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? Insulet (PODD), Celsius (CELH), SLB (SLB), Medpace (MEDP) and Wendy’s (WEN) 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 Russian invasion of Ukraine also 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. The S&P 500, the Nasdaq and the Dow Jones Industrial Average bullishly rebounded following the latest jobs report. The bullish action continued when stocks rallied on the December consumer price index report.
The stock market is now back in a confirmed uptrend. With earnings season kicking off, investors should raise exposure at a measured pace. A confirmed uptrend is when investors should make most stock purchases. It’s also a good time to add to existing holdings at follow-on opportunities, such as support at the 50-day moving average or at the 10-week moving average.
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.
A good way to stay engaged is to build up one’s watchlist of potentially actionable stocks. 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
Now let’s look at Insulet stock, Celsius stock, SLB stock, Medpace stock and Wendy’s stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
The diabetes treatment firm has formed a flat base with an ideal buy point of 320.10. It comes after it consolidated soon after passing a double-bottom base entry of 283.38.
Shares are also finding support at their 50-day line, according to MarketSmith analysis. This can also be used as an entry point.
The relative strength line is near all-time highs, and an upward spike could see it push to fresh heights once again.
It has been outperforming the S&P 500 over the past few months. Indeed, PODD is in the top 7% of stocks in terms of price performance over the last 12 months.
Insulet reported an annual profit for the first time in 2018. EPS is now beginning to ramp up in earnest. Analysts expect full year earnings to grow 88% in 2022 and then vault 151% in 2023.
The stock was given a boost after the firm crushed September-quarter expectations. The company also raised its guidance for full-year revenue, with burgeoning growth for its Omnipod insulin delivery system in the U.S.
Insulet makes insulin pumps for diabetes treatment, a growing market due to the increasing number of diabetes patients worldwide.
There are two types of diabetes. Type 1 typically presents in childhood and is due to a genetic defect. These patients need insulin to survive. Type 2 is usually diagnosed in adulthood. These patients can worsen to the point they also need insulin.
Insulin pumps are more common in type 1 diabetes treatment because parents can struggle to give their diabetic children multiple shots each day. But Insulet has noted increasing interest from type 2 patients, especially from Medicare.
Insulin pumps respond when blood sugar levels fall out of a patient’s desired range. When insulin falls too low, patients can experience a variety of symptoms, like blurred vision and drowsiness. High insulin levels can lead to weight gain, hunger and fatigue.
The stock was given a boost after its Omnipod 5 product was cleared in the U.S. and Europe for children as young as age 2 with type 1 diabetes.
Test results in young children have been promising so far, according to BTIG analyst Marie Thibault. After three months, 90% of children who wore Omnipod had “very good” or “fairly good” sleep, up from 65% at the beginning of the study. Further, there were no severe side effects, she said.
Shares have a rich valuation, Bank of America Securities analyst Travis Steed said in a recent report to clients.
“This is in line with high-growth diabetes companies, which we think is reasonable given Insulet’s high-growth recurring revenue business model and competitive positioning with a recent new product approval,” he said.
Celsius is fizzing off an early entry as it charges towards a proper buy point of 122.34. It has fought back well after a cup-with-handle breakout went awry.
The stock has just retaken its 50-day moving average, a bullish sign. This bounce offers an early entry into the stock.
The relative strength line for CELH stock rallied for much of 2022 and is trying to move higher again after a recent dip. This metric compares a stock’s performance to that of the benchmark S&P 500 index.
Celsius is a fast-growing marketer of fat-burning beverages that contain no sugar, preservatives, aspartame or high fructose corn syrup. After registering years of losses, the Boca Raton, Fla.-based firm turned its first annual profit in 2019.
The stock boasts triple-digit earnings and revenue gains. It managed to nearly double its sales in the most recent quarter though it also served up a big surprise loss.
Over the past three years sales have grown by an average 109%. By some calculations, Celsius is growing faster than giants Red Bull, Monster Beverage and Rockstar in the $53 billion energy drink category.
In the most recent quarter, Celsius doubled its amount of product sold through key retailer Amazon (AMZN)). It also has a PepsiCo (PEP) distribution deal and is continuing to add stores that carry its products.
Analysts expect a return to annual profitability for 2023. A predicted loss per share of $2.32 in 2022 is expected to turn into a profit of $1.14 this year.
CELH is in the top 2% of stocks in terms of price performance over the past 12 months.
Big Money has been buying the stock of late, with its Accumulation/Distribution Rating coming in at a B. In total, 84% of the stock is held by funds.
Bullish recent performance has won the stock a place on the Leaderboard Watchlist.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
SLB stock, formerly known as Schlumberger, is bouncing from the 50-day moving average, cleared a handle entry of 53.97 on Jan. 6. It is now slightly extended from the buy zone.
This is a first stage pattern. Such bases are more likely to net investors rich gains.
SLB specializes in technology for energy innovation, including improving performance in the oil and gas industry, working to reduce emissions and accelerating the transition to low-carbon energy.
The former Schlumberger offers solutions to remove methane and flaring emissions as part of their decarbonizing services.
The oil and gas segment includes equipment and rigs for well construction while SLB drilling tools are used in shale drilling, also known as fracking. Their geo-energy services find applications in building, heating and cooling systems.
EPS growth has accelerated in the last three quarters, up 75% in Q3 after 67% and 62% spurts in Q2 and Q1. Analysts project annual EPS growth of 68% this year and 39% in 2023.
Sales also saw accelerating growth, up 28% in Q3, up from 20% and 14%. Pretax operating margin grew to 23.5% in Q3, from 22.6% in the prior quarter.
The stock could benefit from the Inflation Reduction Act passed in August, earmarking $425 million for states to enhance clean energy planning and implementation for families, businesses and communities.
Medpace stock has formed a consolidation pattern with an ideal buy point of 235.82. The relative strength line is making progress again, a good sign.
The stock is rebounded from the 50-day moving average on Jan. 10, offering an early entry. But shares are now at the edge of being buyable. However, it’s possible that MEDP stock will forge a handle, offering a new, lower official buy point and letting moving averages catch up somewhat.
Overall performance is excellent, with the stock holding an IBD Composite Rating of 97. It holds a rare perfect EPS Rating of 99.
Medpace is also in the top 5% of stocks in terms of price performance over the past 12 months.
Medpace is among a group of companies that provide the backbone for research into new drugs and medical devices. About 85% of its revenue is tied to the biotech segment — an area that saw massive growth in early 2022, but has since faced a number of headwinds.
But Medpace shocked investors when it beat quarterly expectations, raised its full-year outlook and offered a strong 2023 outlook.
At the midpoint, Medpace expects 18% sales growth next year, UBS analyst John Sourbeer says.
“To us, the key question is ‘How achievable is this growth rate?’ ” he said in a recent note to clients. “In a normal environment, we believe growth above 20% would be achievable, particularly given the company’s focus on smaller/faster growing biotech companies. That said, given the headwinds for this segment of the market right now, in our view guidance needed to be below this level for 2023.”
The next big catalyst for Medpace stock could be its Q4 earnings report. Analysts expect Medpace to earn $1.86 per share, minus some items, on $386 million in sales. Earnings would rise almost 38% and sales would surge about 25%, according to FactSet.com.
It’s also important to note, annual profits are growing. Last year, Medpace earned $4.81 per share. This year, MEDP stock analysts call for $6.97 per share, rocketing 45%. By 2026, analysts project Medpace earnings of $13.05 per share. Annual sales growth is on a similarly strong trajectory.
Wendy’s has formed a new flat base with a 23.88 entry. The new pattern is just above a prior base.
Its relative strength line is also moving higher again after a recent pause. The RS line surged for much of 2022.
WEN has bullishly rebounded above the 50-day moving average and reclaimed the 21-day line, also breaking a trendline.
The stock is in the top 19% of stocks over the past 12 months.
Analysts expect Wendy’s earnings growth to surge 15% in 2023. Wendy’s makes its official Q4 report on March 1.
Last Friday the firm preannounced Q4 results that showed a 20% increase in adjusted EBITDA on a 13.4% revenue gain. That marks the highest sales growth in six quarters, and the fourth straight quarter of accelerating gains, just topping Q3’s 13.2%.
The board of the Dublin, Ohio-based company approved doubling its quarterly dividend to 25 cents and spending $500 million on share buybacks.
Wendy’s also reported a 6% rise in same-store sales and expanding margins.
In addition, the restaurant operator announced a broader organizational redesign and several executive departures as part of its long-term growth strategy.
In a separate regulatory filing, activist investor Nelson Peltz’s Trian Fund Management said it won’t pursue a Wendy’s takeover bid.
Back in May, the hedge fund said it was exploring a potential deal. Trian is the fast-food chain’s largest shareholder and Peltz serves as board chair.
Trian initially invested in Wendy’s in 2005 and started a push for change in 2008.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
YOU MIGHT ALSO LIKE:
Stock Market Forecast For Next Six Months Holds Big Risks For Dow Jones — But Hope Too
MarketSmith: Research, Charts, Data And Coaching All In One Place
These Are The 5 Best Stocks To Buy And Watch Now
This Is The Ultimate Warren Buffett Stock, But Should You Buy It?