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, Facebook (FB), Snap (SNAP) and Microsoft (MSFT) are standout performers. Unlike GameStop (GME) and AMC Entertainment (AMC), which have 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 suffered a few pullbacks amid inflation fears and concerns about the rise of the delta variant of the coronavirus weighing on the market. The market is currently faltering after a bullish run. However it remain strong overall amid healthy earnings season gains.
The Dow Jones and the S&P 500 fell for five straight sessions last week. The Nasdaq also suffered a three day losing streak. While the Nasdaq and the S&P 500 remain clear of the key 50-day moving average, the Dow Jones has slipped below it.
The market remains in a confirmed uptrend. However it is especially important that investors stay disciplined and stick to sound buy and sell rules amid weak recent action. Err on the side of caution.
Nevertheless, it still is a good time to be buy fundamentally strong stocks that have built sound chart patterns. It is also an ideal time to be adding top stocks to one’s watchlist. 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 Robinhood Stocks To Buy Or Watch
Now let’s look at Facebook stock, PayPal stock and Square 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.
Facebook stock is in a buy zone after previously breaking out of a flat base. The ideal buy point here is 377.65. It has managed to hold above its short-term moving averages, and squeezed out a gain last week despite a broader decline.
FB stock had previously been actionable from a 10-week line rebound, and from clearing short-term resistance.
The relative strength line is trading around highs. This key gauge compares a stocks performance to that of the broader S&P 500.
Strong market action and earnings performance have earned Facebook stock a best-possible IBD Composite Rating of 99. The stock is up more around 40% so far this year, which beats the S&P 500’s gain of more than 19%.
Profit growth has accelerated in each of the past three quarters. In addition, a Relative Strength Rating of 85 means Facebook resides within the top 15% of stocks in terms of stock market performance over the past 12 months.
Its EPS Rating of 96 is very strong, with earnings growing by an average of 82% over the past three quarters. This is well in excess of the 25% growth sought by the CAN SLIM cognoscenti over this time period.
Earnings are seen continuing to grow. Analysts expect full year EPS to pop 44% in 2021, before moderating to 14% growth in 2022.
Big money is backing the stock, which is a key consideration for CAN SLIM investors. Almost 50% of its shares are held by funds, while it boasts an Accumulation/Distribution Rating of B.
Notable holders include the Fidelity Contrafund (FCNTX) and the MFS Growth Fund Class A (MFEGX). These are rated among the best funds by IBD research.
The firm has long been a leader in the field of social media, and earlier this year its market cap surged past the $1 trillion mark. Its platforms include the likes of Facebook, Instagram, Messenger and WhatsApp.
Ad revenue drives the business and Facebook advertisers are using the service to connect with prospective customers like never before, growing to more than 10 million businesses from more than 8 million when the pandemic started.
UBS analyst John Hodulik is rating Facebook stock as a buy with a 416 target. He said the firm’s long record of execution has earned the stock a “long leash.”
“Net-net, we continue to see FB’s ability to drive strong top line growth supported by their broader social commerce initiative and their opportunity to monetize under-monetized surfaces (Instagram Reels, Explore & Marketplace),” he said in a July 28 research note.
Facebook is a member of the exclusive IBD Sector Leaders list. This is IBD’s most stringent and powerful screen.
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 previously rebounded from its 10-week line.
Investors may want to focus more on a new short flat base with an 80.95 buy point. Snap stock could have an early entry from breaking above a short trend trend line, using last week’s high of 76.84 as a specific trigger.
Snap stock fell by less than 1% last week despite broader market pressure. It also managed to hold above its 21-day exponential moving average, a good sign.
The relative strength line is trying to move higher again after taking a breather following a sharp post-earnings spike. Investors will want to see it build momentum here.
Snap has a strong Composite Rating of 93. 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 around 51%. This is better than the
Institutional support is solid for Snap stock. It boasts eight consecutive quarters of increasing fund ownership, and an Accumulation/Distribution Rating of C. 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.
After Market Suffers ‘Epic’ Retreat, What To Do Now
Microsoft stock is extended after passing a new cup base buy point of 263.29, according to MarketSmith analysis.
Shares have pulled back in the past few weeks treading relatively tightly. Technically, it didn’t quite form a three-weeks-tight, because shares fell 1.52% in one week, just beyond the 1%-1.5% weekly limit for a tight pattern. But investors could use 305.94 as a buy point. Investors may prefer to wait to see if MSFT stock tests its rising 10-week line or forms a new base.
The relative strength line for Microsoft stock has been taking a bit of a breather. Nevertheless MSFT stock has gained around 33% since the start of the year.
Microsoft is one of a handful of U.S.-listed stocks with trillion-dollar market caps. It was the second stock to achieve the feat, after old rival Apple (AAPL).
Microsoft stock’s strong price performance has boosted its IBD Composite Rating to a perfect 99. The biggest key to Microsoft‘s high score is its excellent earnings performance, which is reflected in its EPS Rating of 94. Microsoft earnings growth has accelerated for the past four quarters.
Microsoft managed to serve up a beat-and-raise report for its fiscal fourth quarter ended June 30. The firm earned $2.17 a share on sales of $46.2 billion in the June quarter. Analysts had predicted Microsoft earnings of $1.92 a share on sales of $44.2 billion. On a year-over-year basis, Microsoft earnings rose 49% while sales increased 21%.
This was the company’s fourth-straight quarter of accelerating sales and earnings growth.
For the September quarter, Microsoft expects to generate sales of $43.75 billion, up 18% from the same period last year. That’s based on the midpoint of its guidance. Wall Street had predicted $42.5 billion in sales for Microsoft’s fiscal first quarter.
Its Accumulation/Distribution Rating is sitting at C, which represents a balance of selling and buying among funds over the past 13 weeks.
Nevertheless, institutional investors are big backers of Microsoft stock. In total, 40% of its stock being held by funds. It boasts eight consecutive quarters of increasing fund ownership.
Microsoft has introduced Windows 11, the biggest upgrade to its PC operating system in six years. Windows 11, due for a release in time for the holiday shopping season, features a refreshed design with a new user interface and Start menu. It also provides PC performance improvements and integrates the Teams videoconferencing app. Windows 11 is the successor to Windows 10, which came out in July 2015.
Meanwhile, the firm’s successful pivot into cloud computing has been driving growth. It also benefited from the work-from-home and learn-at-home trends during the Covid-19 pandemic. Microsoft‘s cloud software and services are aiding at-home workers and students.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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