Stocks To Buy: Top Picks

As of July 2024, there are several stocks that investment experts recommend buying now. These include stocks from well-known companies such as Microsoft, Alphabet (Google), Amazon, and Meta Platforms. Nvidia, which designs and sells high-end graphics and video processing chips, is also a good investment option, as it was the best-performing stock in the S&P 500 in 2023. Additionally, investment in healthcare companies like Eli Lilly and Co., which produces brand-name prescription drugs, is recommended. Other stocks to consider include Apple, Spotify Technology, and Sirius XM Holdings.

Invest in stocks with a minimum of 25% annual and quarterly earnings growth

When looking for stocks to invest in right now, it's important to look for companies with consistent profits, good cash flow and other indicators that reflect quality. Here are some stocks that fit the bill and have shown impressive earnings growth:

Meta Platforms (META)

Meta Platforms, the company that owns Facebook, Instagram and WhatsApp, has seen strong earnings growth over the past year, with EPS increasing by 31.9%. Analysts project 22.1% EPS growth on sales growth of 13.2% next year. Meta Platforms has a Composite Rating of 98 out of 99. The stock is trading below its 52-week high and has a price-to-earnings ratio of 33.0.

Goldman Sachs (GS)

Goldman Sachs has seen double-digit earnings growth so far this year, with a three-year EPS growth rate of 21%. The stock has a near-perfect IBD Composite Rating of 97. It is forming a new base with an ideal buy point of 471.48.

Granite Construction (GVA)

Granite Construction has seen EPS growth of 38% on average over the past three quarters. The stock has a perfect Composite Rating of 99. It has formed a flat base with a buy point of 64.33 on its weekly chart.

Universal Health Services (UHS)

Universal Health Services has seen EPS growth of 21% on average over the past three quarters, with a three-year EPS growth rate of 58%. The stock has a very strong IBD Composite Rating of 97. It is trading in the buy zone above a cup-with-handle entry with an ideal buy point of 182.92.

Booking (BKNG)

Booking has seen EPS growth of 47% on average over the past three quarters, with a three-year EPS growth rate of 164%. The stock has a very strong IBD Composite Rating of 97. It has cleared a cup-base buy point of 3,918.

Look for companies with new, game-changing products and services

When looking for stocks to invest in right now, it's important to look for companies with new, game-changing products and services. These companies are likely to experience significant growth and provide strong returns for investors. Here are some examples of companies with new, innovative offerings that may be worth considering for investment:

BILL Holdings

BILL Holdings is a financial technology (fintech) company that provides financial automation software to small and mid-sized enterprises (SMEs). The company's artificial intelligence (AI)-enabled, cloud-based platform automates the receipt and payment of bills and invoices, making it easy for businesses to manage their finances. BILL's revenue surged 65% in its 2023 fiscal year, reaching over $1 billion. The company is growing both organically and through strategic acquisitions, such as its purchase of Finmark, a leading financial planning software provider, in 2022. BILL's focus on innovation and expansion positions it for continued growth and makes it an intriguing investment opportunity.

CrowdStrike Holdings

CrowdStrike Holdings is a cloud-based cybersecurity company that leverages big data and AI to detect threats and prevent breaches. With cybersecurity being a critical and rapidly expanding market, CrowdStrike is well-positioned for growth. The company's annual recurring revenue (ARR) surged 34% in its fiscal year 2024 to $3.4 billion, and they project ARR to rise to over $10 billion in the next five to seven years. CrowdStrike's innovative platform and expanding capabilities make it an attractive investment option in the cybersecurity space.

Lemonade

Lemonade is a tech-based insurance company that utilizes an AI-powered platform to simplify the process of buying insurance and processing claims. Their platform offers a fast and efficient experience, allowing customers to purchase a policy in minutes and process claims in seconds, setting them apart from traditional insurance companies. Lemonade is growing rapidly, with a customer count of nearly 2.1 million in mid-2024, up 13% from the previous year. They are also expanding their product offerings and their international presence, launching homeowners insurance in France in early 2024. With the insurance industry ripe for disruption, Lemonade's innovative approach and expanding market presence make it an intriguing investment opportunity.

Snowflake

Snowflake is a cloud-based data warehouse platform that helps companies store and access their data easily. They have been experiencing rapid expansion, with product revenue soaring 38% to almost $2.7 billion in their 2024 fiscal year. Snowflake sees a massive $248 billion future market opportunity for its cloud data platform and is well-positioned to capture a significant portion of this growing market. Their innovative platform and strong growth trajectory make them an interesting investment prospect.

Toast

Toast is a cloud-based restaurant management software company that provides a point-of-sale and management system to help restaurants enhance their operations, boost sales, and deliver an improved guest experience. Toast has been growing rapidly, with a 32% increase in its annual recurring revenue (ARR) run rate in the first quarter of 2024. They have been expanding their customer base significantly, adding over 6,000 new locations in the same quarter. With a long growth runway ahead, given the vast number of restaurants in the U.S. alone, Toast presents an attractive investment opportunity in the restaurant technology space.

These companies, with their innovative products and services, have the potential to disrupt their respective industries and offer strong investment opportunities. However, it is important to conduct thorough research and carefully consider your investment objectives and risk tolerance before making any investment decisions.

Consider stocks with strong institutional support

When considering stocks to invest in, it's important to look at stocks with strong institutional support. Institutional investors are organisations that control large sums of money and buy large volumes of securities, such as mutual funds, pension funds, insurance companies and universities. They are the main buying and selling force in the market and their involvement is often seen as "smart money".

Institutional investors have the funds and resources to conduct in-depth analysis and find winning growth stocks. They buy large lots with conviction when building or increasing a position, and this process can take months or years. Their buying and selling accounts for up to 70% of activity in most leading growth stocks.

One way to spot if a stock is an institutional favourite is to look at its Accumulation/Distribution Rating. This is a quick way to see if institutions are buying or selling a particular stock. The rating ranges from A+ to E, with A+ indicating heavy institutional net buying and E indicating a barrage of selling. Look for stocks with A+ or B ratings, though C ratings are also acceptable.

Another way to assess institutional support is to check the percentage of mutual fund ownership of a stock. Look for stocks that have seen a significant increase in fund ownership in the most recent quarter and over the last few quarters.

It's also important to consider the quality of the funds that own the stock. Look for top-performing funds with a recent track record of better-than-average performance.

Some examples of stocks with strong institutional support include Meta Platforms (META), which has 48% institutional backing, and Goldman Sachs (GS), with 39% institutional ownership.

Buy stocks with impressive relative strength

When considering what stocks to invest in, it's important to look at those with impressive relative strength. Relative strength is a strategy used in momentum investing and in identifying value stocks. Relative strength investors select stocks that have been outperforming their market or benchmark, with the assumption that this trend of outperformance will continue.

Relative strength can be identified by using the Relative Strength (RS) Rating, which measures a stock's price performance over the last 12 months. The best stocks tend to have an RS Rating of 80 or above as they begin a new climb.

It's also worth keeping an eye on the relative strength line, which compares a stock's price performance to that of the S&P 500. If the RS line is trending upward, the stock is outperforming the general market.

• Expro Group Holdings: Upgraded RS Rating of 71 (up from 65).
• Virtus Invt Partners: Upgraded RS Rating of 76 (up from 68).
• Hess Midstream: Upgraded RS Rating of 75 (up from 70).
• Pembina Pipeline: Upgraded RS Rating of 71 (up from 68).
• Atkore: Upgraded RS Rating of 75 (up from 68).
• MYR Group: Upgraded RS Rating of 73 (up from 70).
• Alaska Air Group: Upgraded RS Rating of 73 (up from 70).

In addition to these stocks, there are other factors to consider when investing. It's important to look at the overall market trend and stay on top of sell signals. For example, if a stock falls 7-8% from your purchase price, it may be time to sell.

Furthermore, it's crucial to remember that relative strength investing works best in stable periods with minimal disruption. During chaotic periods, such as economic uncertainty or conflicts, investment trends can suddenly reverse, affecting relative strength strategies.

Focus on leading stocks in top industry groups

When it comes to investing in stocks, it's important to focus on leading stocks in top industry groups. This means identifying the industries that are performing well and then zeroing in on the top-performing companies within those industries. Here's why this strategy is important and how you can implement it:

• Industry leadership is essential: Studies have shown that industry leadership is a key ingredient for successful stocks. Positive trends in industries often produce winning stocks, rather than the other way around.
• Historical Performance: Historically, winning stocks tend to be found in the top 40 industry groups. By focusing your research on this section of the performance table, you increase your chances of finding stocks with strong growth potential.
• Industry Group Performance: A strong industry group can provide a constant 'tailwind' to your investing success. When an industry group is leading the market, it often means that there are multiple stocks within that group that are experiencing positive earnings and outperforming the market.
• Stock Price Appreciation: Research suggests that about half of a stock's future price appreciation is due to its industry grouping. This means that a winning stock's price movement is significantly influenced by the performance of its industry group.

How to Identify Leading Stocks in Top Industry Groups:

• IBD Industry Group Rankings: Utilize resources such as IBD's industry group rankings, which are updated daily, to identify the top-performing industry groups. You can find these rankings on the IBD website, in IBD Weekly, or in the IBD newspaper.
• IBD Stock Checkup: Use the IBD Stock Checkup tool to identify the top stocks within each industry group. This resource tells you which stocks are at the top of their respective groups and provides valuable information about their Composite, EPS, and Relative Price Strength Ratings.
• Fundamentals and Technical Analysis: When evaluating individual stocks, consider both their fundamentals and their technical analysis. Look for companies with superior fundamentals, including strong earnings growth, and constructive chart behaviour, such as climbing stock prices over time.
• Earnings and Revenue Growth: Focus on companies with impressive earnings and revenue growth. Look for stocks with recent quarterly and annual earnings growth of at least 25%. Also, consider companies that are generating tremendous revenue growth, even if they are not yet profitable.
• Industry Trends and News: Stay informed about industry trends and news by reading industry-specific columns, such as the Industry Themes columns in IBD and Investors.com. Keep an eye out for new economic trends, such as housing and retail gains, or significant structural shifts within an industry.
• Chart Analysis: Learn how to read stock charts to identify good entry points for purchasing stocks. Wait for a stock to form a base and then buy once it reaches a buy point, preferably in heavy volume.

Frequently asked questions