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? Airbnb (ABNB), Snap (SNAP), DocuSign (DOCU), Square (SQ) and Mercado Libre (MELI) 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.
Covid remains a concern, but cases have tumbled as vaccinations reach more and more Americans. Nevertheless, the rising number of cases of the new Delta variant is an emerging worry.
The major indexes have shown strength by bouncing back strongly from recent challenges. Stocks were given an additional boost by Federal Reserve Chairman Jerome Powell’s Jackson Hole speech. He reaffirmed the central bank’s plan to scale back its stimulus policies. He also said he is expecting inflation to recede.
Nevertheless, Friday’s weak jobs report could result in a delay in the plan to cut back on bond purchases, according to analysts. President Joe Biden blamed the rise of the Delta variant and the unvaccinated for the disappointing report.
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.
The stock market has suffered a few pullbacks amid inflation fears and concerns about the rise of the delta variant of the coronavirus weighing on the market. But the market is once again back to bullish ways, bolstered by an encouraging earnings season so far.
The broad S&P 500 and the tech-heavy Nasdaq managed to closed at record weekly levels, with growth stocks in particularly showing strength. The Dow Jones Industrial Average slipped back, but only slightly, and remains clear of the key 50-day moving average.
The market is back in a confirmed uptrend. Nevertheless, it is important that investors stay disciplined and stick to sound buy and sell rules, especially as the market has rallied back toward extended levels.
Now is a good time to be buy fundamentally strong stocks that have built sound chart patterns. The stocks featured below are potential candidates.
But remember, 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
- Mercado Libre
Now let’s look at Airbnb stock, Snap stock, DocuSign stock, Square stock and Mercado Libre 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.
IBD Leaderboard stock Airbnb is back above its 152.86 buy point after falling beneath it in a sharp move last week. The stock’s breakout came with conviction and strong volume, a positive sign. Investors could also wait for the stock to clear its current mini-consolidation before pulling the trigger.
Shares previously broke out of a bottoming cup with handle base on Aug. 24. ABNB stock is actionable as high as 160.50.
One concerning sign was the stock’s relative strength line, which declined after a pop, but it is trying to move higher again. It is important that this key gauge, which reflects a stock’s performance vs. the broader S&P 500, continues to improve.
Overall performance is not ideal as the young company chases growth. At the moment it holds an poor IBD Composite Rating of 26 out of 99.
But while stock market and earnings performance is weak at the moment, Big Money is getting behind the stock. This is important, as the I in CAN SLIM stands for Institutional Sponsorship.
At the moment the stock holds an Accumulation/Distribution Rating of B-. This represents moderate buying among institutions over the past 13 weeks. It boasts two consecutive quarters of increasing fund ownership, with 24% of stock currently being held by funds.
Airbnb’s initial public offering plans were thrown into chaos by the coronavirus pandemic. Not only was the U.S. economy hard, but the tourism industry was particularly affected
Airbnb — along with airlines, hotels and travel booking companies — had a disastrous Q2 in 2020. The firm saw sales plummet 72% from the year-ago period.
Nevertheless, the company launched its IPO in December that raised $3.5 billion. This was way above heightened expectations, making it the largest IPO of the year. Airbnb stock soared by triple digits on its first day of trading.
The recent Stock Of The Day competes with other online travel platforms such as Booking Holdings (BKNG), Expedia (EXPE) and Trip.com (TCOM). It also faces competition from search engines sites such as Google-owner Alphabet (GOOGL), TripAdvisor (TRIP) and Trivago (TRVG).
In 2019, Airbnb began adding trip packages, called Airbnb Adventures. The packages vary widely in price, depending on the length and location of the tour. They include adventures such as a river trip in the Yukon or a bush walk in Kenya.
Why The Market Rally Is So Strong; Tesla Stock Defies Bad News
The stock aggressively gapped above a long consolidation buy point of 73.69, and is currently trading in the buy zone above this entry. Snap stock also has rebounded from its 10-week line, and is still range from that perspective.
Meanwhile, Snap broke a short trend line, but then pulled back. Investors could draw another trend line, or use the Aug. 31 high of 77.88 as an entry. Finally, Snap has a flat base with a 79.28 entry. This won’t show up on MarketSmith pattern recognition, due to the Aug. 10 pop to a record 80.85, but Snap stock reversed lower that day.
Snap finished higher last week, and closed above its 21-day exponential moving average despite giving up some gains.
The relative strength line has been taking a breather after a sharp post-earnings spike. Investors will want to see it build momentum here.
Snap has a strong Composite Rating of 92. At the moment stock market performance is far more impressive than earnings, with the firm yet to turn an annual profit. Since the start of the year, SNAP stock is up about 50%.
Institutional support is solid for Snap stock. It boasts eight consecutive quarters of increasing fund ownership, and an Accumulation/Distribution Rating of B-. In total, 50% of stock is held by funds.
When the firm posted results July 23 it reported adjusted earnings of 10 cents on revenue of $982 million. Analysts expected Snap to report a loss of 1 cent on revenue of $845 million. Revenue jumped 116% from the year-ago period.
Daily active users jumped 23%, or 55 million, to 293 million, above estimates of 290 million.
“Snap delivered very strong second-quarter results and provided an excellent third-quarter outlook,” Monness Crespi Hardt analyst Brian White said in a research note. “The results demonstrate that Snap has dramatically improved its operational execution over the past couple of years, successfully leveraged new innovations, and enhanced its ad tech stack to capitalize on a greatly improved digital ad-spending environment.”
The social media firm claims it is the best way to reach millennials and teenagers. Big consumer brands have increasingly spent more of their digital advertising dollars on Snap’s platform.
The company, recently featured in the New America, continues to develop new products, an important consideration for the CAN SLIM cognoscenti.
In mid-May, Snap introduced its first augmented-reality smart glasses called Spectacles. The company previously released camera-embedded sunglasses under the same name.
“Snap has continued to differentiate with unique content and innovative experiences for users,” Third Bridge Group analyst Scott Kessler told IBD. “Our experts say Snap has done the best job in terms of social media AR/VR features and functionality, even though Facebook bought Oculus, a leader in this area, some seven years ago.”
The new Spectacles aren’t for consumers yet. The company is making them available to software developers to see what sorts of applications they can create with them.
It also recently introduced an augmented reality shopping feature called “TrueSize.” The likes of Nike (NKE), clothing company Farfetch (FTCH) and watchmaker Piaget are fans of the feature.
DocuSign stock is buyable off a 10-week moving average rebound Friday following strong quarterly earnings and guidance. Shares also briefly cleared a flat-base buy point of 310.61 but closing just below that level.
The relative strength line soared following the firm’s earnings report. DOCU stock is also trading above its short-term moving averages, which had converged with its 50-day line.
San Francisco-based DocuSign posted EPS of 47 cents a share on sales of $511.8 million Q2, besting analysts views on both counts. On a year-over-year basis, earnings soared 176% while sales jumped 50%.
For its current quarter ending Oct. 31, DocuSign forecast revenue of $529 million at the midpoint of its outlook. Analysts had projected sales of $522 million. Sales in the year-earlier period were $382.9 million.
DocuSign’s electronic-signatures offering has helped companies during the remote work environment spurred by the Covid-19 pandemic.
The stock currently holds a perfect Composite Rating, with earnings outstripping its excellent stock market performance over the past 12 months.
Big money is also snapping up the recent IBD Stock Of The Day, with its
Several Wall Street analysts noted that DocuSign continues to show strong growth even after the peak Covid period.
“DocuSign posted further evidence that while it benefited during the pandemic, it has a long tail of sustainable growth,” UBS analyst Karl Keirstead said in a note to clients. He kept his buy rating on DOCU stock and raised his price target to 350 from 340.
DocuSign is becoming a “virtual contract management juggernaut,” Wedbush Securities analyst Daniel Ives said in a note to clients. He reiterated his outperform rating on DOCU stock with a price target of 340.
Corporate tech buyers are prioritizing DocuSign’s e-signature platform and solution set, Ives said. Its products service a clear need for remote workers, he said.
“With a ‘new normal’ and still heavy remote workforce on the horizon for the foreseeable future, we believe this backdrop has markedly accelerated DocuSign’s ability to further penetrate existing as well as new customers,” Ives said.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
PayPal rival Square had a so-so week, but still managed to edge higher. It is currently sitting in a buy zone above a handle entry of 267.57. Shares rebounded on Aug. 20 from the 10-week line, offering aggressive entries.
Investors also could draw a trend line from the 289.23 all-time high as an entry, or simply use the Aug. 31 peak of 276.14 as an entry.
Square could soon offer up a new flat base entry, but it will take another week for this pattern to form.
Shares surged 11% in the week ended Aug. 6, hitting a record 289.23 a couple days later. It surged after Square announced a $29 billion deal to pay AfterPay, an Australian-based “buy now, pay later” fintech. Square also reported blowout earnings, though revenue fell short.
The relative strength line has generally been making progress of late after a short pullback from mid-April until late May. Investors will want to see the stock follow through on this promise.
The stock currently holds a very impressive Composite Rating of 98, with earnings performance currently its strongest feature. While it has managed to post a gain of almost 24% so far this year, investors will want to see stronger price performance going forward.
Institutional support has been solid of late, with the stock boasting an Accumulation/Distribution Rating of B. Its Sponsorship Rating of A is also impressive.
The recent IBD 50 Stocks To Watch pick posted a Q1 sales increase of 266% to $5.05 billion. Meanwhile, EPS jumped from a loss of 2 cents a share to a 41-cent profit per share. The firm is getting set to report its latest results on Aug. 5.
Square saw a significant revenue increase from its subscription and services-based products. For this segment, revenue was $558 million in the first quarter, up 88%. The company’s popular Cash App delivered strong growth in the first quarter, generating $4.04 billion of revenue, an increase of 666%.
Square stock experienced major growth in 2020 as investors focused on the growth of its consumer Cash App. But the digital payment processor warned that the app expects slower growth as government stimulus payments to consumers wind down.
For Q1, Square disclosed a new $170 million investment in Bitcoin on top of its $50 million purchase in October. Square reports Bitcoin holdings as unrealized gains on investments, excluded from adjusted earnings.
In a tweet on July 15, Square CEO Dorsey said the company will create a new business line to help developers build financial services products focused on Bitcoin. Square is “building an open developer platform with the sole goal of making it easy to create noncustodial, permissionless, and decentralized financial services,” Dorsey tweeted.
Square is a member of the IBD Sector Leaders, IBD’s most stringent and powerful screen.
Why The Market Rally Is So Strong; 5 Stocks Near Buy Points
Mercado Libre Stock
Mercado Libre stock is in a buy zone after breaking out of a a cup with handle base. The ideal buy point here is 1,899.43. The stock closed up 4.3% last week, and is clear of its short-term moving averages.
The relative strength line took a breather as it formed its handle, but is now moving higher again.
With earnings returning after two quarters of losses, stock market performance has been a strength. This is reflected in its Relative Strength Rating of 88.
The stock’s case is bolstered by its most recent earnings report. Adjusted earnings jumped 23% to $1.37 per share, crushing views for 11 cents. Revenue doubled to $1.7 billion.
Based in Buenos Aires, Argentina, Mercado Libre is the largest provider of e-commerce services in Latin America, and has a big leg up on industry behemoth Amazon.com (AMZN), at least in its own backyard.
As of April, Mercado Libre received nearly 668 million monthly visits within Latin America, according to researcher Statista. Amazon was a distant second for that region, with 169 million.
Mercado Libre provides an e-commerce marketplace for buyers and sellers. Moreover, it hosts platforms where users can create online stores. It also provides financial services technology.
E-commerce sales jumped 96% to $1.14 billion in the second quarter. Revenue from financial technology services grew 89% to $560.4 million. It processed $7 billion in gross merchandise volume, up 46%. Active users climbed 47% to 75.9 million.
The recent IBD Stock Of The Day gets about 93% of revenue from Argentina, Brazil and Mexico. The remaining 7% comes from Colombia, Costa Rica, Chile, Venezuela and Ecuador, among other countries. In total, Mercado Libre operates in 18 countries.
“We believe that our business is showing tremendous momentum despite immense volatility in our key markets due to the frequent closing of physical retail across Latin America,” Chief Financial Officer Pedro Arnt said during a conference call with analysts after the earnings report. “Additionally, three of our top markets — Brazil, Argentina, and Mexico — were listed among the top five growth markets globally.”
Mercado Libre’s financial business, called Mercado Pago, allows customers to make contactless payments, pay utility bills, make peer-to-peer transactions and pay for transportation tickets. Mercado Pago faces competition in digital payments from Brazil-based PagSeguro Digital (PAGS).
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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