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? FedEx (FDX), Target (TGT), Advanced Micro Devices (AMD), Apple (AAPL) supplier Qorvo (QRVO) and Novocure (NVCR) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects a rising confidence that the economy will eventually recover from the coronavirus.
The broader stock market got a shot in the arm after Pfizer (PFE) and BioNTech (BNTX), then rival Moderna (MRNA), announced positive coronavirus vaccine test results. It came after a rally fueled by Joe Biden winning the U.S. presidential election, though President Donald Trump is still disputing the result. Soaring coronavirus cases and new Covid restrictions are concerns. The dueling coronavirus headlines also have spurred some back and forth between stay-at-home stocks and equities that might fare better with the economy returning to normal.
With stocks moving powerfully and the market back into an uptrend, it is a time to be looking for stocks near buy zones showing strength compared to the rest of the market.
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So why do the stocks chosen stand out? Before turning to that question, it is important to consider how one goes about choosing a stock in the first place. Superior fundamentals and technical action, and buying at the right time, are all part of a shrewd investing formula.
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 Dow Jones Industrial Average has been rebounding powerfully after ending October on a low. The Nasdaq, S&P 500 and the Dow Jones Industrial Average are all above their 50-day moving averages. The whole market is back in an uptrend, and it is a good time to be considering opening new positions.
As you identify stocks, on a technical basis look for stocks with rising relative strength lines. Stocks that hold up amid tough conditions often bound to new highs once a market stabilizes.
Remember, things can quickly change, when it comes to the stock market. Make sure you don’t miss out on a rally by keeping a close eye on the market trend page here.
Best Stocks To Buy Or Watch
Now let’s look at FedEx stock, Target stock, AMD stock, Qorvo stock and Novocure stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
FedEx stock has a flat base with a 293.40 buy point. It already staged a rebound from its 50-day moving average, which offered a buying opportunity. Investors could still buy off the line, though they might want to wait to clear last week’s high, with a 289.86 entry.
The shipping giant has been benefitting from an e-commerce boom. FedEx stock rose 1.8% last week. Overall, it’s held up much better than many e-commerce plays amid concerns that consumers will shift back to brick-and-mortar shopping as coronavirus vaccinations spread widely in 2021.
The RS line has been lagging of late, but this comes after a period of fierce outperformance from mid-May until mid-October.
FedEx stock has a mighty IBD Composite Rating of 96. The Stock Checkup Tool shows it is stock market performance that is driving the stock. Nevertheless, FedEx got a boost after it spanked earnings estimates back in September. It snapped a streak of six consecutive quarters of EPS declines.
In Q1 of fiscal 2021, the firm’s EPS jumped 60% $4.87 on revenue of $19.3 billion. Management credited volume growth in FedEx International Priority and U.S. domestic residential package services as well as yield improvement at FedEx Ground and FedEx Freight.
“While business demand improved in the first quarter, continued uncertainties cloud our ability to forecast full-year earnings,” said CFO Alan Graf. “However, we expect to continue to benefit from our strong position in the U.S. and international package and freight markets, yield improvement opportunities and cost management initiatives.”
FedEx didn’t provide a fiscal 2021 earnings forecast but raised its capital spending outlook for the year by $200 million to $5.1 billion to boost capacity and support increased volume.
FedEx and Microsoft (MSFT) announced a partnership to improve shipping for commercial customers in May. They are joining forces against Amazon. The multiyear pact will combine FedEx’s global logistics network with Microsoft’s AI and cloud expertise.
Target is in buy range after clearing a short pattern in heavy volume. The ideal buy point is 167.52. The latest pattern was a bit short for a flat base, just above a prior flat base, but it’s still actionable.
There are positive technical signs for Target stock. It is currently clear of its 50-day moving average, while its relative strength line has also turned positive again after a period of slight decline. The RS line is up solidly for the year so far.
The recent Stock Of The Day has a very strong Composite Rating of 97, putting it in top 3% of stocks tracked. Earnings in particular are a strength, with EPS rising by an average of 43% over the past three quarters. Earnings growth is accelerating, coming in at 105% growth in the most recent quarter.
Institutional sentiment is also strong, with its Accumulation/Distribution Rating coming in at B+. This reflects moderate to heavy buying among institutions.
The big-box retail giant got a big boost after it crushed Q3 earnings and same-store sales forecasts on Wednesday. It was boosted by an early start to the holiday shopping season this year.
A key to the firm’s success has been its work to improve its e-commerce capabilities to support the expected high volumes. Target uses Order Pick Up, Drive Up (curbside pickup) and Shipt, which Target uses to fulfill its digital orders.
Order Pickup surged more than 50%, Drive Up shot up more than 500%, and Shipt soared 280%.
“This was a banner quarter for Target surpassing even the most optimistic estimates for comp sales and bottom line on the Street,” said Third Bridge analyst Nick Shields. “Perhaps the most encouraging factor was the company’s disclosure that customers are making more frequent trips into stores, suggesting brick-and-mortar customers will be willing to come into the stores this holiday season.”
AMD is shooting for a double-bottom buy point of 88.82, MarketSmith analysis shows. AMD stock rallied past an aggressive trend line on Thursday, before falling around 1% Friday.
The stock is clear of its 50-day line. In addition, the RS line has been rallying following a recent decline. Nevertheless, the relative strength line has been largely moving sideways since August.
AMD stock has a perfect IBD Composite Rating of 99. It has earned this due to its excellent earnings and stock market performance, and it holds a perfect EPS Rating of 99.
The Stock Checkup shows earnings have grown by an average of 151% over the past three quarters. This is above the 25% growth sought by CAN SLIM cognoscenti. It slowed to a still-strong 128% growth in the most recent quarter.
AMD stock holds an Accumulation/Distribution Rating of C, which represents a balance between buying and selling from institutions. It boasts eight consecutive quarters of increasing fund ownership.
Another key ingredient to the CAN SLIM formula is new products. AMD is making moves on this front.
Last month the company unveiled its Ryzen 5000 series of central processing units. It claims they are the “fastest gaming CPUs in the world.”
“Gaming is at the heart of so much of what we do at AMD, whether you are talking about PCs or consoles or cloud gaming and mobile,” Chief Executive Lisa Su said during an online presentation.
Shares formed a three-weeks-tight pattern at end of trading Friday. This is a pattern that gives investors the chance to add shares. Because it’s relatively close to the prior, messy consolidation, investors could start a position here. The buy point for Qorvo stock sits at 154.53.
The stock is sailing clear of its 10-week line, and its relative strength line is also looking positive.
Qorvo stock has a top-notch Composite Rating of 96. While earnings are its biggest strength, stock market performance is also good. This is reflected in its Relative Strength Rating of 87 out of 99. The stock is up almost 120% on its coronavirus crash lows. It is also up nearly 27% so far on where it started 2020.
The recent Stock Of The Day hit a 20-year high of 154.43 on Nov. 9. This was three days after the company posted better-than-expected fiscal second-quarter results.
Greensboro, N.C.-based Qorvo earned EPS of $2.43 on sales of $1.06 billion in its fiscal second quarter. On a year-over-year basis, earnings were up 60% while sales climbed 31%. Analysts expected earnings of $2.12 a share on sales of $1.01 billion.
Qorvo was one of several Apple (AAPL) chip suppliers that delivered upbeat earnings reports for the calendar third quarter. Apple typically represents about 35% to 40% of Qorvo’s revenue, according to investment bank Oppenheimer.
“Recent strong execution has Qorvo ideally positioned to capitalize on 5G structural growth,” Oppenheimer analyst Rick Schafer said in a Nov. 5 note to clients. He rates Qorvo stock as outperform with a price target of 170.
More broadly, the 5G chipmaker should fare well, with 5G taking off around the world and the new 5G iPhone.
Novocure stock surged last week and especially Friday, rebounding from its 10-week line on Friday. This was its first since pullback since breaking out of a cup with handle in September. At 7.1% above the 10-week line, NVCR stock still in buyable from that perspective.
But Novocure stock has flashed other buy signals. Friday’s move pushed NVCR stock past a trend line. And shares also crossed yet another early entry at 132.08, just above the Nov. 9 intraday peak.
After all that, Novocure stock has a newly formed base with an official 140.99 buy point.
n addition the relative strength line is rebounding.
The stock has a strong Composite Rating of 95 out of 99. While NVCR stock has a less than optimal EPS rating of 76, earnings shot up by 350% in the most recent quarter.
U.K.-based Novacure produces electric-field technology which serve as another form of attack against solid tumor cancers. It keeps tumors from expanding or metastasizing It’s engaged in clinical trials for some of the toughest forms of cancer, including those of the pancreas and stomach.
Its Optune device is a wearable, portable, FDA-approved treatment for glioblastoma that creates low-intensity, wave-like electric fields called tumor treating fields, which disrupt glioblastoma cell division. The same technology is now used in its treatment for mesothelioma, a cancer related to exposure to asbestos.
More recently, Novocure has been testing the use of its technology to treat advanced liver cancer. Several clinical trials could significantly expand Novocure’s potential market in 2021 and beyond.
NVCR stock was Thursday’s IBD Stock Of The Day and is the latest New America feature.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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