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? Floor & Decor (FND), Idexx Laboratories (IDXX), Artisan Partners Asset Management (APAM), Azek (AZEK) and Rio Tinto (RIO) are prime candidates.
Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.
The coronavirus pandemic remains a concern, but vaccinations are ramping up. However there has been a swathe of positive economic data of late.
President Joe Biden has signed the $1.9 trillion coronavirus stimulus bill. Fed Chairman Jerome Powell has said that the central bank is committed to an “all-in” approach as it tries to nurse the economy back to health. Biden plans at least two more massive spending bills, though he aims to pay for them with higher taxes on corporations and capital gains.
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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, Nasdaq and the S&P 500 rallied strongly after recent pressure. The Dow Jones, S&P 500 index and Nasdaq 100 are all near record highs.
With the market back in an uptrend, it is now a good time for investors to consider putting their money to work. Be sure to buy fundamentally strong stocks passing valid buy points. The stocks featured below are potential candidates.
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 Floor & Decor stock, Idexx Laboratories stock, Azek stock, Artisan Partners stock and Rio Tinto 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.
Floor & Decor
The flooring retailer is sitting around new highs, while its RS line is also close to reaching new heights amid its bullish action of late.
The RS line for FND stock is looking bullish, and has been spiking higher since early April. So far in 2021 it is up more than 22%. This is well in excess of the S&P 500’s gain of around 11%.
The stock was added to Leaderboard on April 9 due to its strong recent performance. It holds a very strong IBD Composite Rating of 96. Strong earnings are its key attribute, though stock market performance is also good.
Housing-related retail stocks have been market leaders over the last several weeks.
Floor & Decor has benefited from consumers investing in their homes among coronavirus lockdowns. Over the past three quarters earnings have grown by an average of 42%. This beats the 25% growth sought by CAN SLIM connoisseurs over this period of time.
However analysts believe earnings growth will continue. Full year EPS is seen jumping 29% in 2021, and swelling by a further 26% in 2022.
The Atlanta-based retailer operated 133 warehouse-format stores and two design centers across 31 states at the end of Q4. It specializes in hardwood, tile, wood and natural stone flooring. Floor & Decor also offers decorative accessories and installation services.
Back in February it reported Q4 results that topped views. It opened five warehouse stores during the quarter. It expects to open seven stores in the current quarter.
“Driven by strong transactions and broad-based regional and category growth, our fiscal 2020 fourth-quarter comparable store sales increased 21.6%, the strongest quarterly growth rate of the year,” CEO Tom Taylor said on the earnings call. “For the full year, our fiscal 2020 comparable store sales increased 5.5%, a significant achievement considering the impact of the Covid-19 pandemic on our store operations beginning in late March.”
Idexx Laboratories Stock
The animal health stock is building the right side of a cup base. It is looking to pass a buy point of 574.09. However this could end up being lower if it forms a handle.
The relative strength line is bullishly bending upwards, and could soon hit a new all-time high. This is reflected in the stock popping almost 15% in the past four weeks alone.
IDXX stock has a near-perfect Composite Rating of 97. While stock market is solid, earnings are even better. The stock boasts a top-notch EPS Rating of 98 out of 99.
Over the past three quarters earnings have grown by an average of 39%. Longer term EPS growth is also solid.
Its good performance has attracted the attention of big money. Its Accumulation/Distribution Rating of B represents moderate to heavy buying among institutions over the past 13 weeks. Institutional support is a key ingredient for winning stocks.
The relative strength line is moving back toward highs. Idexx Labs is on the IBD Long-Term Leaders list due to its long run of outperformance vs. the S&P 500 index.
The firm manufactures diagnostic products an services for the veterinary markets. Sales of veterinary products increased year to date through March 20, according to a recent note from Credit Suisse analyst Erin Wilson. Prescriptions from vets also rose in February, which she described as “an encouraging indicator of the ongoing strength in veterinary offices.”
Both metrics are bullish for Idexx stock. While the recent Stock Of The Day ranks third in the 66-company Medical-Systems/Equipment industry group in terms of market cap, it is among the biggest animal health companies.
“Pet adoption, prescription and veterinary clinic trends can be indicators of overall pet demand and offer a barometer of performance for our animal health coverage universe,” Wilson said.
Earnings could be a catalyst for the company, with the firm set to announce it latest quarterly results on May 4. Analysts expect Idexx EPS to swell 33% to $1.72 per share as revenue pops 17% to $735 million, according to Zacks Investment Research.
Both measures would actually decelerate vs. the fourth quarter, however firms often beat Wall Street targets.
Recent data from analytics firm VetWatch/Animalytix indicate “veterinary traffic and revenues are continuing their recovery and remain positive relative to 2020 levels.”
Artisan Partners Stock
Artisan Partners stock is near buy zone after previously breaking out of a 13-week consolidation period, MarketSmith analysis shows. The buy point here is 55.35. The April 15 breakout came on heavy volume, which is an encouraging sign. Shares then slipped back below the entry, but rallied back toward it again.
The stock is rallying after slipping back towards its 50-day line amid a broader pullback. Investors will want to see its RS line make progress going forward. The stock has risen by as much as 226% on its 2020 lows.
APAM stock has a near-perfect Composite Rating of 97. It boasts a good balance of earnings and stock market performance.
Earnings and revenue growth have accelerated for the past two quarters.
Artisan Partners earnings for the latest quarter are due Tuesday.
Investment firms such as Artisan Partners have been benefitting from an increase in stock market activity. The firm is also performing well, with 10 Artisan funds making IBD’s best mutual funds lists.
APAM stock had rallied as high as 55.25 on Jan. 14. That came just after Artisan Partners announced its year-end total for assets under management of $157.8 billion, up from $134.3 million at the end of September.
The asset manager says 16 of 17 strategies launched prior to 2020 have exceeded their benchmarks, after fees. In 2020, the firm generated $30 billion in investment returns, including $11.3 billion above benchmark.
That included $7 billion in net cash inflows, a notable change after net cash outflows in recent years. That reflected investors transitioning some cash out of Artisan’s first-generation strategies. Now inflows to new funds have overtaken outflows.
In Q1, assets under management grew to $162.9 billion, up 3.2% in the quarter.
Artisan characterizes itself as a “high value-added investment firm,” saying it stays away from fads and gives its managers a high degree of freedom.
In 2020, Artisan set up an investment group in China focused on post-venture investing. It focuses on disruptive, fast-growing public and private companies at an early stage of growth. The firm launched the Artisan China Post-Venture Strategy on March 1.
Azek is in a buy zone after surging past a 48.89 conventional buy point after forming a consolidating pattern. The fact it hit buy zone in a challenging week is encouraging. Aggressive investors could have started an initial position at 46.55.
The recent IBD Stock Of The Day managed to find support and rally after dipping below its 10-week line. Azek’s drop below its 10-week line was in lower weekly volume while the rebound has been in higher volume, a sign of strength.
The RS line had been making progress after dipping off recent highs. Rallying to a new all-time high would be another encouraging sign.
Azek has a mighty Composite Rating of 98. Its most attractive aspect is earnings, which has netted it a rare perfect EPS Rating of 99. This is especially impressive as Azek is a relatively new issue.
Earnings have been accelerating for the past two quarters, reaching 650% growth in the most recent quarter. It easily surpasses CAN SLIM requirements for average earnings growth of 25% over the past three quarters.
The IPO stock went public in mid-2020 at 23 per share. It has now worth more than double this price.
Its increase has been fueled by strong institutional support. It holds an Accumulation/Distribution Rating of B, which represents moderate institutional buying of late.
Chicago-based Azek offers a sustainable solution for homebuilders and businesses. It supplies non-wood decking, trim and other outdoor supplies from recycled material for the residential and commercial markets.
The housing market has held up strongly during the Covid-19 pandemic and homebuyers are facing a very competitive market as inventory fell to a record low earlier this year.
The pandemic has skewed what homebuyers are looking for as many opt for larger houses with more amenities for enjoying the outdoors outside urban centers.
U.S. homebuilding hit a recent high last month, with housing starts jumping 19.4% to a seasonally adjusted annual rate of 1.739 million units. Economists polled by Reuters saw housing starts rising to 1.613 million units in March.
But as housing starts pick back up, prices for raw materials like lumber have skyrocketed. This should make Azek’s products even more attractive.
Rio Tinto Stock
The British-Australian mining giant is closing in on a cup base buy point of 88.83. The stock impressed after driving higher, even as other stocks in its industry group slipped.
Technically, Rio could be forming a handle, which would become valid after Monday’s close if it can avoid clearing last week’s high of 86.82. That would offer a slightly lower buy point of 86.92. However, there’s no handle forming on a weekly chart, and the shallow nature of the proto-handle likely wouldn’t shake out many weak holders.
It has powered clear of its 50-day line, which is encouraging. Its relative strength line is spiking too, though this comes during a dip during its base-building period.
Rio Tinto currently holds an Accumulation/Distribution Rating of C , which slightly more buying than selling among institutions over the past 13 weeks. Notable holders include Fidelity Growth Company Fund (FDGRX).
The company mines materials like iron ore, copper and aluminum, comes as commodity demand rebounds with the broader economy, even as environmental concerns grow for the industry.
Along with the recovery from the coronavirus pandemic, fiscal stimulus, a possible green infrastructure push and demand from China have helped lift prices for materials like copper, nickel and iron ore. Analysts have questioned how long that uptrend can last.
Still, more demand for electric vehicles, which use a lot of copper, and lithium-ion batteries could spur more demand for those raw materials. Bridges and other infrastructure need steel, which requires iron ore.
Friction between Australia and China, Rio’s largest customer, could pose challenges going forward. Rio Rinto is facing pressures to become more environmentally conscious.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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