Best Stocks To Buy And Watch Now: 5 Top Stocks For July
Buying a stock is easy, but buying the right stock without a time-tested strategy is
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), PayPal (PYPL), Align Technology (ALGN), Square (SQ) and Roku (ROKU) are prime candidates.
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Since the coronavirus bear market, stocks rebounded powerfully. The strong action reflects rising confidence that the economy will eventually recover from the coronavirus.
The coronavirus remains a concern, but cases have tumbled as vaccinations reach more and more Americans. Nevertheless, the rising number of cases of the new Delta variant is an emerging worry.
The major indexes have bounced back strongly from recent challenges, though they are in danger of becoming over extended once again.
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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.
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 that 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 when the stock market goes into a correction.
The stock market has suffered a few pullbacks amid inflation fears and concerns about the rise of the delta variant of the coronavirus weighing on the market. But the market was back to bullish ways last week, bolstered by an encouraging earnings season so far.
The broad S&P 500 and the tech-heavy Nasdaq surged once again to new record highs. In addition, the Dow Jones Industrial Average finished above 35,000 closing milestone for the first time. They are all clear of the key 50-day moving average.
The market is back in a confirmed uptrend. Nevertheless, it is important that investors stay disciplined and stick to sound buy and sell rules, especially as the the market has rallied back toward extended levels.
Now is a good time to be buy fundamentally strong stocks that have built sound chart patterns. The stocks featured below are potential candidates.
But 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 Stocks To Buy Or Watch
- Nvidia
- PayPal
- Align Technology
- Square
- Roku
Now let’s look at Nvidia stock, PayPal stock, Align Technology stock, Square stock and Roku stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Check out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Nvidia Stock
Nvidia stock is offering a new buying opportunity after staging a rebound from the 10-week moving average. It is currently finding support at its 21-day line.
The graphics-chip maker pulled back as the broader stock market retreated, notably leading stocks. Given its strong run, the pullback was not surprising for NVDA stock.
Nvidia stock has a perfect IBD Composite Rating of 99. Stock market performance is currently slightly lagging its excellent earnings, but is catching up rapidly. So far this year the stock is up almost 50%, which far outstrips the S&P 500’s gain of more than 17%.
Nvidia rallied May 21 on news of a 4-for-1 stock split. While it fell back slightly Tuesday, when the split took place, it ended up closing the week up almost 8%.
Earnings is a key strength, with its EPS Rating coming in at 97. The Stock Checkup Tool underlines its impressive recent earnings growth.
Over the past three quarters, EPS has grown by an average of 78%. This is well clear of CAN SLIM requirements for 25% growth.
Nvidia beat Wall Street’s targets for its fiscal first quarter on strong sales of gaming and data-center processors. Earnings rocketed 103% to $3.66 per share as sales jumped 84% to $5.66 billion. Analysts expected Nvidia earnings of $3.28 a share on sales of $5.41 billion. However the news failed to lift the stock.
For the current quarter, Nvidia expects to generate revenue of $6.30 billion. Wall Street had predicted fiscal second-quarter sales of $5.5 billion, compared with $3.87 billion in the year-earlier period.
In mid-April, Nvidia unveiled its first central processing unit, or CPU, called Grace. Nvidia currently sells graphics processing units, or GPUs, which act as accelerators for CPUs made by other companies. With its own CPU, Nvidia will offer a more complete system for data centers, in a move that is seen as a direct challenge to Intel (INTC) and Advanced Micro Devices (AMD).
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PayPal Stock
PayPal stock has risen into a buy zone from a cup-with-handle base. The ideal buy point on a weekly chart is 307.92. In June, PYPL cleared a 277.96 early entry.
Volume has been lackluster to weak during most of PayPal’s recent advance, with the exception of a burst of trading around the time shares moved above the 277.96 entry.
The relative strength line has been improving, reaching a four-month high, but not yet at the all-time high reached in mid-February. The payments stock has a long history of outperforming the broader market, a key reason why it is on the IBD Long-Term Leaders list. It’s also on Leaderboard.
PayPal stock has seen its Composite Rating come back strongly, and it now sits at a very strong 97. Stock market performance is improving, and PYPL stock is now up almost 29% so far this year.
Earnings are the stock’s key strength, with its EPS Rating coming in at 98 out of 99. EPS has grown by an average of 52% over the past three quarters. This reflects the current trend towards cashless transactions amid the Covid-19 pandemic.
One thing to bear in mind with PayPal is earnings are due on July 28 after the close. An approach advocated by Investor’s Business Daily is using 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.
When PayPal reported March-quarter earnings, revenue and total payment volume topping analyst estimates. EPS popped by 85% to $1.22 as e-commerce continued to boom amid the coronavirus pandemic. Revenue vaulted 31% to $6.03 billion. The strong results have been helping the stock advance.
Total payment volume processed from merchant customers jumped 50% to $285 billion. This was better than the $264.9 billion projected by analysts.
The company also said it added 14.5 million net new active accounts worldwide in the December quarter. Well known for its online checkout button, PayPal had 392 million active accounts worldwide as of March 31.
Meanwhile PayPal is looking into new growth avenues. It is now fighting it out with payments rival Square in the cryptocurrency space. The two payment companies are marketing apps that let shoppers get discounts, make installments and buy cryptocurrencies.
PayPal‘s Venmo and the Square Cash App started off as person-to-person money-transfer services for family members and friends. Now they’ve evolved into broad consumer financial services apps fueling growth for these leaders in the burgeoning field of digital payments.
In late November, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin. In addition, PayPal customers will also be able to use cryptocurrencies to shop at the 28 million merchants on its network starting in early 2021, the company said.
PayPal also announced cryptocurrency trading on Venmo. The new feature allows customers to use these three types of cryptocurrency, plus Bitcoin Cash, to view crypto trends and make transactions. The rollout has already started, and will be available for all customers directly in the Venmo app.
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Align Technology Stock
ALGN stock is back in a buy zone above a cup-with-handle base buy point of 629.45. It managed to bounce back by 3.6% last week. This came after its suffered a 1.8% retreat in the previous week amid tough action.
Over the last several months, ALGN stock has attempted with breakouts or early entries, only to pull back.
The relative strength line has been moving sideways of late, which is not ideal. The stock is has been finding support around its 50-day moving average, a good sign.
Align stock is up around 16% so far this year. Good overall performance has netted it a very strong Composite Rating of 98.
Earnings performance is the stock’s key strength. EPS popped by an average of 114% over the past three quarters. This is well clear of CAN SLIM requirements. It rose by a higher 241% in the most recent quarter alone.
The recent Stock Of The Day makes Invisalign, a clear plastic alternative to metal braces. Last year, more than 30,000 patients enrolled in virtual care for their Invisalign systems, the company told Investor’s Business Daily in a recent email.
Align says the Covid pandemic forced dentists to find workarounds to frequent in-office visits.
“Invisalign providers are using our virtual tools to minimize in-office appointments and deliver doctor-directed, personalized treatment that meets the needs of the moment,” the company said. “And that will re-share the future of treatment.”
Analysts say demand for the Invisalign systems is just a hair below pre-pandemic levels.
Dentists use three-dimensional scanners to capture images of patients’ teeth. Align uses those images to make a series of progressive aligners. Those aligners put pressure on specific spots in the teeth. That differs from traditional metal braces, which pull indiscriminately on all teeth.
Align is getting set to post Q2 earnings on July 28. While some may be tempted to buy a stock ahead of a potential earnings move, investors should remember IBD recommends using options as a strategy to limit risk. It is a way to capitalize on the upside potential of a stock’s move around earnings, while reducing the downside risk.
ALGN stock analysts call for adjusted earnings of $2.54 per share on $938 million in sales. Under that model, earnings would swing from a year-earlier loss, according to FactSet. Sales would skyrocket 166.5%.
Align completed its acquisition of Exocad, a company that uses software to design and make precision tools for dentistry. The company says it also invested in branding.
Square Stock
Paypal rival Square is in a buy zone after passing a new cup with handle entry 254.88. The buy zone runs as high as 267.62. The current base is second stage, which is a positive.
Square stock rebounded strongly from its 50-day moving average starting on July 19, and this key technical benchmark looks to be bending upwards again after a mild downward trend
The relative strength line is rising lately, however investors will want to see continued improvement on this front.
Square stock boasts a perfect Composite Rating of 99, with earnings performance currently its strongest feature. The stock has still managed to post a strong gain of more than 21% so far this year though.
Institutional support has been stout of late, with the stock boasting an Accumulation/Distribution Rating of B-.
The recent IBD 50 Stocks To Watch pick posted a Q1 sales increase of 266% to $5.05 billion. Meanwhile, EPS jumped from a loss of 2 cents a share to a 41-cent profit per share. The firm is getting set to report its latest results on Aug. 5.
Square saw a significant revenue increase from its subscription and services-based products. For this segment, revenue was $558 million in the first quarter, up 88%. The company’s popular Cash App delivered strong growth in the first quarter, generating $4.04 billion of revenue, an increase of 666%.
Square stock experienced major growth in 2020 as investors focused on the growth of its consumer Cash App. But the digital payment processor warned that the app expects slower growth as government stimulus payments to consumers wind down.
For Q1, Square disclosed a new $170 million investment in Bitcoin on top of its $50 million purchase in October. Square reports Bitcoin holdings as unrealized gains on investments, excluded from adjusted earnings.
In a tweet on July 15, Square CEO Dorsey said the company will create a new business line to help developers build financial services products focused on Bitcoin. Square is “building an open developer platform with the sole goal of making it easy to create noncustodial, permissionless, and decentralized financial services,” Dorsey tweeted.
Roku Stock
Roku stock reached a conventional buy point of 463.09 out of a cup-with-handle base, according to MarketSmith analysis. This comes after it bullishly broke out from a deep double-bottom base with a 397.79 buy entry.
Aggressive investors could have also snapped up shares when Roku stock broke above a short downtrend near 425 on Thursday.
Given that Roku shot up nearly 13% on Friday and 18% for the week, it wouldn’t be a surprise to see shares consolidate or pull back somewhat.
The relative strength line has been spiking of late, however it has yet to clear the highs it reached back in February. A new high will be in reach if progress continues however.
Roku stock boasts a near-perfect Composite Rating of 98m, which reflects its strong overall performance. Since the start of 2021, ROKU stock has popped by almost 43%.
The stock posted earnings per share of 54 cents, up from a loss 45 cents in the same quarter the previous year. Performance has been bolstered by coronavirus lockdowns. Investors will want to see the progress continue when the firm next reports on August 4.
Its strong recent performance is attracting heavy institutional support of late, with its Accumulation/Distribution Rating coming in at A-. In total, 47% of stock is held by funds.
Roku is hoping to get an increase in viewers from the Tokyo Summer Olympics, which run starting Friday through Aug. 8.
It previously announced a partnership with Comcast‘s (CMCSA) NBCUniversal to bring an immersive Olympic experience to streamers on the Roku Platform. In an exciting move, the firm updated its home screen to promote the games.
Roku said it will offer easy access to NBCUniversal’s 5,500 hours of streaming coverage of the Summer Games directly from its home screen. Users will also be able to access coverage of the games via the NBC Sports and Peacock channels.
Needham analyst Laura Martin recently reiterated her buy rating on Roku stock with a price target of 550.
“Roku is a pure-play way to invest in growth of the U.S. over-the-top and connected-TV ecosystems,” she said in a note to clients. “Roku is a walled garden, so it has best-in-class data about its viewers.”
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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