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? At the moment, Tesla (TSLA), Exxon Mobil (XOM) and Costco (COST) are standout performers, at least relatively.
XUnlike 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.
A stock market rally that kicked off 2022 soon fell on its face. While the market battled back amid a better than expected earnings season, the latest uptrend failed amid disappointing inflation data, which comes on the heels of Federal Reserve Chairman Jerome Powell's hawkish Jackson Hole speech. The S&P 500, the Nasdaq and the Dow Jones Industrial Average has all sunk below their 50-day moving averages.
With the market back in a correction now is a time to avoid making any new buys. This will help prevent you getting sucked into a bear market trap. Reversals can be particularly severe at this time. Instead, now is a good time to build a watchlist of exceptional stocks such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks below are good candidates.
It is a good time to consider taking profits. In addition, 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 averages.
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 Robinhood Stocks To Buy Or Watch
Now let's look at Tesla stock, Exxon stock and Costco stock in more detail. An important consideration is that these stocks are solid from a fundamentals 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.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Tesla Stock
Tesla stock has formed a short consolidation with a 314.74 entry, according to MarketSmith analysis.
Assertive investors could use a move above the Sept. 15 high of 309.12 as an aggressive entry slightly above the 200-day moving average.
Tesla's relative strength line has been gaining of late but remains off highs. Good overall performance puts this among the best Robinhood stocks to buy or watch now.
Lackluster recent stock market performance has overshadowed improving earnings. But recent gains has helped its IBD Composite Rating rise to 96 out of 99.
The stock checkup tool underlines the improving financial performance. Earnings have grown an average 173% over the past three quarters, well above CAN SLIM requirements. Longer-term results are also impressive, with its three-year EPS growth rate coming in at 197%.
Tesla CEO Elon Musk is looking to back out of his deal to buy Twitter (TWTR). But Twitter won an early court ruling for an expedited trial in October. Legal experts say the social media company has a strong case. Musk has just been denied a request to delay the trial but has been allowed to add whistleblower claims made public by Twitter's former head of security Peiter Zatko.
Musk recently disclosed that he sold $6.9 billion in TSLA stock on Aug. 5, 8 and 9. He cited his ongoing legal fight.
"In the (hopefully unlikely) event that Twitter forces this deal to close (and) some equity partners don't come through, it is important to avoid an emergency sale of Tesla stock," he tweeted.
TSLA served up better-than-expected second-quarter earnings despite grappling with plant closures in Shanghai and supply shortages. Adjusted earnings climbed 57% to $2.27 per share, better than Wall Street expected. Revenue soared 42% year over year to $16.934 billion, of which $344 million came from regulatory credits.
Earnings and revenue did fall significantly vs. Q1, though they should rebound sequentially in Q3. Automotive gross margins came in at 27.9% vs. 32.9% the previous quarter.
Musk gave a positive update on Tesla's oft-delayed Cybertruck during the conference call.
Cybertruck deliveries, along with the Tesla Semi and Roadster, have been pushed back several times.
Tesla recently reported second-quarter deliveries of 254,695 electric vehicles, slightly below views. It was down nearly 18% vs. Q1's record 310,048 but up 26.5% vs. a year earlier.
Tesla produced 258,580 vehicles in Q2 vs. 305,407 in Q1, nearly all Model 3 sedans and Model Y crossovers.
Tesla Shanghai was shut down for much of April and only resumed full output in early June. Shanghai production slowed again in July, but for capacity-enhancing upgrades.
The recently opened Tesla Berlin and Austin plants are producing relatively few vehicles, partly due to supply-chain issues, though output may be slowly ramping up
Some Giga Austin factory-made Model Ys boast a new structural battery pack and 4680 batteries. The 4680 batteries are not yet being mass produced, with Musk conceding on the Q2 earnings call that significant technical challenges remain.
Tesla is bringing a lower-range Model Y to Europe with much-lower prices than other Y trims. In some countries, the low-end Y costs less than the Model 3.
In China, with output rising, wait times are down sharply. Tesla is now offering an insurance subsidy, a de facto modest price cut.
Exxon Stock
Exxon Mobil stock is among the best Robinhood stocks to buy or watch now. It is eyeing a cup-with-handle pattern entry of 101.66, according to MarketSmith analysis.
It needs to find support at the 50-day moving average. In addition, the relative strength line sits near new highs, an encouraging sign.
Investors could use a move above the Sept. 12 high of 99.19 as an early entry.
XOM stock has a very strong Composite Rating of 98. Stock market performance is bullish, with the stock rising 47% since the start of the year. Improving earnings performance gives added credibility to a bullish outlook on Exxon Mobil stock.
Oil prices surged as the West turns away from Russian supply, topping $130 a barrel. But U.S. crude futures recently plunged to nearly $80, their lowest level since January. Gasoline futures also have tumbled significantly. Natural gas prices, meanwhile, are near 14-year highs, but fell back recently.
On Labor Day, OPEC and key allies such as Russia agreed to cut production quotas by 100,000 barrels per day in October. A production cut had been on the table but wasn't expected.
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.
Futures Look To Fed After This Setback
Costco Stock
COST is one to watch for now after it fell too far below a cup with handle buy point of 552.81. It could go on to form a new consolidation — within that larger cup-with-handle — with a potential 564.85 entry.
One bugbear is the stock's relative strength line. It has been moving sideways of late. Nevertheless, Costco remains in the top 17% of stocks in terms of price performance over the past 12 months.
It has just fallen below the key 50-day and 200-day moving averages. Rallying back above these levels would be a positive development.
A potential catalysts lies ahead, with the stock getting set to report fiscal fourth-quarter earnings late Thursday.
An approach highlighted by Investor's Business Daily is to use options as a strategy to reduce risk around earnings. It's a way to capitalize on the upside potential of a stock's move around earnings, while reducing the downside risk.
While Walmart and Target have been struggling with excess inventory as customers deal with inflationary pressures, Costco is demonstrating the benefit of its model.
It's know for competitive pricing, fast inventory turns, a higher-income customer base and a relatively low labor intensity, meaning higher revenue per employee.
Costco might be the only retailer selling both $1.50 hot dogs and $250,000 diamond rings under the same roof. You can also buy a tank of gas, a chicken coop or a funeral casket there while you're at it. This is a huge part of Costco's allure.
It sells a large variety of items inside a chain of nondescript warehouses and charges customers a $60 membership fee just to get in the door. Costco's buy-in-bulk branding also makes it an ideal place for consumer stockpiling.
Total Costco cardholders rose to a record high 111.6 million in 2021, up from 105 million in 2020. Its membership renewal rate at the end of 2021 was 91% in the US and Canada and 89% in the rest of the world.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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