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? ServiceNow (NOW), Tenet Healthcare (THC), Spotify Technology (SPOT), American Express (AXP) and Texas Roadhouse (TXRH) are prime candidates.
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These Magnificent Seven Stocks Have Earnings Due As Techs Sell Off
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 were expected for 2024, but the benchmark S&P 500 turned in very strong gains for the first half of the year amid growing confidence that 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 IBD Methodology 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.
Using such an approach can help give you an edge over the benchmark 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 it 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 Stock Market Direction When Buying Stocks
A key part of investing is to keep track of the 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 had been building on those gains so far this year. The S&P 500 and the Nasdaq are both fighting to retake the key 50-day moving average after the latest Fed meeting raised hopes for a September rate cut.
Nevertheless, the stock market has been coming under some pressure. Now is a time to exercise more caution before making new stock purchases.
Investors should be looking to buy high-quality issues with good growth prospects. The selections below are among the best stocks to buy or watch now. The IBD 50 is also a rich hunting ground.
Nevertheless, 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. The current issues in Israel and Palestine add even more uncertainty.
Things can change quickly 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
- ServiceNow
- Tenet Healthcare
- Spotify
- American Express
- Texas Roadhouse
Now let’s look at ServiceNow stock, Tenet Healthcare, Spotify, American Express and Texas Roadhouse in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
ServiceNow Stock
ServiceNow has blasted clear of a handle entry of 806.52 and is actionable as high as 846.85.
It’s just below an entry point of 815.32 from the top of the consolidation, MarketSurge analysis shows. This is a third-stage pattern, which counts as midstage.
The AI stock’s relative strength line is spiking sharply at the moment but is off 12-month highs.
Overall performance is solid, but not ideal, which is reflected in its IBD Composite Rating of 91 out of 99.
The stock had been having a tough time on the technical front. Over the past 12 months, it is in the top 33% of issues in terms of price performance. So far in 2024, NOW stock has risen 15%. This is better than the S&P 500.
Earnings are a key strength, with NOW stock’s EPS Rating sitting at a perfect 99. EPS has risen by an average 37% over the past three quarters.
Wall Street expects stout ongoing growth. Full-year EPS is seen rising 27% in 2024 before rising a further 20% in 2025.
The stock surged July 25 after ServiceNow beat EPS and revenue views while also doing better than expected in a key growth metric. EPS rose 33% to $3.16 while subscription revenue rose 23% to $2.54 billion. The company also guided slightly higher on full-year subscription revenue.
ServiceNow also announced the resignation of President and Chief Operating Officer Chirantan “CJ” Desai.
Big Money has been a net seller of the stock of late, with its Accumulation/Distribution Rating coming in at D-. Nevertheless, 52% of the stock is currently held by funds, according to MarketSurge data, which reflects stout institutional backing.
ServiceNow bills itself as a digital workflow company. The enterprise software firm recently announced a partnership with Nvidia and Accenture called AI Lighthouse. This aims to accelerate adoption of business AI software.
This will enhances ServiceNow’s Now Platform, a workflow automation system used by pharmaceutical, financial services, manufacturing and health care companies.
Analysts have been impressed by the firm’s efforts, with TD Cowen analyst Derrick Wood saying it is “proving to be one of the most effective names in software to drive GenAI adoption.”
Tenet Healthcare Stock
The health care stock gapped up and is just above the 5% actionable zone above an adjusted buy point of 147 from a flat base.
Strong overall performance is reflected in THC’s impressive IBD Composite Rating of 96. Tenet Healthcare stock has spiked 98% so far this year.
Earnings performance is very strong for the hospital stock, netting it an EPS Rating of 97 out of 99. But Wall Street expects further improvement in 2024, with full-year EPS seen rising 44%.
Performance is already strong. Earnings have grown an average 75% over the past three quarters. This is well clear of the 25% growth sought by Investor’s Business Daily.
THC stock is displaying leadership, with shares currently siting at the summit of the competitive Medical-Hospitals industry group.
Institutional investors have been snapping up Tenet stock lately, with its Accumulation/Distribution Rating coming in at B+
This is on top of already high overall ownership, with big funds holding 69% of shares. Indeed, fund ownership has risen for the past two quarters in a row. The acclaimed Fidelity Contrafund is a holder.
And while rising surgery bills may not be the best news for patients, they are proving to be a boon for Tenet Healthcare investors.
Dallas-based Tenet gave investors plenty of reasons to break out the bubbly when it posted earnings on July 23. EPS popped 60% to $2.31, topping analyst estimates. Revenue rose less than 1% to $5.1 billion, better than views for about $5 billion.
Same-facility surgical revenue grew 7.1% from the same quarter a year ago. That came as the number of cases rose just 0.2%, with revenue per case rising 6.8%. Tenet attributed the jump in per-case revenue to “higher acuity associated with favorable case mix as well as favorable payer mix.”
It’s also helpful that Tenet rivals HCA Healthcare (HCA) and Universal Health (UHS) jumped above buy points on earnings as well.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Spotify Stock
Shares have formed a flat base with an ideal buy point of 331.08, MarketSurge analysis shows. The stock is actionable as high as 347.63. Shares have taken off following an encouraging earnings repot.
The stock has been showing bullish action of late. It reclaimed its 50-day moving average after rallying from consolidation lows and is also clear of its short-term moving averages.
The relative strength line sits off recent highs but is spiking sharply. The RS line declined during the consolidation period but is bouncing back with aplomb.
SPOT stock is up 83% so far in 2024. This means it is comfortably outperforming the benchmark S&P 500. It has rallied nearly 19% in the past four weeks alone.
Streaming play Spotify is also in the top 4% of issues in terms of price performance over the past 12 months.
The stock holds a solid but not ideal IBD Composite Rating of 88. Earnings performance is solid overall, with SPOT stock holding an EPS Rating of 81 out of a best-possible 99.
In total, 53% of Spotify stock is held by funds, according to MarketSurge data. An additional 2% is held by management. Funds have been net buyers of the stock of late.
The firm is seen swinging from a loss to earning $3.01 per share in 2023 and $6.19 in 2024. Profits are expected to pop by 40% next year.
Spotify posted EPS of $1.43 in the most recent quarter compared with a loss of $1.69 per share in the same quarter last year. This was better than Wall Street expectations. Revenue climbed 18% to $4.08 billion.
For the current quarter, Spotify forecast adding 5 million subscribers for a total of 251 million. It also expects to reach 639 million monthly active users in the third quarter.
KeyBanc Capital Markets analyst Justin Patterson recently said in a note to clients that the company is “even more profitable than most appreciate” after reviewing the company’s latest disclosures with the U.S. Securities and Exchange Commission.
American Express Stock
Payments stock American Express is in a buy zone after clearing a flat-base entry of 244.41. This is an early-stage base, which means it is more likely to net big gains.
The Dow Jones giant is nearly 7% above its 50-day line after getting bullish support at the 21-day exponential moving average.
American Express has a strong IBD Composite Rating of 94 out of 99. Earnings are its strongest suit, with its EPS Rating sitting at 95.
Further progress is expected. Wall Street analysts expect earnings to grow 20% in 2024 and by 11% next year.
American Express has seen its stock price swell by 35% so far this year. This is a comfortably better gain than the benchmark S&P 500’s.
Institutions have been net sellers of the stock of late, with its Accumulation/Distribution Rating coming in at D. In total, 44% of its stock is held by funds, according to MarketSurge data.
AXP has been seeing fund ownership rise for the past three quarters. Fidelity Contrafund has also been raising its stake for the past three quarters.
Last Friday, American Express reported better-than-expected Q2 earnings. EPS popped 44% to $4.15, the second straight quarter of accelerating growth. However, revenue of $18.4 billion was light, despite revenue from card fees topping $2 billion for the first time.
The company hiked its full-year EPS forecast to $13.30 to $13.80 from the prior $12.65 to $13.15. AmEx held the revenue-growth outlook of 9% to 11%.
CFO Christophe Le Caillec boasted to MarketWatch about the firm acquiring 3.3 million new cardholders during the quarter.
“That’s the very reason why we want to keep investing in marketing,” he said. “We want to keep this flywheel going and acquire more and more customers.”
CFRA analyst Alexander Yokum is rating American Express stock as a buy with a 295 target.
“Our Buy opinion reflects best-in-class execution. We view the payments industry as highly attractive as it comes with a revenue CAGR of 7%-8%,” he said in a July 20 research note. “Additionally, AXP is positioned to outperform the industry given its success with younger cohorts as these customers tend to grow their spending at an elevated rate, use Amex cards at a higher frequency than older generations, and are more digitally engaged.”
Futures Rise As These Key Tech Names Beat Earnings Views
Texas Roadhouse Stock
Restaurant stock Texas Roadhouse has been trading tightly for the past two months, with several weeks of support around the 50-day line. It is now flirting with the ideal buy point of 175.51. This is a second-stage pattern, which still counts as early.
The stock’s relative strength line is turning higher following a recent decline, though it remains below 12-month highs.
Overall performance is excellent, with TXRH stock holding an IBD Composite Rating of 98 out of 99.
Earnings performance is a key driver as the steakhouse stock tries to move higher, with its EPS Rating coming in at 96. Additionally, it is in the top 9% of issues in terms of price performance over the past 12 months.
The firm has seen earnings rise an average 33% over the past three quarters, clear of the 25% level sought under IBD investing principles. EPS has accelerated for the past three quarters. Its three-year EPS growth rate comes in at a solid 17%.
Wall Street expects earnings to rise 39% in 2024 before slowing to 9% growth in 2025.
Institutions have been net buyers of the stock of late. This is reflected in its Accumulation/Distribution Rating of C+. This is on top of high ownership already, with funds owning 60% of the firm’s shares.
The lauded Columbia Small Cap Growth Fund Institutional Class (CMSCX) is among the noteworthy holders.
The Louisville, Ky.-based restaurant chain beat Wall Street expectations when it reported a 47% increase in earnings to $1.79 per share on July 25. Revenue jumped 14.5% to $1.341 billion, also above views.
Comparable sales at Texas Roadhouse company locations rose 9.3% for the quarter, outpacing estimates of 9% growth. Domestic franchise restaurants saw same-store sales increase 8.3%.
Restaurant margin as a percentage of sales also improved, to 18.2% from 15.7% last year, primarily driven by higher sales. The company noted it benefited from higher average customer checks and improved labor productivity.
One concern is that while Texas Roadhouse looks strong, most other restaurant stocks have faltered of late.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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