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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? Nvidia (NVDA), Snap (SNAP), Lennar (LEN), Square (SQ) and Burlington Stores (BURL) are prime candidates.You know, there’s everything looks just fine.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.
The coronavirus remains a concern, but cases have tumbled as vaccinations reach more and more Americans. Nevertheless, the rising number of cases of the new Delta variant is an emerging worry.
The major indexes have bounced back strongly from recent challenges, and eased off somewhat last week after getting in danger of becoming over extended once again.
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
Never forget that the M in CAN SLIM stands for market. Most stocks, even the very best, will tend to 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.
The stock market has suffered a few pullbacks amid inflation fears and concerns about the rise of the delta variant of the coronavirus weighing on the market. But the market was back to bullish ways last week, bolstered by an encouraging earnings season so far.
The broad S&P 500 and the tech-heavy Nasdaq pulled back slightly last week, albeit after reaching new record highs. The Dow Jones Industrial Average gave up even less ground, though it ceded the 35,000 level. They are all clear of the key 50-day moving average.
The market is back in a confirmed uptrend. Nevertheless, it is important that investors stay disciplined and stick to sound buy and sell rules, especially as the the market has rallied back toward extended levels.
Now is a good time to be buy fundamentally strong stocks that have built sound chart patterns. The stocks featured below are potential candidates.
But remember, 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
- Nvidia
- Snap
- Lennar
- Square
- Burlington Stores
Now let’s look at Nvidia stock, Snap stock, Lennar stock, Square stock and Burlington Stores stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Nvidia Stock
Nvidia stock rebounded from its fast-rising 10-week moving average again last week, and was about 4% above that key level as of July 30, so it’s still actionable. NVDA stock also has found support at its 21-day line.
The graphics-chip maker pulled back as the broader stock market retreated, notably leading stocks. Given its strong run, the pullback was not surprising for NVDA stock.
Nvidia needs two more weeks before a proper base forms.
Nvidia stock has a perfect IBD Composite Rating of 99. Stock market performance is currently slightly lagging its excellent earnings, but is catching up rapidly. So far this year the stock is up around 49%, which far outstrips the S&P 500’s gain of around 17%.
Nvidia rallied May 21 on news of a 4-for-1 stock split. While it fell back slightly Tuesday, when the split took place, it ended up closing the week up almost 8%.
Earnings is a key strength, with its EPS Rating coming in at 97. The Stock Checkup Tool underlines its impressive recent earnings growth.
Over the past three quarters, EPS has grown by an average of 78%. This is well clear of CAN SLIM requirements for 25% growth.
Such performance has won it admirers on Wall Street. This is reflected in its Accumulation/Distribution Rating of B-, which represents moderate to heavy buying over the past 13 weeks. Noted holders include the like of the MFS Growth A Fund (MFEGX)
Nvidia beat Wall Street’s targets for its fiscal first quarter on strong sales of gaming and data-center processors. Earnings rocketed 103% to $3.66 per share as sales jumped 84% to $5.66 billion. Analysts expected Nvidia earnings of $3.28 a share on sales of $5.41 billion. However the news failed to lift the stock.
For the current quarter, Nvidia expects to generate revenue of $6.30 billion. Wall Street had predicted fiscal second-quarter sales of $5.5 billion, compared with $3.87 billion in the year-earlier period.
In mid-April, Nvidia unveiled its first central processing unit, or CPU, called Grace. Nvidia currently sells graphics processing units, or GPUs, which act as accelerators for CPUs made by other companies. With its own CPU, Nvidia will offer a more complete system for data centers, in a move that is seen as a direct challenge to Intel (INTC) and Advanced Micro Devices (AMD).
Snap Stock
Snap is currently in a buy zone from a long consolidation with a buy point of 73.69. The Snapchat parent has been trading tightly in its buy zone since exploding on earnings.
The relative strength line has also been taking a breather after a sharp post-earnings spike. Investors will want to see it build momentum here.
Snap has a strong Composite Rating of 96. At the moment stock market performance is far more impressive than earnings. Since the start of the year, SNAP stock is up almost 49%.
Institutional support is stout. It boasts eight consecutive quarters of increasing fund ownership, and an Accumulation/Distribution Rating of B-. In total, 49% of stock is held by funds.
When the firm posted results July 23 it reported adjusted earnings of 10 cents on revenue of $982 million. Analysts expected Snap to report a loss of 1 cent on revenue of $845 million. Revenue jumped 116% from the year-ago period.
Daily active users jumped 23%, or 55 million, to 293 million, above estimates of 290 million.
“Snap delivered very strong second-quarter results and provided an excellent third-quarter outlook,” Monness Crespi Hardt analyst Brian White said in a research note. “The results demonstrate that Snap has dramatically improved its operational execution over the past couple of years, successfully leveraged new innovations, and enhanced its ad tech stack to capitalize on a greatly improved digital ad-spending environment.”
The social media firm claims it is the best way to reach millennials and teenagers. Big consumer brands have increasingly spent more of their digital advertising dollars on Snap’s platform.
The social media company, recently featured in the New America, continues to develop new products, an important consideration for the CAN SLIM cognoscenti.
In mid-May, Snap introduced its first augmented-reality smart glasses called Spectacles. The company previously released camera-embedded sunglasses under the same name.
“Snap has continued to differentiate with unique content and innovative experiences for users,” Third Bridge Group analyst Scott Kessler told IBD. “Our experts say Snap has done the best job in terms of social media AR/VR features and functionality, even though Facebook bought Oculus, a leader in this area, some seven years ago.”
The new Spectacles aren’t for consumers yet. The company is making them available to software developers to see what sorts of applications they can create with them.
It also recently introduced an augmented reality shopping feature called “TrueSize.” The likes of Nike (NKE), clothing company FarFetch (FTCH) and watchmaker Piaget are fans of the feature.
Lennar Stock
LEN stock is closing in on a buy point of 110.71, according to MarketSmith analysis. Investors is already actionable from an early entry around 103. While the stock dipped on Friday, it was a positive week overall for Lennar stock.
The bullish action in LEN stock came as several other homebuilders rallied on strong earnings. Homebuilders could be ready to go another run after a period of consolidation.
The relative strength line is an area where investors will want to see improvement. It is off consolidation highs, though this is acceptable during a base-building period. It has begun to pick up, and it is important this continues.
Earnings are currently the strongest suit of the homebuilder stock, with its EPS Rating a very impressive 94 out of 99. Over the past three quarters, earnings have grown by an average of 51%. This is double the growth level sought by CAN SLIM connoisseurs.https://research.investors.com/ibdchartswp.aspx?cht=pvc&type=daily&symbol=LEN
Last month the recent IBD Stock Of The Day reported Q2 earnings of $2.65 per share, a 61% jump from the year-ago quarter. Sales grew 22% to $6.4 billion. Deliveries rose 14% to 14, 493 homes. New orders jumped 32% to 17, 157, with a value of $7.6 billion. Lennar’s backlog is up 38% to 24,741 homes.
Lennar management still expects to close 62,000 to 64,000 units in fiscal 2021. But it raised its outlook for the average closing price to $420,000 from $400,000.
Lennar also sees gross margin improvement to 26.5% to 27% from a prior estimate of 25%.
“Our second quarter homebuilding gross margin of 26.1% was the highest second quarter percentage in the company’s history, and a 450 basis point improvement over the prior year,” Co-CEO Rick Beckwitt said in a statement. “The improvement was driven by a higher-than-expected sales price per home delivered of $414,000, reflecting higher sales prices in most of our markets, partially offset by higher land and construction costs.”
Lumber prices, which spiked 300% to all-time highs during the pandemic, have fallen in recent weeks.
“If the recent lumber deflation trends continue, Lennar anticipates every 10% decline in the framing lumber index should result in $1,700 in cost savings per home,” said Wedbush analyst Jay McCanless in a June 17 note to clients. “Panel prices have not declined like framing, but if that occurs, the savings should track similarly to framing lumber.”
Square Stock
PayPal rival Square has retreated back below a cup with handle entry of 254.88. Square stock rebounded strongly from its 50-day moving average starting on July 19, reaching 267.77 on July 23. But shares fell fell solidly last week, with most of the decline coming as PayPal (PYPL) tumbled on weak revenue.
Investors also could view last week’s pullback as forging a new handle with a 267.87 entry. The top of that handle lines up with a trend line from the February and April peaks.
The current base is second stage, which is a positive.
The relative strength line had been rising lately, but is now pulling back. Investors will want to see improvement on this front.
Square stock boasts a perfect Composite Rating of 99, with earnings performance currently its strongest feature. The stock has still managed to post a solid gain of around 19% so far this year however.
Institutional support has been balanced of late, with the stock boasting an Accumulation/Distribution Rating of C.
The recent IBD 50 Stocks To Watch pick posted a Q1 sales increase of 266% to $5.05 billion. Meanwhile, EPS jumped from a loss of 2 cents a share to a 41-cent profit per share. The firm is getting set to report its latest results on Aug. 5.
Square saw a significant revenue increase from its subscription and services-based products. For this segment, revenue was $558 million in the first quarter, up 88%. The company’s popular Cash App delivered strong growth in the first quarter, generating $4.04 billion of revenue, an increase of 666%.
Square stock experienced major growth in 2020 as investors focused on the growth of its consumer Cash App. But the digital payment processor warned that the app expects slower growth as government stimulus payments to consumers wind down.
For Q1, Square disclosed a new $170 million investment in Bitcoin on top of its $50 million purchase in October. Square reports Bitcoin holdings as unrealized gains on investments, excluded from adjusted earnings.
In a tweet on July 15, Square CEO Dorsey said the company will create a new business line to help developers build financial services products focused on Bitcoin. Square is “building an open developer platform with the sole goal of making it easy to create noncustodial, permissionless, and decentralized financial services,” Dorsey tweeted.
Square is a member of the IBD Sector Leaders, IBD’s most stringent and powerful screen.
Burlinton Stores Stock
Burlington Stores is trading just below a cup with handle buy point of 336.53. BURL stock managed to close the week with a gain of around 1.5%.
The stock is currently trading clear of its 50-day moving average, which is encouraging. The RS line is also show signs of life, though it is modestly off highs for the year.
At the moment earnings are badly lagging its stout stock market performance. This is why it holds a strong, but not ideal, Composite Rating of 80.
The stock has recovered well from its coronavirus crash lows, gaining as much as 231%. The stock has gained a muscular 28% so far in 2021 alone.
Burlington Stores is betting big on brick and mortar. The firm has said it is exiting e-commerce entirely, which flies in the face of current convention.
In March, Burlington Stores said it’s targeting 2,000 stores in the long term, up from a prior target for 1,000 stores. It tied the hike to its pursuit of a smaller-store format, as well as opportunities from retail disruption and industry store closures. In 2021, Burlington expects to open 75 net new stores.
On May 27, the retailer delivered a huge earnings beat for the first quarter, though BURL stock fell that day. Sales jumped 174% year over year, accelerating sharply from a 3% gain the prior quarter. Armed with stimulus checks, shoppers flocked to “treasure hunt” for clothes, shoes and accessories again as states across the nation started to reopen.
Even against pre-pandemic 2019 results, Q1 earnings increased 106% while sales rose 35%. In addition, comparable store sales increased 20% and margins expanded 230 basis points.
Management touted operating with leaner inventories and adopting a smaller-store format. Meanwhile, the company is betting on brick-and-mortar stores over e-commerce.
“In our business, which is a moderate off-price business, the nature of the treasure hunt and the average price point that we operate at mean that bricks-and-mortar stores have a significant competitive and economic advantage over e-commerce,” CEO Michael O’Sullivan said on a March 5, 2020, earnings call, according to a FactSet transcript.
The recent Stock Of The Day belongs to the apparel and shoes retail industry group, which ranks a solid No. 8 out of 197 groups tracked by IBD. It includes famous off-price peers such as TJX (TJX) and Ross Stores (ROST), as well as the more high-end names like Lululemon (LULU) and Boot Barn (BOOT).
Off-price and discount retailers tend to be resilient in tough markets. That could make Burlington stock a nice counterweight to tech-heavy names in a growth stock portfolio.
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