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?
XAt the moment, Apple (AAPL), Microsoft (MSFT) and Pfizer (PFE) are standout performers. Unlike misfiring meme stocks such as GameStop (GME) and AMC Entertainment (AMC), 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.
Brutal recent action has seen the IBD market outlook switch to "market in correction." A stock market rally that kicked off 2022 soon fell on its face. The Nasdaq has now fallen below its 200-day line for the first time since April 2020 while the S&P 500 and the Dow Jones Industrial Average are also both below this key benchmark.
The hope now is that stock market bulls can continue to help the S&P 500 hold firm near its 200-day line. But resolve will have to stiffen in the face of flaccid recent performance. Rally attempts so far have failed to hold up, bringing market performance into question.
With the current outlook investors should not be buying stocks. Now is a good time to be raising cash and it is especially important that you are entirely off margin.
Start by selling your weakest performing stocks first. If you have great conviction about a stock and have a profit cushion, consider holding through the correction. Sell signals must be followed strictly to avoid painful losses. Consider selling stocks that are less than 7% below the purchase price. With stocks that have been rising above their 50-day or 10-week moving averages, beware of sharp breaks below those lines.
It is also a time to be building a watchlist of fundamentally strong stocks with good technical setups. The stocks below are ideal candidates. Nevertheless, it remains crucial that investors stay disciplined and stick to sound buy and sell rules.
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 Apple stock, Microsoft stock and Pfizer 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.
Apple Stock
AAPL stock is worth putting on your watchlist as appears to be forming a new base. The potential buy point here would be 182.23, according to MarketSmith analysis.
The stock has also just surged back above its 10-week moving average. This could serve as an alternative, lower cost, entry, but buying during a market correction is risky.
Apple stock is seeing its relative strength line hold around new highs, a sign of how bad the market sell-off has been. Stocks with strong RS lines can still lose ground in a correction or bear market, but they may among the first to break out in a new uptrend.
Apple stock has seen its Composite Rating shoot up to a very strong 95 out of 99. Earlier in January Apple became the first company to reach a market capitalization of $3 trillion, though it has now backed off this level.
The IBD Stock Checkup tool shows earnings growth is bouncing back in recent quarters following the Covid-19 pandemic. Apple stock got a boost after reporting earnings for Q1 of fiscal 2022 late Thursday. The RS line spiked and it shot back above its 50-day line.
It was the firm's best ever quarter for revenue, with all categories excluding iPads coming in above views. Apple did not give guidance for the current quarter. The firm has not given specific quarterly guidance since the Covid-19 pandemic began.
Apple's EPS growth has averaged out a 65% growth over the past three quarters. This is comfortably clear of the 25% earnings growth sought by the CAN SLIM cognoscenti.
Analysts see earnings growth of 8% growth in fiscal 2023. Investors will want to see CEO Tim Cook squeeze out more impressive gains.
With its iPhone business maturing, investors are looking for a new big growth driver for Apple stock. Services and wearables are seen as two key drivers.
In the September quarter, Apple's services revenue rose 26% year over year to $18.3 billion. Services include the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+, Apple Arcade and other offerings.
One reason to be bullish on Apple is it continues to produce new products, which is a major success factor in the CAN SLIM system.
Speculation is reaching fever pitch that Apple is looking to make a self-driving electric car. In November Bloomberg reported Apple is aiming to launch self-driving EVs in 2025.
The firm recently introduced its first Mac computers with processors the company designed itself rather than those supplied by longtime partner Intel (INTC).
Apple executives showed off a lineup of Mac computers running the company's new M1 processor. The M1 chip delivers up to 3.5-times-faster central processing unit performance than Intel-based Macs. Chip foundry Taiwan Semiconductor Manufacturing (TSM) will make the chips for Apple, using its 5-nanometer process technology.
The M1 news comes after the firm revealed its iPhone 12 lineup of 5G-enabled smartphones as well as the HomePod Mini smart speaker. Apple has also introduced its sixth-generation Apple Watch smartwatches, new iPad tablets, Apple Fitness+ service and Apple One subscription service bundles.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Microsoft Stock
Microsoft is back above its 200-day moving average after a bullish earnings report. Given Microsoft is an IBD Long-Term Leader, a rebound from here could be used as an entry.
It had been forming a flat base but the size of its recent decline means this pattern is no longer valid. This may evolve into a different kind of base. A key for the stock going forward will be regaining its 50-day line.
The relative strength line for Microsoft stock isn't too far off highs, following a long, strong uptrend. MSFT stock has gained nearly 30% over the past year despite recent travails.
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). Both now have valuations above $2 trillion.
MSFT is now trailing Apple by quite a margin again after briefly snatching Apple's crown as the world's most valuable publicly traded company.
Recent market turbulence has knocked Microsoft stock's IBD Composite Rating down to a strong, but not ideal, 87 out of 99. Key to Microsoft's high score is its excellent earnings performance, which is reflected in its EPS Rating of 93 out of 99.
The firm is getting set serve up its latest earnings report late Tuesday. A strong report and guidance could give the stock a lift.
Microsoft managed to top analyst estimates for the December quarter. It earned $2.48 per share on sales of $51.7 billion in the quarter ended Dec. 31. On a year-over-year basis, Microsoft earnings rose 22% while sales increased 20%.
Analysts had predicted Microsoft earnings of $2.08 a share on sales of $44 billion.
"Solid commercial execution, represented by strong bookings growth driven by long-term Azure commitments, increased Microsoft Cloud revenue to $22.1 billion, up 32% year over year," Chief Financial Officer Amy Hood said in a news release.
Microsoft guided for sales of $48.9 billion in the current quarter, based on the midpoint of its guidance. This was better than analyst expectations for $48.1 billion. In the year-earlier period, it posted $41.7 billion in sales.
Microsoft recently agreed to buy Activision Blizzard (ATVI) for $69 billion cash. The video game publisher behind Call of Duty and many other big titles had tumbled in recent months in part over accusations of sexual harassment by company executives.
Institutional investors remain big backers of Microsoft stock overall, though it has been selling off of late amid broad weakness in software. In total, 41% of its stock being held by funds. It boasts eight consecutive quarters of increasing fund ownership.
On Sep. 14 the company announced a $60 billion MSFT stock buyback and also raised its dividend by 11%.
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.
Market Rally Still Must Take This Step; 5 Key Earnings
Pfizer Stock
Shares are trying to bounce back after triggering a round-trip sell signal from a cup base entry point is 51.96.
While recent performance is painful, aggressive investors may see the stock retaking its 10-week line as a potential buying opportunity. Such an approach would be extremely risky until the market can get back into an uptrend however.
The relative strength line is picking up again after a pullback. Moving back above recent highs would be a bullish sign.
PFE stock was boosted by new Covid worries, but overall bearish action and some negative developments have seen it give up the bulk of its gains.
The pharma stock, which serves as a Covid vaccine play, was previously boosted by the failure of Merck's (MRK) anti-coronavirus pill.
It speaks to the stock's strong overall performance that Pfizer stock still holds a perfect IBD Composite Rating of 99.
PFE stock up about 52% over the past 12 months. Enterprising stock pickers may see its current pullback as the harbinger of an opportunity to snap up the stock before it goes on another run.
Earnings have been accelerating for the past four quarters though. And EPS growth topped out at 127% in the most recent quarter. It is posting its latest earnings report on Feb. 8.
It looked set to rake in even more cash due to the Omicron variant, which was first detected in South Africa. It contains what scientists have described as a constellation of mutations.
However a study out of Israel suggested a fourth dose of its BioNTech (BNTX)-partnered Covid vaccine was only partially effective against omicron.
The vaccine produced virus-blocking antibodies, but there will be still infections among recipients. The lead researcher suggested only high-risk people should receive a fourth dose.
On the antiviral side, Pfizer tested Paxlovid in unvaccinated Covid patients at risk of developing severe disease. It cut down on hospitalizations by 89% when patients started treatment within three days of symptoms beginning. No Paxlovid recipients died. The results were far better than Merck's rival pill.
Meanwhile, Pfizer recently inked a deal with Beam Therapeutics (BEAM) to test a newer form of CRISPR gene editing.
They will collaborate on three diseases of the liver, muscles and central nervous system. Pfizer will pay Beam $300 million up front and up to $1.05 billion in milestone payments.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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