Buying a stock is deceptively easy, but purchasing the right stock at the right time without a proven strategy is incredibly hard. So what are the best Robinhood stocks to buy now or put on a watchlist?
At the moment, General Motors (GM), Square (SQ) and Roblox (RBLX) are standout performers. Unlike GameStop (GME), which has been hitting the headlines of late, these stocks offer a mix of solid fundamental and technical performance.
Best Robinhood Stocks To Buy: The Crucial Ingredients
There are thousands of stocks trading on the NYSE and Nasdaq. But to generate big gains you have to find the very best. The best Robinhood stocks for investors will be those that offer a mix of earnings and stock market performance.
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.
The Market Is Key When Buying Robinhood 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.
The stock market has bounced back, and indexes have just turned in another strong week of performance. The Dow Jones, S&P 500 index and Nasdaq 100 all hitting record highs. This means the market is now in the midst of a Power Trend. Due to the rich gains, this is a time to play aggressive offense. However
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.
Best Robinhood Stocks To Buy Or Watch
Now let’s look at GM stock, Square stock and Roblox stock in more detail. An important consideration is that these stocks are solid from a fundamental perspective, while institutional ownership is also strong. They are also part of the Robinhood Top 100 Stocks, the platform’s most popular stocks among traders.
The stock has been finding support at its 50-day line amid a broader pullback. Investors will be looking for the stock to show strength from here though. If a stock breaks below the 50-day line in heavy volume and cannot rally back, it is often a signal that buying demand is drying up and the stock’s run is ending.
The stock has previously met resistance at the 60 level, so rising above this would be an important step.
The relative strength line has been showing signs of weakness of late. This gauges a stock’s performance compared to the broader S&P 500. However it has been on a longer-term upward trend since late July.
GM stock has a strong, but not ideal, IBD Composite Rating of 85 out of 99. Stock market performance has been outstripping earnings, but both are improving. The stock has risen by around 38% since the start of 2021.
General Motors has been seeing its profit levels ramp up. Earnings have accelerated for the past two quarters, and have exploded by 3760% in the most recent quarter.
GM is a cyclical play, and industrial companies have been market leaders as enthusiasm rises for the economy reopening following the Covid-19 lockdowns.
One key part of the CAN SLIM formula that GM is pursuing is the N, which stands for New Products. GM has also said it plans to phase out the sale of ICE light vehicles by 2035.
The U.S. carmaker plans to invest $7 billion in electric and autonomous vehicles this year and $27 billion by 2025. It looks to launch 30 new EVs. It has announced plans to launch a new all-electric Chevy Bolt. The redesigned hatchback will start at under $34,000 and could be available by summer. A new crossover at the same price point is also in the works.
The vehicles are the first in a lineup of affordable EVs. GM also plans to unveil its Hummer EV by fall at a cost of $100,000. And by late 2021, GM expects to deliver its first EV600 commercial van to FedEx.
GM stock soared in October and November, when it announced its Hummer EV launch and stepped-up production. But shares then pulled back when it said it dramatically scaled-back its deal with EV startup Nikola.
Then GM stock regained momentum amid news on Jan. 19 that Microsoft (MSFT) had joined a new investment round in GM’s Cruise autonomous vehicle unit.
An issue for GM at the moment is one that is gripping the wider auto industry. A chip shortage has been cited a factor that will slow production.
Aggressive investors could use the using the March 15 intermediate high for a 252.60 early buy point. Square stock has been finding support at the 50-day line.
The official buy point on a daily chart right now is 283.29, according to MarketSmith chart analysis. However, SQ stock pulled back last week and has formed a handle with a lower 278.23 buy point. The handle decline is bigger than normal however.
Last week’s pullback followed 10 straight up days. Notably, several of those gains came on higher volume, a bullish sign that’s been missing from some growth stock rebounds.
The RS line for Square stock has stabilized, but is off its highs. But that follows a strong uptrend from from early April 2020 until mid-February.
Square stock has a near-perfect Composite Rating of 97. Both earnings and stock market performance are extremely strong. Since the start of the year, SQ stock is up more than 13%. This beats the S&P 500’s gain of around 11%
The payments stock is a big favorite among institutional investors, with 47% of stock currently being held by funds. A further 2% is held by banks.
Square is looking to build on a pandemic-fueled move to cashless payments.
The San Francisco-based company provides a point-of-sale system that allows small businesses to use mobile devices to conduct credit, debit card and smartphone based transactions. Cashless payments have grown increasingly popular during the coronavirus pandemic.
And the share of cashless business has more than doubled since pre-pandemic 2020 in the U.S., Australia, Canada, and the U.K. and nearly doubled in Japan, according to Square.
“In February 2020 in the U.S. alone, just 6.3% of Square sellers were cashless businesses, which jumped to 14% by February 2021,” the company noted in a recent report.
But that doesn’t mean people will stop using cash. According to the study conducted by Wakefield Research, 73% of American consumers and 68% of small business owners say the U.S. will never become a completely cashless society.
Still, the pandemic has highlighted the appeal of touch-free payments. Square also deals with another type of digital currency: Bitcoin. In 2018, it launched Cash App, which enables users to buy and sell Bitcoin. In October, Square said it bought around $50 million in Bitcoin. It followed up in February with a $170 million Bitcoin purchase.
“We believe that Bitcoin has the potential to be a more ubiquitous currency in the future,” CFO Amrita Ahuja said in a news release. “As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
Bitcoin has been a tailwind for Square stock, but if the cryptocurrency retreats it can be a headwind. Square’s retreat began on April 14, as the Bitcoin price reversed from a record high.
IPO stock Roblox is shy of its buy zone after breaking out from an IPO base. The ideal buy point is 79.20. It has also slipped back below an aggressive buy point of 72.96, but is is trying to move back above it.
Many new issues tend to be quite volatile on their first few days or weeks of trading. Its recent action underlines that fact. But IPO stocks can also provide the brave with the biggest gains.
Investors should be looking for IPO stocks are priced high, and which boast large price increases on their IPO day. These are signs the stock has strong underlying quality. The Roblox direct listing’s reference price was 45, and the stock closed at 69.50 on its first day of trading.
The Roblox stock chart is hard to analyze, due to the fact it is a new issue. However the relative strength line just hit a fresh high on a weekly chart, which is encouraging. The devil is in the detail however, as it has slipped back from highs on a daily chart.
Roblox stock has shown exceptionally tight action for a brand-new IPO on a weekly basis. Shares actually formed a three-weeks-tight in their first 3 weeks.
RBLX stock has risen in five of the six weeks since its direct listing, with lone down week coming on extremely low volume.
Roblox provides a global online platform targeted to young gamers. The company’s eponymous “Roblox” game was the biggest mobile game of 2020 in the U.S., in terms of revenue, according to data provided by Sensor Tower. Roblox reported having 32.6 million daily active users at the end of 2020, up 85% from the year-earlier period.
The firm has yet to make a profit, but this is seen changing in 2021. It is expected to post annual earnings per share of 44 cents, compared to a loss of 46 cent per share in 2020. Analysts see this improving by 27% to 56 cents per share in 2022.
A clutch of Wall Street firms are covering of Roblox stock with buy ratings, including BofA Securities, Goldman Sachs, Morgan Stanley and Truist Securities.
Goldman Sachs analyst Michael Ng set a 12-month price target of 81 on Roblox stock.
“The creation and monetization of user-generated content effectively allows Roblox to outsource game development costs to its creators while retaining the economic upside with a diversified portfolio of content, reducing hit-risk,” Ng said in a note to clients.
Roblox content creators include individuals and video game studios. Other businesses create Roblox content for marketing purposes such as film and TV studios like Netflix (NFLX), Disney and Warner Bros.
Roblox’s core demographic is gamers under 13 years old, Truist Securities analyst Matthew Thornton said in his report to clients. That age group is a less competitive market than other gaming markets, he said.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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