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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? Merck (MRK), Chevron (CVX), Exelon (ANTM), Golar LNG (GNLG) and Northrop Grumman (NOC) are prime candidates.
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With inflation worries growing, and the Federal Reserve taking a more hawkish approach to interest rates, market action has been challenging so far in 2022. The Russian invasion of Ukraine continues to weigh on markets.
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
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. However it is now trying to rally again, with a new confirmed uptrend coming into force. The S&P 500, the Nasdaq and the The Dow Jones Industrial Average are back off 52-week lows after charging back strongly.
Nevertheless, it remains to be seen if the rally can stick. Investors should make most stock purchases when the market is in a confirmed uptrend. It’s also a good time to add to existing holdings at follow-on opportunities, such as support at the 50-day moving average or at the 10-week moving average.
Given the current market turmoil, investors may want to consider taking smaller pilot positions to ensure they are not overexposed. If the general market and your stocks continue to show strength, you can then buy more aggressively.
Investors should be looking to buy quality stocks, such as those in the IBD 50. These will tend to have rising relative strength lines. The names below are good candidates.
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 Stocks To Buy Or Watch
- Merck
- Chevron
- Exelon
- Golar
- Northrop Grumman
Now let’s look at Merck stock, Chevron stock, Exelon stock, Golar stock and Northrop Grumman stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Merck Stock
Merck stock is in its buy zone from a cup-with-handle base. The buy point here is 89.58. MRK has held up better than most amid the pullback.
The relative strength line has slipped back somewhat but remains near a 16-month high.
The stock currently boasts outstanding all-around performance. This is reflected in its near-perfect IBD Composite Rating of 98.
Big money has been investing in the stock of late, which is why it holds a powerful Accumulation-Distribution Rating of B.
Earnings in particular are a strength, with its EPS Rating coming in at 93 out of 99. Additionally, the stock is up more than 26% over the past 12 months.
The stock shot up following its latest earnings report. Merck earned $2.14 per share, minus some items, on $15.9 billion in sales, up 50% year over year. Merck stock analysts expected $14.56 billion in sales, according to FactSet. Earnings soared 84% and easily beat analysts’ call for $1.83.
Excluding the impact of exchange rates, earnings and sales popped a respective 89% and 52%.
Merck’s biggest moneymaker, cancer treatment Keytruda, raked in $4.8 billion revenue, up 23%. Human papillomavirus vaccine Gardasil generated $1.5 billion in sales, up 59%. In constant currency, Keytruda sales rose 27% and Gardasil sales rocketed 60%.
The Ridgeback Biotherapeutics-partnered Covid-19 treatment called Lagevrio generated more than one-fifth of Merck’s sales during the quarter. It rivals Pfizer’s Paxlovid. Overall sales surged by half in the first quarter. Excluding Lagevrio’s impact, Merck reported 19% sales growth.
The recent IBD Stock Of The Day expects the Covid pill to bring in $5 billion to $5.5 billion in full-year sales.
For the year, Merck now expects to earn $7.24-$7.36 per share on $56.9 billion to $58.1 billion in sales.
However, renewed talk of U.S. price controls has weighed on Merck and other big drugmakers in recent days.
Chevron Stock
Chevron stock is in range from a 174.86 buy point from a flat base.
Ideally, its relative strength line should be at or near a new high when a stock breaks out. Chevron has achieved this with aplomb.
After a successful breakout last October, Chevron stock rallied to new highs. Shares have held above their 50-day moving average since the breakout and the majority of the time as it formed its latest base.
Chevron stock still maintains a near-perfect Relative Strength Rating of 98. While earnings performance is not ideal overall, EPS has jumped by 261% in the most recent quarter.
One more consideration for the stock is its current fund ownership. The number of funds holding CVX increased to 2,886 in the March-ended quarter. This was up from 2,778 funds in the quarter prior. The highly-rated Fidelity Contrafund is a noteworthy holder.
Oil and natural gas prices have continued to rise after the Russian invasion of Ukraine, and this has no doubt helped Chevron. The California-based company said in a recent investor day presentation that it’s increasing production in the Permian Basin. The Permian Basin is the largest U.S. production area, a giant shale oil field spanning parts of Texas and New Mexico.
Chevron’s unconventional production, which typically involves horizontal drilling and fracking, grew to a record 692,000 barrels of oil equivalent per day in the Permian Basin during the first quarter. The company raised 2022 output guidance for the area to between 700,000 and 750,000 barrels per day. This represents an increase of over 15% from 2021. The company is on track to raise the Permian Basin’s output to 1 million barrels a day by 2025.
However, Chevron is not seeking to ramp up overall production too much. Typically, when oil and gasoline prices climb, oil firms invest heavily in increasing production. But right now, Chevron is reaping higher profits without looking to flood the market with increased supply too quickly.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Exelon Stock
The Chicago-based energy provider is closing in on a shallow cup with handle base buy point of 49.96. It continues to trade above its 50-day line.
The relative strength line is trying to fight back after a slight decline of late. A longer-term uptrend remains in tact.
Top class all-around performance has netted the stock a Composite Rating of 94 out of 99. Stock market performance is particularly strong. The stock is up nearly 20% so far this year.
Big Money is a key backer, with the firm boasting six consecutive quarters if increasing fund ownership. More than half its stock is held by institutions.
Exelon is the largest utility company in the United States. It serves more than 10 million customers through six fully regulated transmission and distribution utilities.
These are Atlantic City Electric, Baltimore Gas and Electric, Commonwealth Edison, Delmarva Power & Light, PECO Energy Company and Potomac Electric Power Company.
Until February 2022, it not only marketed and distributed energy, but it generated it as well through its Constellation Energy Generation unit. Acquired in 2012 for $7.9 billion, this Baltimore, Md.-based side of the business owns interests in 13 nuclear power plants. Those generation stations produced 20,899 megawatts as of Dec. 31, 2021 for Exelon, making up the vast majority of its generation resources, according to SEC filings.
Fossil fuels, primarily natural gas and oil, ranked second in generation with 8,819 megawatts. Renewables accounted for another 2,680 mw. The company contracted third party generation for an additional 4,100 mw.
But in February, Constellation Energy Generation split from EXC, becoming Constellation Energy (CEG). Exelon is now become a utility giant strictly distributing energy with electrifying market results.
The company has been working hard to thrive despite higher interest rates, rising commodity prices and inflation. It has also had to weather rising energy prices stemming from Russia’s invasion of Ukraine making already soaring inflation climb higher.
The company just missed Q1 earnings views but beat predictions on revenue. Importantly, it maintained its full year earnings per share guidance of $2.18 to $2.32.
Golar Stock
GLNG stock is actionable as it rebounds off its 10-week line. The stock has also been flirting with its official consolidation buy point is 26.70, though it now sits just below it.
Shares have been bouncing back well following a nasty reversal following first-quarter earnings. It recouped its losses and more, and now sits above the 50-day line. GLNG stock turned in a gain of more than 2% last week.
The relative strength line of Golar stock currently looks mighty. It is in the top 1% of stocks in terms of market performance over the last year.
Since the start of 2022 alone the stock has seen its share price shoot up by nearly 102%.
One caveat is earnings are yet to catch up to its stellar price performance. This is reflected in its EPS Rating of 46 out of 99.
GLNG stock has been rising since late February, when more nations and other customers began to seek oil and natural-gas sources outside of Russia.
Russia’s war on Ukraine, begun Feb. 24, sent oil and gas prices higher as concerns mount over supply disruptions, and as buyers work to avoid sanctions.
The company runs two carrier ships that haul liquefied natural gas. It has also begun converting ships into floating LNG (FLNG) terminals. These offshore facilities process natural gas produced from undersea sources into LNG close to the production source. Golar has one operational FLNG vessel, and has another undergoing the conversion process.
Golar LNG sold off two subsidiaries in April.
What To Do As Market Looks To Rebound
Northrop Grumman Stock
NOC stock is actionable after it moved above a buy point of 477.36 from a bullish cup with handle base.
Among the big defense contractors, NOC stock was the only one that held support at its 50-day line amid recent challenging action, a bullish sign.
Northrop Grumman won a spot on the prestigious IBD Leaderboard list after it soared clear of a trend line within its handle.
Northrop’s relative strength line has climbed to a two-year high, reinforcing its position as one of the current stock market leaders. It is up more than 24% so far in 2022.
Northrop Grumman fills in the role of a leader within a cyclical area of the market that had struggled as a laggard for years until Vladimir Putin’s Russia attacked Ukraine in February. Meanwhile, China-Taiwan tensions continue to remain high.
On Northrop’s April 28 first-quarter earnings call, CEO Kathy Warden said the budget request fully funds initial production of the B-21 Raider stealth bomber. Biden’s defense budget plan also includes a “significant year-over-year increase in development funding” for a new intercontinental ballistic missile known as the Ground Based Strategic Deterrent.
The Air Force plans to spend $20 billion for B-21 production over five years. In 2020, Northrop received a $13.3-billion contract to develop the new ICBM.
While Northrop’s revenue and EPS have trended lower in recent quarters, those and other programs are expected to fuel growth in 2023 and beyond.
Northrop also recently announced a 10% increase in its quarterly dividend, to $1.73. That makes 19 straight years of higher dividends.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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