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Finding the best growth stocks to buy is no easy task. But you can streamline your search by following a simple buying checklist. In both bull and bear markets, regularly checking time-tested stock screens can help you put the best potential stock picks on your list of stocks to watch. While well-known tech and growth stocks like Apple (AAPL), Alphabet (GOOGL) and Nvidia (NVDA) will come on and off these stock lists depending on market conditions, checking the names on lists like the IBD 50, IBD Long-Term Leaders and IBD Sector Leaders always provides a good starting point.
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This process will help you identify and track stocks such as NVDA, AAPL, GOOGL and Microsoft (MSFT). In strong markets, household names like Meta Platforms (META) (formerly known as Facebook), Amazon.com (AMZN), Netflix (NFLX) and fellow FANG stock Alphabet may also make an appearance.
After posting a strong rebound from the coronavirus crash in 2020, NVDA stock soared to a new high in November before getting ravaged in this year’s bear market. Prior to breaking down, Nvidia showed up on IBD stock screens, as well as lists of new buys by the best mutual funds, before falling off along with Apple, Microsoft and Alphabet in recent months.
Boosted by pandemic-driven demand for streaming, in April 2020 NFLX stock reached an all-time high following a breakout. But Netflix crashed below its 10-week line the week of Dec. 3, leading to a severe decline. It’s a reminder of how successful investing isn’t just about picking stocks. Having sell rules and a risk-management strategy is essential. Using a checklist for when to sell stocks helps with that.
GOOGL stock has also made multiple IBD stock lists over the years, offering several buy points along the way.
AMZN stock provides yet another example of how tech stocks have felt the claws of this year’s bear market. While the monthly stock chart shows the huge move the e-commerce and cloud giant made in the bull market that began in 2009, Amazon has now tumbled below its 10-week moving average.
Viewed from a longer-term perspective, these stock screens also help you zero in on IBD Long-Term Leaders, such as Alphabet, MSFT stock, Monolithic Power Systems (MPWR) and Synposys (SNPS).
In a better market for initial public offerings, you’ll also find younger stocks to watch on IPO Leaders. Currently only two IPOs — Li Auto (LI) and Harmony Biosciences (HRMY) — make that screen.
Find The Best Stocks To Buy And Watch
The company names will change over time and across fluid stock market cycles. But the traits of winning stocks you look for remain the same.
Here’s an effective way to hone your stock picks and zero in on the best stocks to buy and watch. Focus on stocks with exceptional earnings growth that are breaking out of a chart pattern during a strong market uptrend.
For beginning investors unsure of how to start investing in stocks (or for experienced investors looking to save time), start with this simple three-step routine.
Maintaining your list of stocks to buy and watch is an ongoing process. Regularly use lists like IBD Long-Term Leaders, IBD Sector Leaders, IBD 50, IBD Big Cap 20 and IPO Leaders to continually find potential stock picks.
As noted earlier, be sure to also have sound rules for when to sell stocks since even the best stocks eventually falter, especially in a bear market or market correction. The 2020 coronavirus stock market crash and rebound only reinforced that reality.
Find The Best Growth Stocks With The IBD Stock Screener
Stock Picks: Growth Stocks — Focus On Big EPS Growth
Through a groundbreaking study of 100-plus years of market history, IBD identified seven common traits of winning stocks, with earnings growth being one of the most critical factors.
During their big moves, top performers like GOOGL, AAPL, NVDA, AMZN, MSFT and NFLX have all shown explosive, even triple-digit, earnings growth as their share prices rose dramatically. New IPO stocks to watch, such as HRMY and LI stock, have also shown many of these key stock-picking traits.
So as you go through a buying checklist to evaluate your potential stock picks, look for companies posting 25% or higher earnings growth.
Be sure to also use IBD Stock Checkup to check your stock’s EPS Rating and many other key stock-picking metrics. You’ll instantly see if the stock earns a pass or fail grade for both its quarterly and annual earnings growth.
Tips On Evaluating Earnings Growth
Stock Picks: Look For Growth Stocks Forming Chart Patterns
Just because a company has stellar earnings growth doesn’t mean it’s a good time to buy its stock. Several other factors come into play, including the stock market trend and the action in the stock chart. You can significantly improve the performance of your stock picks — and reduce your risk — if you make sure the stock chart and the market are giving you the green light to buy.
Chart patterns serve as a launchpad for a stock’s new climb. Also known as bases or consolidations, these patterns form after a stock has already climbed and is now taking a breather to hopefully set up a new run. The ideal time to buy a stock is when it completes that base and proves its strength by punching through a point of resistance in heavy volume.
The most profitable and common chart patterns to look for are the cup with handle, double bottom and flat base. Once you identify companies with strong earnings that are also forming one of these three patterns, you’ll be well on your way to finding the best stocks to buy and watch.
Winning moves from AAPL, NVDA, GOOGL, AMZN, NFLX, META stock and countless others over the years prove this point. Virtually all of the market’s biggest winners form one or all three of these patterns as they make their big climbs.
These chart patterns repeat again and again, year after year.
Tips On How To Read Stock Charts
Stock Picks: Where To Find The Best Stocks To Buy And Watch
To help streamline your research, IBD provides a collection of time-tested stock lists. These screens are computer-generated, based on proven criteria rather than opinions.
The criteria come from our extensive study of over 100 years of market history in which we identified the common characteristics winning stocks share in the early stages of a big move. With these screens, we highlight today’s stocks that are most strongly showing those same telltale traits.
While you should never buy a stock just because it’s on one of IBD’s screens, these lists are an excellent starting point for building a high-quality, actionable watchlist.
Be sure to regularly check IBD Stock Lists Update to see which companies just came on and off IBD’s top screens.
Tips On Where To Find The Best Stocks
Tips On Finding The Best Stocks To Buy And More
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
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