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? They are Autozone (AZO), Splunk (SPLK), Fortinet (FTNT), Inphi (IPHI) and Pan American Silver (PAAS).
The current stock market is looking strong. The Dow Jones Industrial Average, S&P 500 index and Nasdaq composite are trading tightly after running up sharply for several months. China trade concerns continue, even as hopes growth for a possible delay in China tariffs.
The Federal Reserve helped push the market higher by cutting interest rates for the third time this year. Earnings season has also been going well, besting tepid profit expectations for S&P 500 companies.
Nevertheless, the Trump impeachment inquiry does add a new level of uncertainty for the stock market.
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Chip stocks are doing well, along with some medical names and a few megacap techs such as Apple (AAPL) and Microsoft stock. Some retail names are doing well. Software is mounting a comeback while a number of IPOs are joining the leaders.
So why are these five names above the best to buy or watch? Before turning to that question it is important to consider how one goes about choosing a stock in the first place. Superior fundamentals and technical action and buying at the right time are all part of a shrewd investing formula.
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 current 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
Never forget the "M" in CAN SLIM stands for market. Most stocks, even the very best, will tend to follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash in a stock market correction. One good sign for investors is the market's current uptrend, which offers opportunities for assertive investors, overcame a recent stern challenge.
With the major averages near record highs, breakouts are flourishing.
Best Stocks To Buy Or Watch
Now let's look at Autozone stock, Splunk stock, Fortinet stock, Inphi stock and Pan American Silver stock in more detail. Several of these stocks are on IBD Leaderboard or its watchlist.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Autozone Stock
AutoZone stock blasted above its 1,186.70 buy point on Dec. 10, breaking out from a bullish flat-base. The 5% chase zone extends to 1,246.04.
A bullish indicator for the stock is the fact its relative strength line has hit a new high. The RS line tracks AutoZone stock's performance against the S&P 500. It's the blue line in the chart provided.
Autozone stock exploded after the auto parts retailer reported strong earnings and accelerating same-store sales. Going forward, AutoZone CEO Bill Rhodes touted initiatives to improve inventory, drive DIY sales and increase commercial sales "substantially faster than industry growth."
While Autozone stock has a mediocre Composite Rating of 70 out of best-possible 99, there are reasons to be optimistic. The Stock Checkup Tool shows earnings are a key strength, netting it an EPS Rating of 90. However earnings have been slowing down for the past four quarters.
The recent Stock Of The Day has been making investments in wages and technology to help employees sell more efficiently, according to analysts at Bank of America Merrill Lynch.
Concerns about the potential for Amazon (AMZN) to grab share in the auto parts market have declined meaningfully from two years ago, the analysts wrote in October.
AutoZone has not yet experienced meaningful cost pressure from tariffs from President Donald Trump's trade war, Bank of America added. But the auto parts retailer has raised pricing on products where costs have risen.
Splunk Stock
The Big Data and cybersecurity software firm is in a buy zone after breaking out of a long consolidation on strong earnings. The ideal entry point is 143.80.
After an up-and-down 2019, the relative strength line for Splunk stock has rallied strongly. It now looks to be on a strong upwards trend.
Splunk stock has a top-notch Composite Rating of 97. The Stock Checkup Tool shows it is flashing a number of green lights. Earnings have grown by a mighty 101% over the past three years. This is well above CAN SLIM requirements for 25% growth.
Splunk stock was given a boost after the firm beat on the top and bottom line last month. It also raising its outlook. It now expects revenue of approximately $2.35 billion, up from prior guidance of $2.3 billion.
"Splunk is transforming the way our customers around the world turn data into doing," Chief Executive Doug Merritt said in written remarks with the earnings release.
Fortinet Stock
The cybersecurity leader has formed a three-weeks-tight formation with a 106.10 buy point. This pattern is notable when a market leader with top-notch fundamentals holds firm near a certain price level for at least three straight weeks. It gives investors the chance to make a follow-up buy.
Fortinet stock formed its 3 weeks tight after becoming extended from a 92.89 buy point of a cup with handle cleared early last month. It broke out following a beat and raise at the end of October.
Bullish signs for the stock include the fact its relative strength line is now at an all-time high. In addition it has an excellent Composite Rating of 97. An Accumulation/Distribution Rating of B+ shows big money has been piling into the stock. This is important as the I in CAN SLIM stands for Institutional Sponsorship, with professional investors accounting for about 75% of all market activity.
For the current December-ending quarter, Fortinet forecast revenue in a range of $595 million to $610 million. Analysts had projected $584.7 million in sales.
The Sunnyvale, Calif.-based company, ranked sixth in the IBD 50, competes with Palo Alto Networks (PANW) and others in the firewall security market. Firewalls help protect computer networks by monitoring web-based apps and blocking online intrusions.
The recent IBD 50 Stock To Watch serves customers around the world. Last year, the Americas accounted for 42% of sales, Europe, Middle East and Africa 38%, and Asia Pacific 20%. It's become a key player in an emerging computer network technology called software-defined wide area networks (SD-WANs), which links corporate headquarters with branch offices and remote workers.
Inphi Stock
The chipmaker is buyable after staging a bullish rebound from its 10-week line. It comes after Inphi stock broke out of a base on Oct. 15, with either a 64.85 or 66.66 buy point.
Inphi stock gapped up into buy range after the Santa Clara, Calif.-based company posted better-than-expected third-quarter results on Oct. 29. Shares kept rising to 77.67 on Nov. 12, then erased much of its gains before finding support at the 50-day/10-week line.
Its outlook was another positive. For the current quarter, Inphi expects to earn 45 cents a share on sales of $99.8 million. That's based on the midpoint of its guidance. Wall Street was modeling Inphi earnings of 42 cents a share on sales of $96 million in the December quarter.
The maker of high-speed data connections saw its stock hit a record high of 77.67 on Nov. 12.
Imphi stock has a very strong Composite Rating of 98. This means it has outperformed 98% of stocks in key metrics over the past 12 months. This is enough to make it the top stock IBD's Electronics-Semiconductor Fabless industry group. The group itself is performing well, ranking 17th out of the 197 groups tracked.
The Stock Checkup Tool shows a mix of technical and fundamental strength. It boasts an excellent EPS Rating of 94, but it is its stock market performance that shines brightest. This is why it holds a Relative Strength Rating of 96. Institutional ownership is strong, with 42% of its shares being owned by institutions.
Pan American Silver Stock
It is often a wise to have a counter-cyclical name in one's portfolio. A precious metals stock can hold up against a fall in the broader market, as their assets tend to spike in value during such times. This makes Pan American Silver stock a candidate for those looking to balance their portfolio. It is currently in range from a 19.06 buy point from a cup-with-handle base. The 5% chase zone running up to 21.01.
The RS line for Pan American Silver stock is near record highs.
The stock has a good Composite Rating of 93, and it is improving. The Stock Checkup Tool shows its stock market performance is stumping its fundamentals, with a Relative Strength of 95 comparing favorably to its EPS Rating of 64.
In the most recent quarter, Pan American Silver earned 35 cents a share, a big improvement on a 3-cent loss a year earlier. Revenue spiked 88% due to Pan American's Silver Tahoe takeover.
Pan American Silver is based in Vancouver, Canada. Its main business is the operation and development of silver producing properties. Its segments include operations in Peru, Mexico, Argentina and Bolivia. In addition to silver, it also produces and sells gold, zinc, lead and copper.
Back in February Pan American completed the $1 billion acquisition of Silver Tahoe Resources. At the time CEO Michael Steinmann said the deal "establishes the world's premier silver mining company with an industry-leading portfolio of assets, a robust growth profile and attractive operating margins."
Pan American Silver CEO Steinmann said during the Nov. 7 earnings call that "cost performance was better than expected."
Recently Removed Stocks
Microsoft (MSFT) was chopped after becoming extended beyond its buy point. Costco (COST) has been cut after drifting lower, as well as due to the fact it has earnings due. The Leaderboard stock is still worth watching though. Finally Disney (DIS) and Adobe (ADBE) have also been axed. Disney stock undercut its buy points while Adobe stock has earnings Thursday. Both are worth keeping tabs on as they could soon move back into buy zone.