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? Nvidia (NVDA), Eli Lilly (LLY), TransDigm (TDG), KLA (KLAC) and Embraer (ERJ) are prime candidates.
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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 are expected for 2024, but the benchmark S&P 500 turned in its best Q1 gain in years amid growing confidence 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 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.
CAN SLIM 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 turned in stunning gains in 2023 and had been building on those gains so far this year. However recent negative action caused the S&P 500 and the Nasdaq to undercut the key 50-day moving average.
The stock market is trying to regain some momentum. Now is a not an ideal time for investors to be making stock purchases, except for exceptional stocks. IBD is currently recommending 20% to 40% market exposure.
Investors should also be building watchlists of high-quality stocks for when the stock market uptrend resumes. The selections below are among the best stocks to buy or watch now. The IBD 50 is also a rich hunting ground.
This is the time when it is particularly crucial 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 add even more uncertainty.
Things can quickly change 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
- Nvidia
- Eli Lilly
- TransDigm
- KLA
- Embraer
Now let’s look at
Nvidia stock, Eli Lilly stock, TransDigm stock, KLA stock and Embraer stock in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
Nvidia Stock
Nvidia has been consolidating and is eying a potential entry point of 974. The 5% buy zone here would top out at 1,022.70. This is a mid-stage pattern.
NVDA stock holds a perfect IBD Composite Rating of 99. It is also in the top 2% of stocks in terms of price performance over the past 12 months. So far this year it is up around 74%, building on previous strong gains in 2023.
Earnings is a key strength, with its EPS Rating coming in at 99. Recent impressive earnings growth is underlined by the Stock Checkup Tool.
Over the past three quarters, EPS has grown by an average of 503%. This is well clear of IBD requirements for 25% growth. Earnings growth has been accelerating for the past five quarters.
In the most recent quarter Nvidia‘s earnings per share surged 486% to $5.16. Revenue soared more 265% to $22.1 billion.
“Accelerated computing and generative AI have hit the tipping point,” CEO Jensen Huang boasted following his firm’s quarterly report.
Nvidia is seeing demand not just from large cloud-service providers, but enterprise software and consumer internet companies.
NVDA stock is a member of the prestigious IBD 50 list. This is an objective, computer-generated list based solely on time-tested criteria. It is also a member of the prestigious IBD Leaderboard list of top stocks.
Nvidia leads in artificial intelligence chips, but competition is rising. Key customer Microsoft (MSFT) is among firms developing its own solutions.
OpenAI, whose backers include Microsoft, reportedly is exploring its own AI chips as well.
But Nvidia is certainly not resting on its laurels amid rising demand. At the SC23 supercomputing conference in Denver back in November, Nvidia introduced its HGX H200 AI computing platform and GH200 Grace Hopper Superchip.
And in March, at Nvidia’s GTC conference for artificial intelligence AI developers, the AI powerhouse has already announced its successor – the Blackwell platform.
Customers can also look forward to the next-generation B100 chip that is expected in coming quarters. B100 chips will have better performance and will likely have a higher average selling price.
Additionally, Nvidia has entered into an agreement to buy Run.ai. for $700 million. Run.ai helps developers use AI tools more efficiently and reveals Nvidia’s roadmap and priorities. Run.ai works with Nvidia’s Cloud AI product that helps businesses get “instant access to an AI supercomputer from a browser.”
Eli Lilly Stock
A chance has emerged to buy obesity play Eli Lilly as it firms up near a buy point despite expanding competition. It is flirting with a double-bottom base entry of 793.67, briefly clearing the entry on April 30.
This can also be interpreted as a flat base with an ideal buy point of 800.78. The stock made a bullish move by gapping above its 50-day line following earnings.
LLY stock has an IBD Composite Rating of 98 out of 99. Meanwhile, it holds an EPS Rating of 66 out of 99. EPS grew by 59% in the most recent quarter. The bullish move won LLY stock a spot on the IBD Leaderboard list of top stocks.
Obesity plays have been some of the most rewarding stocks to own for investors amid recent scientific progress in the field.
The firm, which has been boosted by enthusiasm for its weight-loss drug Zepbound, has seen its stock price swell an impressive 34% so far this year. This is better than the S&P 500.
Eli Lilly ranks second in the competitive Medical-Diversified industry group. Institutions have net buyers of the stock of late, with its Accumulation/Distribution Rating coming in at B-. In total, 40% of its stock is held by funds, according to MarketSurge data.
The stock impressed investors in the March quarter. Weight-loss drug Zepbound brought in $517.4 million in sales, beating forecasts for $373 million, according to FactSet. This pushed Lilly to raise its sales outlook for the year by $2 billion.
Competition is rising, with Viking Therapeutics (VKTK) saying its own experimental pill helped patients lose up to 5.3% of their body weight using the same mechanism as Lilly‘s offering. But UBS analyst Trung Huynh said the test results are unlikely to faze leaders Lilly and rival Novo Nordisk (NVO). NVO is a also member of the IBD Leaderboard list of top stocks.
“Although the data look promising, we note the early Phase 1 study is in a small population,” he said in a research report. “A Phase 2 trial in obesity is planned for the second half of 2024. Nevertheless, we acknowledge increasingly viable competition in the GLP-1 space for the Lilly/Novo duopoly, but we ultimately believe near- and midterm impacts are limited.”
Both Lilly‘s and Viking’s treatment block hormones called GLP-1 and GIP to slow how fast the stomach empties itself and improve feelings of fullness.
Nevertheless, Viking faces stiff competition as LLY and NVO both sell approved weight-loss injections and are working on pills. Analysts surveyed by FactSet expect the duo to bring in a combined $12.48 billion in sales this year, growing to $37.72 billion in 2029.
But Eli Lilly has many strings to its bow. Among potential offerings that have excited investors is a gene therapy that could restore hearing loss.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
TransDigm Stock
TransDigm stock is offering an entry as it rebounds from the 10-week moving average. It is also offering an alternative 1,246.22 four-weeks-tight entry.
TDG stock is currently a member of the SwingTrader list of stocks.
The relative strength line for TDG stock site at fresh heights. This gauges a stock’s performance vs. the benchmark S&P 500.
Overall performance is strong, but not ideal. This is reflected in its IBD Composite Rating of 91 out of 99. It is in the top 8% of stocks in terms of price performance over the past 12 months.
Earnings performance is also impressive for the stock. EPS has grown by an average of 51% over the past three quarters.
Aerospace contractor TranDigm got a boost after GE Aerospace (GE) served up a bullish Q1 earnings report. TDG stock has bounded off key support and is near possible entries.
Both GE Aerospace and TransDigm derive the bulk of their profit from aftermarket sales, which are expected to be given a tailwind by Boeing (BA) production problems. That will keep older aircraft operating for longer.
In a presentation released with fiscal Q1 earnings on Feb. 8, TransDigm said that aftermarket sales accounted for just over 75% of earnings before interest, taxes, depreciation and amortization. Fiscal Q2 earnings are expected on May 7, so that’s something to consider.
TransDigm comprises about 50 companies that produce highly engineered components and systems for nearly all military and commercial aircraft. About 90% of sales are unique, proprietary products, according to the company. About 50% to 55% of sales come in the aftermarket.
Earlier in April, Cowen highlighted Boeing’s problems while hiking its price target for TDG stock to 1,300 from 1,250. It also maintained a buy rating. The firm cited healthy demand, pricing power and M&A opportunities. At the same time, TD Cowen upgraded GE Aerospace to buy from hold.
KLA Stock
KLA is trying to reach a flat base entry of 729.15. The 5% buy zone here runs as high as 765.61.
Shares could offer an early above the April 30 high of 717.73.
This pattern pattern is a third-stage base for the semiconductor equipment stock. This counts as mid-stage.
It has slipped back to the 50-day moving average but is holding above the key technical benchmark. In addition, the relative strength line remains at highs.
Overall performance is strong, if not quite ideal, with its IBD Composite Rating sitting at 93.
The expert in process control and yield management equipment for chipmakers has been a strong performer over the past 12 months. It is in the top 7% of issues in terms of price performance during that period.
Earnings performance is solid, with its EPS Rating coming in at 80 out of 99. Earnings are seen slipping 8% in 2024 before rebounding to growth of 23% next year.
The stock was boosted after it beat estimates for its fiscal third quarter and guided higher than views for the current quarter.
For the current quarter, KLA forecast adjusted earnings of $6.07 a share on sales of $2.5 billion. Analysts had been looking for earnings of $5.73 a share on sales of $2.43 billion in the fiscal fourth quarter. In the June quarter last year, KLA earned an adjusted $5.40 a share on sales of $2.36 billion.
“Market conditions have stabilized and we expect our business levels to improve as we progress through the year,” Chief Executive Rick Wallace said.
Institutions have been holding steady on the stock, with 57% of shares currently being held by funds. Notable holders of the stock include the MFS Growth Fund and the Janus Henderson Enterprise Fund.
Stock Market Skids Into Fed: What To Do Now
Embraer Stock
Brazilian aerospace stock Embraer has formed a flat base with an ideal entry point of 27.25. This is an early stage base.
It comes after the stock bullishly rebounded off the 10-week moving average. The RS line has also reached fresh heights.
The stock holds a rare perfect IBD Composite Rating of 99. While earnings performance is not ideal, it is in the top 4% of stocks in terms of price performance over the past 12 months.
With ongoing issues at Boeing (BA), Embraer might be able to snatch some share from the aerospace juggernaut.
In the most recent quarter Embraer posted an 80% increase in adjusted earnings to 42 cents. Revenue eased 0.8% to $1.975 billion.
In addition, the company delivered 75 jets in Q4, including 25 commercial aircraft, 49 executive jets and one military C-390. Full-year deliveries rose 13% to 181 aircraft.
Embraer guided 2024 deliveries for its commercial and executive aviation divisions between 197 and 215 planes. The company expects to deliver 72 to 80 commercial aircraft and 125 to 135 executive jets.
In addition, the firm sees 2024 revenue between $6 billion and $6.4 billion, increasing from $5.27 billion for 2023.
Back in March TD Cowen hiked its price target on ERJ stock from 18 to 26. It made the move after its Q4 report, with the firm noting strong order prospects.
Despite this, Cowen maintained a Market Perform rating ERJ stock due to Brazilian dividend regulations and potential new product launches which may limit cash returns to shareholders.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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