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? Dollar Tree (DLTR), AutoNation (AN), Exxon Mobil (XOM), Heico (HEI) and BJ’s Wholesale (BJ) are prime candidates.
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
- Dollar Tree
- Exxon Mobil
- BJ’s Wholesale
Now let’s look at Dollar Tree stock, AutoNation stock, Exxon stock, Heico stock and BJ’s Wholesale stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Dollar Tree Stock
The stock is trading around a 166.45 cup-with-handle buy point. The relative strength line is near highs, an encouraging sign. Shares fell below the buy zone early last week following the Walmart (WMT) earnings warning, but it rebounded from its 50-day line.
The stock has a mighty Composite Rating of 95 out of 99. Stock market performance is currently its strongest suit. It sits in the top 3% of stocks in terms of price performance over the past 12 months.
Big Money has been taking notice of the firm’s performance. Currently, 60% of stock is held by funds. Institutions have been ramping up holdings of late, with its Accumulation-Distribution Rating coming in at B-.
In Q1 the firm broke exciting new ground for a dollar store — it raised the price of dollar items to $1.25. The IBD 50 top growth stock positioned the shift, known as “breaking the buck,” as an opportunity to enhance offerings while navigating higher costs.
“We are focused on exceeding shopper expectations for value at $1.25, just like we have for more than 30 years at the $1.00 price point,” the 2021 Dollar Tree annual report said.
Early signs point to a boost in foot traffic and profitability, despite backlash from some loyal customers. In the first quarter, earnings for Dollar Tree stock jumped 48% as same-store sales at Dollar Tree stores surged 11%, a record gain.
Dollar Tree is launching $3 and $5 merchandise in select stores as well. It’s on an expansion spree, aiming to add 590 new Dollar Tree stores this year, as well as 400 combined stores, rolling its Dollar Tree and Family Dollar brands under one roof.
The firm, which appeals to bargain hunters looking to stretch their budgets to the maximum, is well placed to thrive in a recessionary environment.
“DLTR’s higher income demographic offers some protection and both brands should benefit from (customers) trading down while any reduction in labor market tightness would help the (profit and loss),” Guggenheim analyst John Heinbockel, said in a research note. He maintained a buy rating on Dollar Tree stock and above-consensus price target of 185 a share.
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.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Exxon Mobil stock is also worth considering. It trading just below the 50-day moving average and has topped an aggressive early entry around 93.24, according to MarketSmith analysis.
It is also closing in on a cup base entry of 105.67. In addition, the relative strength line sits near new highs, an encouraging sign.
XOM stock has a near-perfect Composite Rating of 95. Stock market performance is increasingly bullish, with the stock rising 40% since the start of the year. Improving earnings performance gives added credibility to a bullish outlook on Exxon Mobil stock.
Oil prices have surged as the West turns away from Russian supply. And analysts had expected the price of a barrel of oil to skyrocket to $200.
Covid lockdowns in China seem to be easing now, which is supporting higher prices. XOM stock rose Friday, helped by strong earnings and a 3% advance in U.S. crude oil futures to around $100 per barrel.
The Irving, Texas, based multinational is diversified across much of the petroleum industry spectrum. Operations range from exploration and production of crude oil and natural gas to refining and marketing fuels and petrochemicals. Exxon is one of the largest publicly traded companies in the energy sector.
Exxon Mobil earnings soared 276% to $4.14 per share in the second quarter. Sales spiked 70% to $115.7 billion. The oil major said this increase was primarily driven by a tight supply and high demand for oil, natural gas and refined products.
“Earnings and cash flow benefited from increased production, higher realizations, and tight cost control,” CEO Darren Woods said in a statement.
Exxon Mobil reports compressed markets across most of its business segments, including refined products such as gasoline, Woods said during the Q2 earnings call.
“We clearly see the tightness in supply and refining with a closure rate during the pandemic that was three times the rate of the 2008 financial crisis,” Woods said.
Capex totaled $4.6 billion in the quarter and $9.5 billion to date in 2022. The company said capital expenditures are in line with its full-year guidance of $21 billion to $24 billion.
The firm resumed buybacks in January, announcing $10 billion at the time.
On April 26, Exxon said it hiked its recoverable resource estimate for its Stabroek Block in offshore Guyana to 11-billion oil-equivalent barrels, thanks to three new discoveries at the site. The previous estimate was for 10 billion barrels.
But Exxon, like other oil companies, is appealing to ESG investors by earmarking funds to develop new business models to address climate change. Exxon has announced $15 billion in investments in its Low Carbon Solutions business.
Heico cleared a trendline early entry near 145.73 and then a double bottom entry of 151.36 in short order. It remains in a buy zone from the latter entry.
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 10% in the latest week and 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 nearly 10% so far in 2022. In comparison, the S&P 500 is down almost 14%.
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 Bets On Just-Right Outlook
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 97.
Earnings are its biggest strength. Nevertheless, it is in the top 6% 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.