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? Medpace (MEDP), Wendy’s (WEN), Axon Enterprise (AXON), Vertex Pharmaceuticals (VRTX) and Noble (NE) 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 rebounded following the latest jobs report. The bullish action continued when stocks rallied on the December consumer price index report. Last week big tech layoffs helped the market recovery after some shaky sessions.
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 Medpace stock Wendy’s stock, Axon stock, Vertex stock and Noble stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
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. 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. Investors could use 23.59, just above the Jan. 17 peak, as a slightly early entry.
Its relative strength line is also moving higher again after a recent pause. The RS line surged for much of 2022.
WEN previously rebounded above the 50-day moving average but is now testing this key benchmark once again.
The stock is in the top 21% 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.
On Jan. 13 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 market cap is below $5 billion, so $500 million is big repurchase plan.
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.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
AXON has formed a cup with handle base pattern with a buy point of 189.72 after previously clearing the key 50-day moving average. The bounce above that level could’ve been considered an early entry for aggressive investors.
The relative strength line had been taking a breather during its consolidation but has just hit fresh heights. The pause was healthy following a strong upward move from mid-July until early November.
Axon is among the top 3% of stocks in terms of price performance over the past 12 months.
Earnings performance is solid, with its EPS Rating a healthy 83 out of 99.
Earnings are seen improving, with full-year EPS expected to climb 34% in 2023. Not many companies can say that as some think a recession looms.
Institutional investors have been snapping up the stock of late, which is reflected in its Accumulation/Distribution Rating of B+.
In total, 56% of the stock is held by funds. A further 7% is held by management, a good sign.
Axon Enterprise shot to fame as the maker of the Taser stungun, but now makes a wide range of products for law enforcement and military clients.
Formerly known as Taser International, the company has taken advantage of the business opportunity offered by public demands for more police oversight. Its line of body cameras and accompanying software are now market leaders.
The Scottsdale, Ariz.-based company also boasts a cloud-based digital evidence platform and has also won share in the in-car police camera market with its Axon Fleet product.
Axon makes the bulk of its revenue in the United States. Of the approximately 18,000 law enforcement agencies in the U.S., the firm has a customer relationship with approximately 17,000.
Credit Suisse has named Axon its New Top Pick for 2023 and maintains an outperform rating.
Vertex Pharmaceuticals shares have been forming a flat base. This is a first-stage pattern, which means it is more likely to net rich gains. The ideal buy point here is 324.85.
Shares recently reclaimed the 50-day line and is now consolidating. Investors could use 312.76 as an early entry.
The relative strength line is bending higher again, a positive sign.
Big Money is getting behind the stock, with its Accumulation/Distribution Rating coming in at a healthy B. This reflects net institutional buying of late.
In total, 61% of its shares are held by funds, according to MarketSmith data.
The stock has been flashing bullish signs as it eyes multiple money-spinning opportunities.
The company is known for its cystic fibrosis treatments. The firm estimates a market of 88,000 patients. Of those, there are still 20,000 patients who could receive its old-school oral treatments.
Analysts are watching for what’s new from Vertex, including an updated regimen of three drugs that could strengthen Vertex’s position against incoming rival AbbVie (ABBV).
The company has been noted for coming up with a pain alternative to opioids. Vertex is roughly a year out from results in its pain program.
It is also working on a new approach to type 1 diabetes and treatments for serious kidney and liver diseases.
SVB Securities analyst David Risinger recently upgraded VRTX stock to outperform. He also hiked his price target to 374 from 265. Shares popped as a result.
“Our investment thesis is that potential positive financial inflections associated with next-gen triple combo in cystic fibrosis and pipeline developments can drive stock performance,” Risinger said in a research note Wednesday.
10 Big Earnings On Tap Amid Market Rally
NE stock has formed a cup base with an ideal buy point of 42.18, though it’s possible a handle is being forged. The relative strength line has been making progress of late, a good sign.
Stock extended after rebound from 10-week moving average. Noble stock has been in a volatile period of multiple breakouts since March 2022.
Noble is in the top 5% of stocks in terms of price performance over the past 12 months. Since exiting bankruptcy in June 2021, NE shares are up almost 70%.
Earnings performance is not ideal, which is reflected in its EPS Rating of 77 out of 99. Institutions have been piling in of late, with its Accumulation/Distribution Rating coming in at A-.
Headquartered in Sugar Land, Texas and incorporated in the Cayman Islands, Noble is an offshore drilling contractor for the oil and gas industry. The Oil & Gas-Drilling group is now rated No. 5 out of 197 industries tracked by IBD.
The company operates a fleet of ultra-deep-water drillships and high specification jackup oil rigs, pursuing opportunities in both established and emerging regions worldwide. The company has operations in North America, Europe, the Middle East, South America, Australia and Asia.
In June, 2021, Noble stock relaunched following bankruptcy proceedings, through which it offloaded $3.4 billion in bond debt.
Since then, Noble has posted three quarters of profits and two quarters of losses. In Q3, Noble topped estimates and saw earnings grow 400% to 50 cents per share. Meanwhile, sales edged up 22% to $306 million.
There have also been recent optimistic oil demand forecasts from both the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC). U.S. crude oil prices on Friday hovered near $81 per barrel. U.S. crude oil futures have regained support above their 50-day moving average line, after settling above that line on Tuesday for the first time since mid-November.
In November, the company reported that its contracting activity remains firm, “reflecting the tight condition of the high-end drillship market segment.”
Current contracts on three of the company’s four semi-submersibles extend until at least April, Noble’s jackup fleet is also mostly booked, with 12 of its 13 rigs working under contract.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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