search.
Marvell Technology Stock
MRVL stock is trying to clear a 66.81 buy point from a cup with handle pattern, MarketSmith analysis shows.
It is also trying to rebound from its 10-week moving average, which ould offer an alternative entry.
The relative strength line has been moving sideways during its consolidation period. This gauges a stock’s performance vs. the S&P 500. If it can spike it would be a positive signal about the breakout attempt.
Overall performance is strong, but not ideal, with its IBD Composite Rating coming in at 86 out of 99. It is in the top 5% of stocks in terms of price performance over the past 12 months.
Earnings are the current weak spot, with EPS seen falling 59% in fiscal 2024. But earnings are then seen rebounding by a mighty 92% in 2025.
For its fiscal 2023 that ended in January, Marvell sales rose 33% to $5.92 billion. In fiscal 2024, sales are expected to fall 6%, then rebound to 17% growth in fiscal 2025.
Big Money is getting on board, with the stock boasting three consecutive quarters of rising fund ownership. In addition, it has a solid Accumulation/Distribution Rating of C+.
Marvell makes chips used in wireless phone networks, automobiles, industrial systems, data storage devices and data centers. Semiconductor companies are in favor as AI stocks to watch because of high-performance computing and networking needed in data centers.
Marvell sells custom AI processing chips. That’s a small part of the market but growing. Analysts expect demand for custom AI processing chips to increase because of the rise of “generative” AI.
Training generative AI models requires an order of magnitude more compute power than inferencing — executing AI applications in real-time.
Marvell management expects its AI chip business to grow to $400 million in fiscal 2024, up from $200 million in fiscal 2023. Then it sees AI sales doubling again in fiscal 2025 to $800 million, reaching about 15% of sales.
In contrast, management expects weakness in telecom network, enterprise networking and data storage sales.
MRVL stock surged on the AI outlook, as investors shrugged off first-quarter fiscal 2024 earnings that dropped 40% while revenue fell 9%. Marvell reported its fiscal first-quarter results after the market close on May 25. Marvell stock surged 32% on May 26.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Visa Stock
The payment processor stock is actionable after clearing a flat base official buy point of 235.57. It is also rebounding off the 10-week moving average, which can also be used as an entry point.
Visa has forged a three-weeks-tight pattern within the buy zone, offering an official 245.37 entry.
Investors could use the Aug. 4 high of 241.97 as an entry or early entry from almost all of these perspectives.
The relative strength line is moving higher again recently but has work to do to reclaim recent highs.
All-around performance here is strong, with its IBD Composite Rating coming in at 86 out of 99.
Earnings growth is sturdy, if not ideal, with EPS rising by an average of 15.4% over the past three quarters.
Gains are seen trending steadily higher. EPS is expected to climb 15% in 2023 before rising an additional 14% in 2024
Institutional investors have been net buyers of the stock of late, 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 earnings rose 9% to $2.16 per share on 12% revenue growth to $8.1 billion, topping analyst views. A resilient U.S. consumer and strong travel trends worldwide are fueling transaction growth.
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 Consumer Confidence Index is at its highest level since July 2021, according to the latest release from the Conference Board
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.
Oracle Stock
Shares are currently in a flat base with a buy point of 127.54. This is a second stage base. Such early stage patterns are more likely to net big gains.
In addition, a move above the Aug. 1 high of 118.04 would offer an early entry from the 50-day average and break a downward-sloping trendline. Oracle stock finished a fraction below the 50-day line on Aug. 4.
All-around performance for ORCL is strong, with its IBD Composite Rating coming in at 91 out of 99.
Stock market performance is particularly impressive, as it is in the top 8% of stocks in terms of price performance over the last 12 months.
While Oracle earnings have grown by an average of 6% over the past three quarters, EPS has been accelerating.
Earnings are seen dipping 11% in fiscal 2024 before ramping up to 14% growth in 2025.
Oracle’s multiyear business restructuring has moved the database software giant solidly into cloud computing.
Jefferies analyst Brent Thill holds a buy rating on Oracle stock. He also notes the Oracle Cloud Infrastructure business, or OCI, has been a bright spot.
“The continued execution of OCI has led to improving investor sentiment, and ongoing cost cuts around Cerner should be accretive to margins as management team continues to deliver on top and bottom line goals,” Thill said in a recent note to clients.
It is also benefitting from the current buzz around artificial intelligence. Generative AI technology already is finding applications in internet search, marketing, advertising, drug development, video gaming, customer support and digital art. Generative AI creates text and images based on patterns in training data.
In June Oracle management touted potential growth in its cloud business, thanks to corporate adoption of generative AI.
“Oracle has been working on clustering technology for a long time to support HPC (high performance computing) workloads and this now gives it an advantage vs. competitors as new AI workloads demand the same kind of scale/performance,” TD Cowen analyst Derrick Wood said in a recent note.
What To Do With Stock Market At Turning Point
MercadoLibre Stock
MercadoLibre is in a buy zone after decisively retaking its 50-day moving average. The entry point here is the July 31 high of 1,257.66,
In addition it is trading below a cup base buy point of 1,365.64. It’s possible that MELI stock will forge a handle, which would offer a lower entry for investors who want to see the stock prove itself following its post-earnings spike.
The relative strength line is gathering strength, outperforming the S&P 500 in recent weeks.
MELI has an Accumulation/Distribution Rating of C+, which reflects slightly more buying than selling among funds of late. There are a lot of high-volume down days in MercadoLibre’s current base, though more high-volume up days have returned.
MercadoLibre is the largest e-commerce company in Latin America, but it faces competition from Amazon (AMZN). Strong overall performance has netted it an IBD Composite Rating of 94.
The company recently reported Q2 profit rocketed $112% to $5.16 per share. Revenue jumped 31% to $3.42 billion.
Operating income increased 124% to $558 million, while its operating margin was 16.3% vs. 9.6% a year ago, boosted by operations in Brazil and Mexico.
The Uruguay-based company also reported that gross merchandise volume, considered a key e-commerce metric, grew 47% to $10.5 billion. MercadoLibre said this is the first time GMV has surpassed $10 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.
Morgan Stanley analyst Andrew Ruben wrote in a recent note to clients that MELI stock is in a “position of strength including around share gain and marketplace monetization.”
Ruben has an overweight rating on the shares and a price target of 1,770.
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 Twitter at @IBD_MLarkin for more analysis of growth stocks.
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