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? Vertex Pharmaceuticals (VRTX), AutoNation (AN), Commercial Metals (CMC), Heico (HEI) and BJ’s Wholesale (BJ) 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 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 market has moved back into a confirmed uptrend after stocks were boosted by the latest Fed meeting and earnings season. The S&P 500, the Nasdaq and the Dow Jones Industrial Average are off their 52-week lows and are pulling away from their 50-day moving averages.
Now is a time to be buying fundamentally strong stocks coming out of sound chart patterns. 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. Stick to sound buy and sell rules as, even in an uptrend, not every trade will work out. This is especially the case given the volatile nature of the current market.
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
- Vertex Pharmaceuticals
- AutoNation
- Commercial Metals
- Heico
- BJ’s Wholesale
Now let’s look at Vertex Pharmaceuticals stock, AutoNation stock, Commercial Metals stock, Heico stock and BJ’s Wholesale stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Vertex Pharmaceuticals Stock
Vertex stock is actionable after rebounding from the 50-day line and crossing a short-term trendline near 286 after reporting earnings. It has also blasted back above an alternative entry of 279.23.
The relative strength line has been spiking higher even as VRTX stock and the broader market struggled. The stock has retaken its 50-day moving average, an encouraging sign.
VRTX stock has soared more than 32% higher so far in 2022. This is especially impressive considering the broader market action.
Vertex is also highly profitable. As a result, VRTX stock has an EPS Rating of 99 out of a best-possible 99.
Earnings have grown by an average of 690% over the past three quarters. This easily beats CAN SLIM requirements.
Vertex was boosted after Q2 earnings came in at $3.60 a share vs. 17 cents a year earlier. That beat expectations for $3.47.
The company also boosted its full-year sales outlook by $200 million. It now expects $8.6 billion to $8.8 billion in sales of its cystic fibrosis, or CF, medicines. That was largely in line with predictions and follows a second-quarter beat, RBC Capital Markets analyst Brian Abrahams said in a report to clients.
“As expected, given recent favorable trends on ex-U.S. reimbursement and expansion into younger CF patients, Vertex raised their CF sales guidance,” he said. “We believe a $200 million raise is about the order of magnitude the Street was looking for.”
The company is testing a replacement for pancreatic cells known as islets. Islet cells help produce insulin, but don’t function properly in patients with type 1 diabetes. This leads to dangerous spikes in blood sugar. It’s important to note, the program is currently on pause in the U.S. while the Food and Drug Administration reviews dosing information.
Roughly nine months after receiving Vertex‘s treatment, one patient no longer needed insulin shots or a pump. At five months, another patient had a 30% reduction in external insulin needed. Both received a half-sized dose while Vertex assesses the drug’s safety, Chief Financial Officer Charles Wagner said in an interview. The company has also dosed a third patient.
Both patients also showed increases in the amount of time their blood sugar was in the desired range. Dr. Camillo Ricordi called the results “remarkable and encouraging.” Ricordi is the director of the Diabetes Research Institute and Cell Transplant Center at the University of Miami Miller School of Medicine and is the steering committee chair for the Vertex study.
“As a treating physician, I have seen the profound burden of this disease on patients, especially those who experience severe (low blood sugar),” he said in a written statement. “The ability to restore a patient’s islet function and improve glycemic control, and subsequently reduce (external) insulin dependence, has significant potential to improve patients’ lives.”
AutoNation Stock
AN stock is currently in a consolidation pattern going back nine months with an official buy point of 133.58, according to MarketSmith analysis. But investors should probably focus on early entries around 125-126.
While it has made big moves on its daily chart, its weekly chart shows more orderly behavior. It is one to watch for now.
The relative strength line has been moving sideways in recent sessions. An upwards spike could see the stock pass its entries.
Overall solid performance is reflected in an IBD Composite Rating of 91. Earnings are its strongest suit, with EPS popping by an average of 93% over the past three quarters.
AutoNation, which sits on the IBD 50, has more than 300 locations across the country. It sells new and used vehicles along with an auto parts and services business segment.
AutoNation along with Group 1 Automotive (GPI) and Penske (PAG), have capitalized on car shortages, delivering strong profits through the first part of 2022.
Auto retail stocks have also been delivering aggressive growth on the back of favorable industry dynamics, with demand for vehicles still far ahead of supply as pandemic disruptions drag on.
Despite strong earnings growth, auto retail stocks lagged the general market in much of early 2021 and early 2022. The industry started to improve in April, holding relatively flat while the S&P 500 fell almost 20% from April 1 to mid-June.
AutoNation earnings rose 34% vs. a year earlier, ending a five-quarter streak of triple-digit growth but topping views. Sales dipped 2% to $6.87 billion, slightly missing.
AN announced has just announced plans to expand its used car business. While AN reported that new vehicle revenue declined 14% in the second quarter, used vehicle revenue increased 13%.
A weaker economy and a likely pickup in new-car production could be headwinds for used-car pricing.
The company is now set to open its twelfth AutoNation USA store, which is focused primarily on buying and selling used vehicles. The company has a target of more than 130 AutoNation USA stores in operation by the end of 2026.
Commercial Metals Stock
Commercial Metals is sitting in a buy zone after forming a double-bottom base. The ideal entry here is 42.99.
The relative strength line is gaining momentum and has just hit fresh highs. In a bullish move, it has retaken its 50-day moving average and 200-day line.
CMC stock may pause for a period to digest recent gains before moving higher. The steel and metals firm formed a handle on a daily chart after Monday, which offers a lower 41.35 buy point.
Earnings performance is stellar at the company. It is also in the top 9% of stocks in terms of price performance over the past 12 months.
EPS grown by an average of 150% over the past three quarters. Earnings also accelerated in the most recent quarter.
Commercial Metals manufactures, recycles and markets steel and metal products in North America and Europe.
It’s North American business made up roughly 84% of its total revenue in the most recent quarter. Europe accounted for 16% of sales. Its North American segment is a network of recycling facilities, steel mills and fabrication operations.
The company continues to invest in equipment and mills to insure further growth for many quarters to come. The Irving, Texas-based firm is on track to finish its third micro steel mill, which will serve regions in the eastern U.S. primarily.
Commercial Metals also recently acquired Tensar, a global provider of engineered civil construction products. This will be an immediate boost to the firm’s earnings and will help expand its products and services. It could also create future growth opportunities.
Heico Stock
Heico cleared a trendline early entry near 145.73 and then a double bottom entry of 151.36 in short order.
Last week’s move above its base buy point was in strong volume, which is a positive indicator. Its powerful move won it a spot on the prestigious IBD Leaderboard of top stocks.
Since June, more volume is being seen on advancing sessions vs. declining ones. This action hints at growing institutional accumulation.
Still, after running up 20% in July, investors might want to see Heico stock pull back or consolidate for a time before starting a position now.
Heico is up more than 12% so far in 2022. In comparison, the S&P 500 is down over 11%.
Earnings are also strong. It currently holds an EPS Rating of 89 out of 99. EPS has grown by an average of 27% over the past three quarters.
It leads the aerospace group, which ranks No. 34 out of 197 industries. HEI’s RS line is making new highs on the weekly chart.
Heico is a major aftermarket supplier of parts for manufacturers of airline jets, warplanes plus targeting systems, industrial turbines and missiles.
As such, it has a big stake in commercial plane orders and defense spending.
Analysis from Morningstar notes that Heico “will continue to benefit from the cyclical recovery in commercial aerospace. Airlines have chosen to take aircraft out of storage, rather than retire older aircraft and bring back capacity on newer planes.”
The company is in a unique position compared to most aerospace and defense suppliers. Most of these face significant research and development costs, which they recoup by holding a monopoly over the product and its aftermarket.
Heico reverse-engineers complex spare parts, gains regulatory approval to sell them and sells parts at a discount compared to original equipment manufacturers.
What To Do As Market Rally Show Resilience
BJ’s Wholesale Stock
BJ’s Wholesale stock is riding its 21-day line higher as it trades near a new entry. It has formed a double-bottom base with a 71.10 buy point and briefly climbed above this level.
While its RS line took a hit last week it is still holding near highs on its weekly chart.
Exceptional all-around performance is reflected in its Composite Rating of 95.
Earnings are its biggest strength. Nevertheless, it is in the top 9% of stocks in terms of price performance over the past 12 months
It is also a major favorite for Big Money. In total, 68% of its stock is currently held by funds. It is currently held by five members of the IBD Mutual Fund Index.
BJ’s started the year off strong and hit 6.5 million members. The membership-only warehouse retailer reported 20% earnings growth to 87 cents per share for the first quarter. Revenue jumped 16.3% to $4.39 billion.
The company has worked on expanding its e-commerce offerings to compete in the push to online sales. Those investments are starting to pay off. BJ’s digital sales jumped 26% in the first quarter.
BJ’s also sells food and gasoline, which aren’t expected to see declines even as consumers cut back on spending in other areas.
“Our business model remains more relevant than ever in the current inflationary environment,” said CEO Bob Eddy. “We also continued to build on the transformational gains we have driven over the last two years.”
BJ’s has beaten quarterly earnings expectations since Q2 2018 and has averaged a surprise of 20.8% over the past two years. The company has posted sales growth for five straight quarters, which Wall Street expects to continue when BJ’s reports results in August. For the upcoming quarter, analysts predict earnings of 77 cents per share on $4.58 billion in revenue.
BJ stock currently sits at the summit of the Retail-Discount & Variety Industry Group.
It has shown strength despite group rival Walmart cutting its full-year guidance by 11% to 13% last week, a move which hit retail sector stocks.
The big-box chain says customers are feeling the effects of inflation and shifting their spending to cover higher food costs. Walmart expects lower general merchandise sales for the year and is cutting prices to clear up shelf space.
