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? Occidental Petroleum (OXY), General Motors (GM), Pure Storage (PSTG), Texas Roadhouse (TXRH) and Enphase Energy (ENPH) are prime candidates.
X
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 also 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. While the market battled back amid a better than expected earnings season, the previous uptrend failed amid disappointing inflation data. The market had been trying to battle back, with the S&P 500, the Nasdaq and the Dow Jones Industrial Average all powering off lows for the year.
The confirmed uptrend has resumed after the market rallied on a cooler-than-expected CPI report. Now is the time to get back into the market, though exposure should be increased in a measured fashion. 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.
It is key for investors to keep their wits about them given the current challenging nature of the market. It is also key to stay on top of sell signals as not every trade will work out, even in an uptrend. 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.
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
- Occidental Petroleum
- General Motors
- Pure Storage
- Texas Roadhouse
- Enphase Energy
Now let’s look at Occidental Petroleum stock, GM stock, Pure Storage stock, Texas Roadhouse stock and Enphase Energy stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Occidental Petroleum Stock
The Warren Buffett stock is in a buy zone after previously crossing the 72.14 buy point from a cup-with-handle base, according to MarketSmith analyis.
Shares are trading above their 50-day line and well above their 200-day moving average, both bullish signs.
Adding further to the encouraging picture, the relative strength line is near highs. This compares a stock’s performance to the S&P 500.
The stock is up more than 139% so far this year, far outperforming the broader stock market.
While price performance is top class, earnings are also improving. The stock currently has an EPS Rating of 81, and earnings grew by 180% in the most recent quarter the firm reported last week.
The oil producer also announced it had returned nearly $2 billion to investors in the third quarter while production remained mostly flat. So far in 2022, OXY has returned $2.6 billion to its stockholders, the company reported.
Occidental Petroleum reported capital spending of $1.1 billion, while production came in at 1.18 million barrels of oil equivalent per day in the third quarter, an increase of less than 1% compared to Q3 2021.
Warren Buffett is a major fan of Occidental. His firm Berkshire Hathaway has increased its OXY stake to 20.9%, with warrants that could bring the stake up to more than 25% of outstanding shares, according to SEC filings.
This comes after the Federal Energy Regulatory Commission (FERC) granted Berkshire approval on Aug. 19 to purchase up to 50% of the energy giant.
A Wall Street Journal report speculates that, given “Berkshire Hathaway’s value-driven DNA, though, it might take a big drop in oil prices to prompt an acquisition of that scale.”
Oil and gas stocks have consistently outperformed the 2022 market and Houston-based Occidental Petroleum is one of the top S&P 500 performers. It has benefited from higher fuel prices, triggered by inflation and Russia’s invasion of Ukraine in February. However, crude oil has slumped since peaking in June, dropping below $85 per barrel earlier this week.
The firm’s primary business in oil, natural gas liquids and natural gas hasn’t been dented, at least so far. On the other hand, the heavyweight has a petrochemicals segment that has struggled since home sales have imploded.
The Oxychem division makes PVC pipe and is one of the three largest suppliers. This chlorinated hydrocarbon and plumbing product is made from natural gas and salt.
GM Stock
GM stock is in a buy zone above a cup-with-handle base ideal entry point of 40.20, MarketSmith analysis shows.
General Motors stock is back above the key 50-day moving average, though much of the base formed below it. GM forged the handle right around the 200-day line.
The RS line is making progress once again after a recent dip. Nevertheless, it is off highs for the year.
Stock market performance and earnings are moving roughly in lockstep. The stock has surged off late, gaining about 18% in the past four weeks alone. It has more work to do to recoup its losses for the year though.
General Motors has just snapped a four-quarter streak of declining earnings. GM earnings rebounded 48% to $2.25 per share, topping analyst estimates. Revenue bounced 56% to $41.889 billion, but was light of Wall Street expectations.
Despite the big Q3 beat, General Motors still sees full-year EPS $6.50-$7.50. It continues to expect 25%-30% higher wholesale volumes and automotive free cash flow of $7 billion-$9 billion.
Wall Street now sees full-year GM earnings per share of $7.10, up 0.4%.
Big money has been buying up the stock of late, which is reflected in its Accumulation/Distribution Rating of B-. In total, 48% of its stock is held by funds.
One key part of the CAN SLIM formula that GM is pursuing is the N, which stands for New Products. GM has said it hopes to phase out the sale of ICE light vehicles by 2035.
At a Nov. 17 investor day GM will discuss the “rapid scaling of our EV portfolio,” CEO Mary Barra said in a recent letter to shareholders.
For General Motors an EV ramp is key as it attempts to compete with Tesla (TSLA).
GM aims to deliver 400,000 EVs in North America through 2024. But its pricey new Hummer and Lyriq EV models sold less than 500 units combined last quarter, with an older but refreshed Chevrolet Bolt model comprising the bulk of its EV sales.
Next year, the automaker plans to increase Bolt EV production by nearly 60%. In 2023, GM also plans to launch the first all-electric versions of the Silverado truck, Blazer SUV and Equinox SUV crossover, all from its Chevrolet brand, which is known for value.
Along with earnings, auto industry forecasts are under close scrutiny. Investors and industry watchers are bracing for any signs of weaker demand as interest rates rise and recession fears grow. GM CEO Mary Barra said “demand continues to be strong,” echoing similar statements from both GM and Ford management earlier in October.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Pure Storage Stock
PSTG stock is also one of the best stocks to buy or watch now. It is trading just below a consolidation pattern buy point of 31.62 after briefly clearing the level.
The base, which started on Aug. 18, is within a much-larger cup-with-handle base with a 32.07 buy point.
The RS line is at consolidation highs on its weekly chart, a positive sign. It has also reached its highest level in seven months.
Excellent all-around performance is reflected in its IBD Composite Rating of 92 out of 99. Earnings are its biggest strength, with the stock holding a rare perfect EPS Rating.
It is also in the top 11% of stocks in terms of price performance over the past 12 months.
According to IBD Stock Checkup, Pure Storage ranks first out of 10 stocks in IBD’s Computer-Data Storage industry group.
The Mountain View, Calif.-based company makes high-speed storage systems for businesses and cloud-computing services using all-flash chip technology.
Pure Storage says it has 10,500 customers worldwide, including 56% of the Fortune 500 companies.
It is a beneficiary of the billions of dollars that Facebook owner Meta Platforms (META) is spending to build the metaverse.
Two months ago, the company reported better-than-expected results for its fiscal second quarter ended Aug.7.
Its revenue jumped 30% from the year-earlier period to $646.8 million. Subscription services revenue grew 35% to $232.2 million. And it posted adjusted earnings of 32 cents a share, up 128%.
The company guided for third-quarter revenue of $670 million, ahead of analyst estimates by 3% and up 19% from the year-earlier period. For its fiscal year 2023 it expects revenue of $2.75 billion, topping views for $2.6 billion.
“Our portfolio continues to be strong despite a turbulent macro environment,” Chief Financial Officer Kevan Krysler said during the company’s second-quarter earnings conference call. “Our U.S. business continues to deliver strong revenue growth.”
Its products, such as Pure Fusion, enable customers and cloud service providers to implement a cloud operating model for data storage management and offerings.
Texas Roadhouse Stock
Texas Roadhouse is trading in a buy zone after previously clearing a flat-base entry point of 95.52. It comes after it previously broke past an early trendline entry.
TXRH stock continued to show strength last week following earnings, managing to buck the overall stock market trend by moving higher still.
Shares reversed lower on Nov. 11 amid a shift out of restaurants and defensive/defensive growth stocks, but closed in range. TXRH bounced back modestly on Nov. 14.
The relative strength line for TXRH is remarkable, making new highs for months. This is especially impressive as retail and consumer-spending sector leaders are few and far between.
Overall powerful performance is reflected in an IBD Composite Rating of 88. The stock has seen its price pop by about 7% over the past four weeks alone.
Texas Roadhouse’s first shop opened in Indiana, very close to its current headquarters of Louisville. It follows a simple strategy: Provide a fun, family friendly dining experience with great value.
The pitch has one plenty of institutional support, with 63% of its stock currently being held by funds.
The casual dining specialist has over 680 locations in 49 states and 10 foreign countries. It also operates under the Bubba’s 33 and Jaggers names.
The firm currently boasts average EPS growth of 14% over the past three quarters. Texas Roadhouse has also posted average EPS growth of 43% over the last three years.
The purveyor of hearty fare like Texas Size Combos and Fall-Off-The-Bone Ribs reported Q3 earnings after the close on Oct. 27.
A 24% EPS increase in the third quarter of 2022 comes on top of 79% growth in the same quarter a year ago. Quarterly sales have averaged 36% year-over-year growth over the past six quarters through Q3 this year. A recent study by research firm Placer.ai notes that Texas Roadhouse is one of the best-performing U.S. restaurant brands in terms of visits, up 27% in the third quarter vs. the same period in 2019.
Earlier this month Wedbush hiked its price target on Texas Roadhouse stock to 98 from 95 while maintaining an outperform rating. The firm noted “consistent market share gains’ for the dining chain.
After Game-Changing Week For Market Rally, Don’t Do This
Enphase Energy Stock
Enphase Energy stock is trying to reach a cup-with-handle buy point of 316.97, reversing lower from that level on Nov. 11. The top of its buy zone here is 332.82.
It is back above the 10-week line, which highlights a more-than-likely return of institutional buyers.
ENPH stock rose on Nov. 14, following news that it will join the Nasdaq 100 on Nov. 21.
The solar system inverter maker has experienced phenomenal growth over the past three years, as it turned a profit of 10 cents a share in 2018. In 2021, earnings hit $2.41 a share, up 76% from 2020, and Wall Street sees continued growth in the bottom line.
Overall performance is excellent, netting the stock a perfect IBD Composite Rating of 99. It is also in the top 2% of stocks in terms of price performance over the past 12 months.
The Street has boosted its forecast and now sees earnings rising 81% this year to $4.37 a share. Enphase is also trying to bolster sales in its battery storage systems powered by solar power.
The firm posted a Q3 EPS increase of 108% to $1.25, well clear of analyst views. Revenue ran up 81% vs. a year earlier to $634.7 million.
Bullish recent action has won the stock a spot on the prestigious IBD Leaderboard list of top stocks.
The company is a leading provider of solar microinverters and battery systems. Microinverters boost solar energy production, improve reliability in solar energy systems and support intelligent energy management.
The company focuses primarily on residential markets.
Analysts are bullish on the stock. In a recent research note, Oppenheimer analyst Colin Rusch said: “As ENPH continues to grow ahead of expectations while driving costs lower, we believe the company has several areas of opportunity.”
This includes battery systems and a redesign of its microinverters. He added he believes the firm is “augmenting its offerings with enhanced software and charging capabilities and can continue to grow revenue per home, suggesting incremental operating leverage.”
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?
