Number One Stock To Buy
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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 MercadoLibre (MELI), Meta Platforms (META), HubSpot (HUBS), PagerDuty (PD) and Palo Alto Networks (PANW) are prime candidates.
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.
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.
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. While the Nasdaq looks healthy, the S&P 500 has fallen under the 50-day moving average amid challenging action sparked by negative action among bank stocks.
Now is a time to prepare for the next stock market uptrend by creating a robust watchlist. 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.
Now let's look at MercadoLibre stock, Meta stock, HubSpot stock, PagerDuty stock and Palo Alto Networks stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
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 Etsy (ETSY).
Lackluster earnings are reflected in an EPS Rating of 48 out of 99. Despite this, growing bullish sentiment is reflected in the fact it is in the top 4% of stocks in terms of price performance over the past 12 months.
Encouragingly, the stock has been getting support at its 21-day exponential moving average and recently found support at the 50-day/10-week line. IBD research has found that big stock market winners tend to find support at the 21-day after a breakout for at least several weeks.
At a growing number of companies, digital transformation means speeding up internal software development and deploying new applications quickly. The process includes monitoring how apps perform. It's called \"DevOps.\"
The year 2022 was a lousy one for the stock market. Even after factoring in dividends, the S&P 500 fell 19.4% in those 12 months, while the tech-heavy Nasdaq composite took a 33.1% haircut. The catalysts behind Wall Street's sell-off are all too familiar: Inflation, soaring interest rates, persistent recession fears and the Russia-Ukraine war snowballed into an avalanche of worries that investors couldn't ignore, and many previously high-flying stocks took a beating as the \"risk off\" mindset came to dominate markets. This, thankfully, provided a window of opportunity for investors to snap up great companies at a discount entering the new year.
Before each new year, U.S. News selects 10 stocks to buy for the year ahead. Here's a rundown of the 10 best stocks to buy for 2023 and how each has fared thus far based on total returns, which include dividends:
First up is Apple, the largest publicly traded company in the world, if you exclude government-backed behemoths such as oil giant Saudi Aramco. Like other tech stocks, AAPL shares had a rough go of it in 2022, as recession fears and soaring interest rates spooked investors in the sector. Following a rare 26.4% pullback in 2022, Apple now trades at 26 times earnings, offering investors a sound entry point into the $2.5 trillion iPhone maker. Although its most recent earnings report technically missed expectations, that was more due to supply chain snarls than demand issues. In fact, Apple reported an active-installed base of more than 2 billion devices, and revenue in its high-margin services segment surpassed $20 billion. AAPL stock is bouncing back from its 2022 woes, with shares up 22.5% in 2023 through March 23.
While massive, established companies like Apple can offer investors some stability, smaller companies have more room for expansion and can boost portfolios. Enter the rapidly expanding coffee chain Dutch Bros, which for comparison's sake, is roughly 0.2% the size of Apple despite being worth about $5 billion. Revenue is growing like a weed, surging 48.4% in 2022. With initial roots on the West Coast, Dutch Bros locations are almost entirely in the West and Southwest, with 671 locations in 14 states through the end of last year. The small footprint of its drive-thru stores means they are relatively cheap to open, allowing for faster expansion. That shows up in the numbers: Dutch Bros opened 133 new stores in 2022, which works out to location growth of 25%. Shares are up 5.3% through March 23.
Next up is Citigroup, a nearly $90 billion multinational bank with both retail and investment banking arms. What Citigroup offers investors is twofold: First, it pays a healthy 4.6% dividend yield, which is a nice buffer for shareholders in an era of rising rates and high inflation. Importantly, that dividend is sustainable over time, with Citigroup using less than 30% of earnings to finance its payouts. Aside from its high dividend, Citigroup also looks like a value stock at current levels, trading for seven times forward earnings and just 0.47 times book value. Famed investor and financial guru Warren Buffett began buying Citigroup stock in the first quarter of 2022, and Berkshire Hathaway Inc. (BRK.A, BRK.B) now owns a roughly $2.4 billion stake in the company. Citigroup stock is down 3% in 2023 through March 23.
Another return pick from last year's list, this off-the-beaten-path stock is a $9 billion Latin American airport operator. The only industrial on this list, ASR also offers geographic diversification and is a mid-cap company that isn't on most investors' radars. The stock was a diamond in the rough in 2022, posting a total return of 17% in a bear market. It helps, of course, that passenger traffic has been surging: In February 2023, passenger traffic shot up 23.9% year over year, driven by a 25.6% surge in Mexico. Airport operators earn money when airlines rent out gates and pay landing fees, as well as from parking, ground transportation, airport retail and advertising, among other sources. ASR's largest airports are in Cancun, Mexico; San Juan, Puerto Rico; and Medellin, Colombia. The stock pays a 2.7% dividend, and shares have posted a total return of 24.2% in 2023 through March 23.
Taiwan Semiconductor Manufacturing, a $500 billion business and the dominant high-level foundry for advanced chips, is next on the list. In the semiconductor industry, foundries are companies that manufacture chips for other companies, and TSM enjoys a massive market share for chips 7 nanometers and under. Apple, which has started to shift its supply chain away from China, is one of TSM's biggest customers. The company reported fourth-quarter results that beat both top- and bottom-line expectations, with revenue jumping 43% and earnings per share surging 78%. Trading at just 14 times earnings and paying a 2% dividend, TSM is, incidentally, yet another Buffett holding, and its shares have been crushing it in early 2023, posting gains of 27.7% through March 23. TSM is the best-performing stock among the best stocks to buy so far in 2023.
Last up is Diageo, the $100 billion U.K.-based beverage giant. A consumer defensive stock, Diageo should be able to hold up in a strained macro environment, as alcohol tends to be relatively recession-resistant. As with tobacco, alcohol consumers tend to have a fair degree of brand loyalty, and the company's slate of elite brands gives it enviable positioning in its space, with bar staples such as Johnnie Walker, Guinness, Tanqueray, Don Julio, Smirnoff, Baileys, Ciroc and Bulleit all under its umbrella. Despite net sales jumping 21.4% in fiscal 2022, the stock fell with the broader market last year, losing 17.4%. That's largely due to its base in the U.K. and a bad year for the British pound. That slump can't last forever, and shares now trade for about 20 times forward earnings, a discount to its five-year average forward P/E of 24.4. The defensive DEO has traded more or less flat in 2023, adding 0.3% through March 23.
Richard Saperstein, the Chief Investment Officer at Treasury Partners, has expressed his belief that the stock market and economy are still facing challenges and are not yet in a secure position. He told Forbes on February 1:
As per Forbes, the stock market in China has begun 2023 with strong performance and is expected to continue to improve as the country eases its COVID-19 policies, such as lifting travel restrictions and ending lockdowns. This is due to the growth potential of the world's second-largest economy. Investors also favor value stocks since they tend to perform better than growth stocks during times of high interest rates. This is because high interest rates affect discounted cash flow valuations, which have a greater impact on high-growth stocks compared to value stocks. In addition to that, utilities, consumer staples, and healthcare stocks are considered to be defensive plays tha