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? Northrop Grumman (NOC), Dollar Tree (DLTR), Li Auto (LI), Centene (CNC) and AstraZeneca (AZN) are prime candidates.
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With inflation worries high, and the Federal Reserve tightening rates aggressively, market action has been challenging so far in 2022. The Russian invasion of Ukraine continues to weigh on 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 current rally attempt is already under pressure. The S&P 500, the Nasdaq and the Dow Jones Industrial Average are off their 52-week lows. The Dow, S&P 500 and the Nasdaq are also stuck below their 50-day moving averages.
With the market showing signs of stress yet again investors should be very careful about making any new stock purchases. Investors should concentrate their efforts on quality stocks, such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks below are good candidates.
Remember to stay disciplined and flexible. The market could either fall once again into a correction or could shake off the recent selling and move back into a confirmed uptrend. This is also a good time to be beefing up one’s watchlist.
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
- Northrop Grumman
- Dollar Tree
- Li Auto
- Centene
- AstraZeneca
Now let’s look at Northrop Grumman stock, Dollar tree stock, Li Auto stock, Centene stock and AstraZeneca stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Northrop Grumman Stock
NOC stock has slipped below a prior buy point of 477.36. While that entry is no longer technically valid it is a level that has seen a lot of trading in recent months.
NOC stock now has new flat base on a weekly chart with an entry of 492.40.
Northrop Grumman is just below its 50-day line, after previously being the only defense giant to hold that level.
The relative strength line is holding near a two-year high, reinforcing its position as one of the current stock market leaders.
Northrop Grumman fills in the role of a leader within a cyclical area of the market that had struggled as a laggard for years until Vladimir Putin’s Russia attacked Ukraine in February. Meanwhile, China-Taiwan tensions continue to remain high.
On Northrop’s April 28 first-quarter earnings call, CEO Kathy Warden said the budget request fully funds initial production of the B-21 Raider stealth bomber.
President Joe Biden’s defense budget plan also includes a “significant year-over-year increase in development funding” for a new intercontinental ballistic missile known as the Ground Based Strategic Deterrent.
The Air Force plans to spend $20 billion for B-21 production over five years. In 2020, Northrop received a $13.3-billion contract to develop the new ICBM.
While Northrop’s revenue and EPS have trended lower in recent quarters, those and other programs are expected to fuel growth in 2023 and beyond.
Northrop also recently announced a 10% increase in its quarterly dividend, to $1.73. That makes 19 straight years of higher dividends.
Northrop reports Q2 earnings on July 28.
Dollar Tree Stock
The stock is currently actionable above a 166.45 cup-with-handle buy point. The relative strength line has just pushed to fresh heights, an encouraging sign.
The stock has a mighty Composite Rating of 97 out of 99. Stock market performance is currently its strongest suit. It sits in the top 2% of stocks in terms of price performance over the past 12 months.
Big Money has been taking notice of the firm’s performance. Currently, 58% of stock is held by funds. Institutions have been ramping up holdings of late, with its Accumulation-Distribution Rating coming in at B.
In Q1 the firm broke exciting new ground for a dollar store — it raised the price of dollar items to $1.25. The IBD 50 top growth stock positioned the shift, known as “breaking the buck,” as an opportunity to enhance offerings while navigating higher costs.
“We are focused on exceeding shopper expectations for value at $1.25, just like we have for more than 30 years at the $1.00 price point,” the 2021 Dollar Tree annual report said.
Early signs point to a boost in foot traffic and profitability, despite backlash from some loyal customers. In the first quarter, earnings for Dollar Tree stock jumped 48% as same-store sales at Dollar Tree stores surged 11%, a record gain.
Dollar Tree is launching $3 and $5 merchandise in select stores as well. It’s on an expansion spree, aiming to add 590 new Dollar Tree stores this year, as well as 400 combined stores, rolling its Dollar Tree and Family Dollar brands under one roof.
The firm, which appeals to bargain hunters looking to stretch their budgets to the maximum, is well placed to thrive in a recessionary environment.
“DLTR’s higher income demographic offers some protection and both brands should benefit from (customers) trading down while any reduction in labor market tightness would help the (profit and loss),” Guggenheim analyst John Heinbockel, said in a research note. He maintained a buy rating on Dollar Tree stock and above-consensus price target of 185 a share.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Li Auto Stock
LI stock offers an early entry from Wednesday’s bounce off the 21-day moving average. The Chinese auto stock was added to SwingTrader after it found support near its 21-day line.
It is also working on a new consolidation pattern with a possible future buy point of 41.59, according to MarketSmith.
LI’s relative strength line is just off record high levels. The stock has been showing remarkable power, more than doubling from early May to late June. It is in the top 2% of stocks in terms of price performance over the past 12 months.
Earnings are not ideal, with its EPS Rating coming in at 76 out of 99. Nevertheless, it reported better-than-expected Q1 earnings in May 10 despite supply chain and Covid headwinds.
Li Auto reported adjusted earnings of 7 cents per share with revenue of $1.5 billion. Analysts had expected the carmaker to post a loss of 7 cents per share on revenue of $1.4 billion. LI stock rose on the earnings beat.
Li Auto EV deliveries saw a sharp year-over-year rise in Q2, although they dipped on a quarter-vs. quarter basis. Overall, Li Auto sold 28,687 EVs last quarter, up 63% from the previous year. That included 4,167 EV deliveries in April, 11,496 in May and 13,024 in June, up 69% vs. a year earlier. The Q2 EV deliveries were well above its forecast range but down significantly from Q1.
Li sells the premium Li One hybrid-electric SUV and unveiled the more-upscale L9 in June. L9 deliveries should start in late August, with the automaker predicting sales of 10,000 seen in September.
Li Auto saw its second consecutive quarter of triple-digit revenue growth. But increased supply chain and inflation costs ate into the company’s gross profits, which saw a 9% dip from the previous quarter. Still, that number is up 251% year over year. The China EV maker is anticipated to bring its second vehicle model to market in Q3.
LI stock rose sharply on the unveiling, part of a its massive run.
Centene Stock
Centene is benefiting from a current uptick among health stocks. It has just cleared a double-bottom buy point of 87.44.
The relative strength line has just hit a new high, and it remains on a strong long-term uptrend.
CNC stock reclaimed its buy point on July 15, along with several other health insurers, on strong UnitedHealth (UNH) earnings.
Centene’s Q2 earnings are due July 26.
First-quarter earnings rose 12% while revenue growth accelerated for a second straight quarter to 24%.
Centene recently increased its 2022 full-year guidance. The company cited increased Medicaid premium revenue and “favorable” insurance marketplace performance so far.
Analysts predict that CNC earnings per share will increase 8% in 2022 and that revenue will climb 13%, according to FactSet.
Centene holds an EPS Rating of 93 out of 99. Earnings grew by an average of 43% over the past three quarters.
Big Money is a key backer of the stock, with 66% of shares currently held by funds. Investors will want to see volume pick up as it attempts to break out.
The company provides health plans and related health care management services.
The St. Louis-based company is one of the largest Medicaid-based managed care organizations in the country. While Centene primarily provides health care products and services through Medicaid and Medicare, it also works through private insurers.
Funds and other institutional investors own 67% of Centene’s outstanding shares. As of March, 2,269 funds owned CNC shares, an increase of 124 since December, according to MarketSmith.
What To Do As Market Rally Faces Key Test
AstraZeneca Stock
AZN stock is just below a 67.50 buy point from a double-bottom base, rebounding from its 50-day line late last week. The relative strength line has been making progress since the start of December last year.
The base started when the stock peaked at 71.70 following a 14% gain from its previous breakout in March.
From the April 8 peak, the drug stock corrected twice. First to its 200-day moving average and then under it in the second pullback.
The U.K.- based company manufactures a vast variety of treatments, including a Covid vaccine and cancer drugs Tagrisso, Imfinzi and Lynparza.
Earnings grew 57% in the fourth quarter of 2021 and 16% in the first quarter of 2022. That’s after falling 7% and then rising only 6% in the two previous periods.
Excellent all-around performance is reflected in its perfect BD Composite Rating of 99. Analysts see EPS rising 34% in 2022 and by 16% in 2023.
AstraZeneca will report second-quarter results on July 29. Analysts predict profit will soar 98% to 81 cents a share vs. 41 cents a year earlier. Full-year EPS is expected to increase 34% to $3.34 from $2.49, according to FactSet.
AstraZeneca is working in big areas of medicine. Its biggest cancer drug is called Tagrisso. Other cancer medicines include Imfinzi and Lynparza.
Last September AstraZeneca said a combination of its drug Imfinzi and tremelimumab plus chemotherapy extended the amount of time before patients’ lung cancer worsened by 28%. It also improved overall survival — the time before any cause of death — by 23%.
Further, the company said a fixed dose of drugs called albuterol and budesonide reduced the risk of asthma exacerbations compared with albuterol alone. It also improved lung function in patients with mild to moderate asthma in another study.
Last year the firm said Alexion drug Ultomiris gained approval in Europe to treat children with a rare blood disorder. Before its acquisition, Alexion’s biggest drug was Soliris. Ultomiris is a next-generation version of Soliris with a longer timeline before it faces biosimilar rivals.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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