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? Microsoft (MSFT), Ares Management (ARES), Dexcom (DXCM), Square parent Block (SQ) and Shockwave Medical (SWAV) are prime candidates.
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Inflation and the Federal Reserve tightening rates aggressively worried investors last year. But the market confounded expectations for difficulties and turned in an outstanding performance in 2023. More moderate gains are expected for 2024, though there is growing confidence the Fed will reach its goal of a soft landing.
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.
CAN SLIM 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.
The stock market turned in stunning gains in 2023 and will now look to build on those gains. Indexes are looking strong, with the Nasdaq and the S&P 500 remain above the key 50-day moving average. The S&P 500 and the Nasdaq recently hit fresh record highs, though gains have faded slightly.
The stock market is back in a confirmed uptrend, though there have been a number of distribution days lately. Now is a good time for investors to make stock purchases. It’s also a good time to add to existing holdings at follow-on opportunities. IBD is currently recommending 60% to 80% market exposure.
Investors should take care to invest in high-quality stocks. The selections below are among the best stocks to buy or watch now. The IBD 50 is also a rich hunting ground.
Despite the market going back into a confirmed uptrend it remains crucial to stay on top of sell signals. 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 average.
Remember, there is still significant headline risk. Inflation could still be an issue while the Russia-Ukraine conflict is a wild card that has proved its ability to shake the market while the current issues in Israel adds even more uncertainty.
Things can quickly change when it comes to the stock market. Make sure to keep a close eye on the market trend page here.
Best Stocks To Buy Or Watch
- Microsoft
- Ares Management
- Dexcom
- Block
- Shockwave Medical
Now let’s look at Microsoft stock, Ares Management stock, Dexcom stock, Block stock and Shockwave stock in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
Microsoft Stock
Microsoft was actionable as it rebounded off the 10-week moving average, MarketSurge analysis shows. It has also formed a short consolidation that was just too short to qualify as a flat base. The ideal buy point here is 420.82.
MSFT stock cleared the buy point on March 14, but fell the following session amid a sharp retreat in the software sector.
The relative strength line has been moving sideways since late November. Microsoft stock is in the top 14% of issues in terms of price performance over the last 12 months.
Overall impressive performance is reflected in its strong IBD Composite Rating of 94 out of 99.
The firm has seen EPS grow by an average of 25% over the past three quarters, which meets CAN SLIM requirements. In addition, earnings grow by an average of 14% over the past three years, impressive growth for such a large firm.
Big Money have been net buyers of MSFT stock of late, with its Accumulation/Distribution Rating coming in at B-.
In late January the Redmond, Wash.-based firm reported earnings per share had popped 33% to $2.93 as revenue climbed 18% to $61.1 billion for the most recent quarter. Microsoft Cloud revenue rose 24% year over year to $33.7 billion in the September quarter.
CEO Satya Nadella boasted about the firm’s artificial intelligence initiatives following the results.
“We’ve moved from talking about AI to applying AI at scale,” Nadella said in a statement. “By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”
Microsoft recently unveiled its own AI chip, the Azure Maia AI Accelerator, to ease its dependence on Nvidia GPUs. It is designed to run generative AI and other AI workloads, including large language model training and inference. The firm plans to roll out Maia to its data centers early next year.
It remains to be seen whether moves to adopt a vertical integration approach by firms such as Microsoft and Apple (AAPL) could be a longer-term threat to chip makers such as Nvidia and Advanced Micro Devices (AMD) remains to be seen.
Microsoft has been making good progress since it showed off its new Bing search engine and Edge web browser that use AI technology. Microsoft hopes the OpenAI-based technology can help Bing chip away at Google’s dominance in the internet search market. Microsoft stock was given a flurry of price-target hikes from analysts after the presentation. ‘
The firm kept up the momentum by adding artificial intelligence tools to its popular Office productivity applications.
It comes after the Microsoft announced a investment, reportedly worth $10 billion, in artificial intelligence startup OpenAI.
The software giant is providing its Azure cloud computing infrastructure for OpenAI. It also is adding OpenAI models to its consumer and enterprise software products.
Microsoft may have strengthened its OpenAI position after the AI startup ousted and then brought back CEO Sam Altman in a five-day span. Microsoft has said that Copilot for Security, a generative AI cybersecurity tool, will launch April 1.
Excellent sustained performance has won Microsoft stock a spot in the IBD Long-Term Leaders Portfolio.
Ares Management Stock
ARES stock has formed a flat base with an ideal buy point of 139.40. It is currently testing support at its 21-day exponential moving average as it constructs the pattern.
Ares will offer an early buying opportunity if it breaks the trend line sloping down from its Feb. 8 high.
A move past the March 6 high of 137.47, ideally on above-average volume, would also flash a buy signal.
Overall performance is very strong, with its IBD Composite Rating coming in at 95. Earnings performance is particularly strong, with the stock holding an EPS Rating of 97 out of 99.
Nevertheless, it has been doing very well on the stock market over the past 12 months. It is in the top 9% of issues over that period.
Ares is a diversified alternative asset manager, engaged in direct lending, private equity, and investment in infrastructure and real estate. The firm is looking to put $111 billion in ‘dry powder’ to work as it looks to continue fast earnings growth.
Ares was cofounded in 1997 by Tony Ressler, also the co-founder of Apollo Global Management.
The firm’s assets under management grew 19% to $418.8 billion in Q4, helping to drive a 39% increase in EPS per Class A share to 86 cents.
On the Q4 earnings call, CEO Michael Arougheti said that Ares had its second-largest fundraising year despite a difficult year for fundraising across its industry. “We entered 2024 in the enviable position of having more than $110 billion in dry power to invest in what we believe is an attractive vintage, providing the opportunity to drive strong earnings growth in the years ahead.”
The firm is underweight office buildings, which comprise just 4% of its real estate portfolio. But the company recently formed a joint venture to invest in “high-quality distressed office buildings in New York,” looking for favorable deals amid scarce capital for that particular asset.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Dexcom Stock
DXCM stock has fallen back just below a flat base entry of 126.44 initially cleared on March 6, according to MarketSurge analysis.
This is a first stage pattern, which means it is more likely to net big gains for investors. Dexcom stock sits clear of both its short-term moving averages and its 50-day line.
Dexcom is in the top 21% of stocks in terms of price performance over the last 12 months. In fact, it has rallied around 80% from its 12-month lows while its relative strength line is also gaining..
Overall top-notch performance is reflected in its solid IBD Composite Rating of 94. Earnings grew by 47% in the most recent quarter. Even more impressively, they grew by an average of 75% over the past three quarters.
Dexcom makes continuous glucose monitoring systems for ambulatory use by patients with diabetes. That’s a landmark change in diabetes care.
The company ended many years of losses with earnings of 9 cents a share in 2018, then saw a 397% surge in EPS to 46 cents in 2019. It has been consistently profitable ever since
Dexcom is continuing to innovate. Indeed, the latest twist came with the news its newest body-worn glucose monitor has been cleared for people who don’t require insulin treatment by the Food and Drug Administration.
This means the company can cash in on the expanding obesity treatment market.
It remains to be seen how much of a tailwind this will be, for Dexcom is targeting its new continuous glucose monitor, Stelo, at the 25 million people in the U.S. with non-insulin intensive type 2 diabetes.
William Blair analyst Margaret Kaczor Andrew believes it could be a big driver of profits given people can also request the device over the counter rather than requiring a prescription.
“The broad approval — as well as the (over-the-counter) indication, which eliminates the need for a prescription — increases the (total addressable market) by many multiples,” she said.
Experts say doctors are prescribing continuous glucose monitors for patients taking weight-loss drugs.
“As awareness of metabolic health and disorders brings people into the system, it should raise demand for technologies like CGM even higher,” Andrew said. “All of this should make the CGM market — and its largest pure-play beneficiary in Dexcom — one of, if not the, fastest-growing medical technology market (already above $5 billion) over the next five years.”
Block Stock
Square parent Block’s stock has showed some up-and-down action since its Feb. 23 earnings gap-up, which briefly cleared an 80.29 cup-base buy point. SQ stock then forged a high handle with an 83.29 entry. After clearing that on March 13, shares have fallen back below the original 80.29 trigger.
Shares have moved clear of the 50-day and 200-day moving averages. They are also above the shorter-term 10-day and 21-day lines.
Payments processing may not sound like the most exciting business in the world. But recent success has spurred Square-parent Block’s surge of around 23% in the last four weeks — enough to get the soberest of investors giddy with delight.
Square has built a two-sided digital payments ecosystem, with products designed for both merchant sellers and consumer buyers. The Square Cash App has 56 million active monthly users. Cash App helps individuals manage money, buy stocks and cryptocurrency, and more.
The company aims to bridge the Cash App and merchant ecosystems with consumer financing services from Afterpay. Block acquired Afterpay in early 2022. Afterpay offers consumers “buy now, pay later” installment payment services.
Overall performance is strong, with SQ holding an IBD Composite Rating of 98. Earnings performance is the strongest suit, with its EPS Rating a near-perfect 97.
There are certainly some promising signs for the future. The stock soared around 16% after EPS popped 105% to 45 cents while revenue climbed 24% to $5.8 billion in Q4.
While its report was mixed, the stock surged on guidance. Block forecast gross profit of at least $8.65 billion vs. consensus for $8.55 billion.
Wall Street expects earnings to rocket 79% in 2024, before growing an additional 33% in 2025.
Six AI Stocks Near Buy Points As Fed Meeting Looms
Shockwave Stock
SWAV stock is in a buy zone after clearing a 270.96 handle buy point within a long and deep consolidation from June’s 52-week high.
Recent action also fit the bill for a three-weeks-tight pattern, with back-to-back weekly gains or losses of no more than 1.5%, before skidding back to the 21-day line.
Shockwave stock has consolidated after soaring on earnings, decisively clearing the 200-day line.
Shockwave remains well below the 52-week high it notched last June.
Shockwave Medical recently surged after it served up a big earnings beat. The firm posted Q4 EPS of $1.16, up 3% on a year ago and trouncing estimates by 27 cents.
Revenue grew 41% to $203 million, and Shockwave’s outlook calls for 25% to 27% growth in 2024.
Overall performance is not ideal, with its IBD Composite Rating coming in at 80 out of 99. Earnings are the major Achille’s heel, with its EPS Rating a meager 27 out of 99.
Big Money has been snapping up the stock of late though, with its Accumulation/Distribution Rating coming in at B+. In total, 67% of its stock is held by funds according to MarketSurge data.
Shockwave pioneered intravascular lithotripsy, or IVL, which treats people who have problematic calcium buildups in their arteries.
The stock is recovering after it sold off hard in the second half of last year. This was partially due to worries that a decision by Aetna to restrict reimbursements might be repeated by other insurers. But these seem to have been overblown.
“We have a couple of meaningful reimbursement tailwinds that will support continued adoption,” CEO Doug Godshall boasted during the company’s earnings call.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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