Best Stocks To Buy And Watch Now: 5 Top Stocks For January 2023
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? Caterpillar (CAT), Celsius (CELH), Insulet (PODD), Medpace (MEDP) and AbbVie (ABBV) are prime candidates.
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With inflation worries high, and the Federal Reserve tightening rates aggressively, market action was challenging in 2022, with more difficulties expected in 2023. The Russian invasion of Ukraine also 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. The market overall has been choppy since then, with bear market rallies often being undercut by painful drawdowns. The S&P 500, the Nasdaq and the Dow Jones Industrial Average have been reversing once again following the latest Fed meeting.
The stock market is currently in a correction. Investors should be taking a defensive posture. Investors should avoid buying stocks altogether. It is also important to start raising cash and be entirely off margin. Start by selling your weakest performing stocks first. Only if you have great conviction in a stock and have a profit cushion should you consider holding through a correction.
It’s crucial to 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.
A good way to stay engaged is to build up one’s watchlist of potentially actionable stocks. Focus on fundamentally strong stocks coming out of sound chart patterns, such as those in the IBD 50. These names will tend to have rising relative strength lines. The stocks 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
- Caterpillar
- Celsius
- Insulet
- Medpace
- AbbVie
Now let’s look at Caterpillar stock, Celsius stock, Insulet stock, Medpace stock and AbbVie stock in more detail. An important consideration is that these stocks all boast impressive relative strength.
Caterpillar Stock
CAT stock has formed a new flat base with an ideal buy point of 239.95 next to a deep cup base. It currently sits in the buy zone.
The relative strength line is just below highs. It had taken a breather following a sharp upwards spike from late September until early November.
The Dow Jones stock currently holds a very strong IBD Composite Rating of 98 out of 99. While stock market performance is its strongest suit, solid earnings are reflected in an EPS Rating of 85 out of 99.
Investors may wonder why CAT stock is making such a strong move when the global economy could be potentially sliding toward recession in 2023.
Even in a soft landing, residential construction, which accounts for 25% of Caterpillar’s construction industry sales, is going to struggle. In addition, China, which drives a lot of the demand for global commodities, is also having a tough time.
But Caterpillar has so many other things going in its favor, starting with three big Biden-era spending packages. Together they could plow $1 trillion into earth-moving projects over a decade, starting with the $500 billion in new infrastructure spending approved in the fall of 2021.
Then, over the summer, Congress passed the CHIPS Act to boost domestic semiconductor production with up to $250 billion in authorized funding. And the Inflation Reduction Act will put up $369 billion to expedite the mining projects and the build-out of green energy infrastructure. That includes factories to make EV batteries, photovoltaic cells and wind turbine blades.
Those latter two bills tap into the push to build a domestic supply chain for critical inputs. That has become all the more important amid Russia’s invasion of Ukraine and growing tensions with China.
Caterpillar’s energy-sector business also stands to benefit from Europe’s push to secure non-Russian energy capacity, including the buildout of terminals for shipping LNG.
As Wall Street probes potential weak spots in the thesis of a sustained investment upcycle for Caterpillar, there’s more reason to be reassured. Strong order backlogs are providing a degree of visibility, while Caterpillar says that dealer inventories are at the low end of the typical range.
CAT management says the company can pivot quickly if conditions warrant, as it did when sales tanked after Covid hit. « We still met our margin targets that year, » CEO Jim Umpleby said in the Q3 earnings call on Oct. 27. « So again, we know what to do. But as we sit here today, even though we’re watching things very closely, we continue to see healthy demand across most of our end markets. »
Celsius Stock
Celsius is looking to clear a cup with handle base. It is shooting for a 122.34 buy point. The RS line has backed off highs, but an upturn could energize a breakout.
Its latest entry comes an early December breakout past a cup-base buy point at 118.29 failed.
Celsius stock could offer an early entry if it clears the 21-day line decisively, with a move above the Dec. 27 high of 109.31 as a specific trigger. It needs to find support at its 50-day line first.
The stock is particularly strong on the technical front. Over the past 12 months it is in the top 3% of stock in terms of price performance.
Celsius is a fast-growing marketer of fat-burning beverages that contain no sugar, preservatives, aspartame or high fructose corn syrup. After registering years of losses, the Boca Raton, Fla.-based firm turned its first annual profit in 2019.
Over the past four quarters, revenue growth has ranged from 117% to 192%. In the third quarter, Celsius doubled sales on Amazon (AMZN), which is a key sales platform.
On Aug. 1 PepsiCo (PEP) said it is investing $550 million for an estimated 8.5% ownership stake as part of a long-term distribution deal with the energy drink maker.
The fizzy drinks behemoth already has an interest in the energy drink space, for it acquired Rockstar Energy for $3.85 billion in 2020.
But energy drinks are one of the fastest growing beverage segments outside of alcohol, meaning that mixing its drinks in the space could lead to bigger profits.
The stock was promoted to the S&P MidCap 400 from the small-cap S&P 600 on Aug. 10.
Celsius notched a Q3 loss of 28 cents a share, but revenue jumped 98% to $188.2 million. Following a heavy investment year that may lead to a net loss of $2.42 a share, Celsius is seen returning to the black with a profit of $1.11 a share in 2023.
Analysts forecast Celsius earnings will rebound to $1.11 in fiscal 2023 from a loss of $2.42 in 2022 (which includes the third quarter’s $2.46 per share loss).
Revenue gains are seen slowing from 107% in 2022 to a still-mighty 50% in 2023.
Looking For The Next Big Stock Market Winners? Start With These 3 Steps
Insulet Stock
The diabetes treatment firm has formed a flat base with an ideal buy point of 320.10. It comes after it consolidated soon after passing a double-bottom base entry of 283.38.
A strong move above the Dec. 29 high of 300.92 could offer an aggressive entry.
The relative strength line is near all-time highs, and an upward spike could see it push to fresh heights once again.
It has been outperforming the S&P 500 over the past few months. Indeed, PODD is in the top 7% of stocks in terms of price performance over the last 12 months.
Insulet reported an annual profit for the first time in 2018. EPS is now beginning to ramp up in earnest. Analysts expect full year earnings to grow 88% in 2022 and then vault 151% in 2023.
The stock was given a boost after the firm crushed September-quarter expectations. The company also raised its guidance for full-year revenue, with burgeoning growth for its Omnipod insulin delivery system in the U.S.
Insulet makes insulin pumps for diabetes treatment, a growing market due to the increasing number of diabetes patients worldwide.
There are two types of diabetes. Type 1 typically presents in childhood and is due to a genetic defect. These patients need insulin to survive. Type 2 is usually diagnosed in adulthood. These patients can worsen to the point they also need insulin.
Insulin pumps are more common in type 1 diabetes treatment because parents can struggle to give their diabetic children multiple shots each day. But Insulet has noted increasing interest from type 2 patients, especially from Medicare.
Insulin pumps respond when blood sugar levels fall out of a patient’s desired range. When insulin falls too low, patients can experience a variety of symptoms, like blurred vision and drowsiness. High insulin levels can lead to weight gain, hunger and fatigue.
The stock was given a boost after its Omnipod 5 product was cleared in the U.S. and Europe for children as young as age 2 with type 1 diabetes.
Test results in young children have been promising so far, according to BTIG analyst Marie Thibault. After three months, 90% of children who wore Omnipod had « very good » or « fairly good » sleep, up from 65% at the beginning of the study. Further, there were no severe side effects, she said.
Shares have a rich valuation, Bank of America Securities analyst Travis Steed said in a recent report to clients.
« This is in line with high-growth diabetes companies, which we think is reasonable given Insulet’s high-growth recurring revenue business model and competitive positioning with a recent new product approval, » he said.
Medpace Stock
Medpace stock has formed a consolidation pattern with an ideal buy point of 235.82. The relative strength line is making progress again, a good sign.
The stock is currently looking for support at its 50-day moving average. The Dec. 29 bounce, which also broke a trendline, offered an early entry, but MEDP gave up some of those gains on Dec. 30.
Overall performance is excellent, with the stock holding an IBD Composite Rating of 96. It holds a rare perfect EPS Rating of 99.
Medpace is also in the top 5% of stocks in terms of price performance over the past 12 months.
Medpace is among a group of companies that provide the backbone for research into new drugs and medical devices. About 85% of its revenue is tied to the biotech segment — an area that saw massive growth in early 2022, but has since faced a number of headwinds.
But Medpace shocked investors when it beat quarterly expectations, raised its full-year outlook and offered a strong 2023 outlook.
At the midpoint, Medpace expects 18% sales growth next year, UBS analyst John Sourbeer says.
« To us, the key question is ‘How achievable is this growth rate?’ » he said in a recent note to clients. « In a normal environment, we believe growth above 20% would be achievable, particularly given the company’s focus on smaller/faster growing biotech companies. That said, given the headwinds for this segment of the market right now, in our view guidance needed to be below this level for 2023. »
The next big catalyst for Medpace stock could be its Q4 earnings report. Analysts expect Medpace to earn $1.86 per share, minus some items, on $386 million in sales. Earnings would rise almost 38% and sales would surge about 25%, according to FactSet.com.
It’s also important to note, annual profits are growing. Last year, Medpace earned $4.81 per share. This year, MEDP stock analysts call for $6.97 per share, rocketing 45%. By 2026, analysts project Medpace earnings of $13.05 per share. Annual sales growth is on a similarly strong trajectory.
AbbVie Stock
ABBV stock has formed a cup with handle base. The ideal buy point in this case is 167.85.
A rise above the Dec. 28 high of 164.69 would offer an early entry. It sits just below this level.
The relative strength line has just hit fresh heights. This is a bullish sign.
The pharma blue chip stock launched in 2013 as a spinoff from Abbott Laboratories (ABT).
It shown strong results and solid financials. S&P has AbbVie’s debt rated at (BBB+) and last month raised its outlook to « positive » from « stable. »
Stock market performance has been particularly impressive of late. It gained 19.3% in 2022, much better than the S&P 500’s fall of 20%.
Earnings are also outstanding. The stock currently holds a top-notch EPS Rating of 95 out of 99.
On concern surrounds its best-known and most profitable drug is Humira, which is used to treat rheumatoid arthritis. The treatment contributed a robust 40% to total revenue in 2021.
But Humira is now patent-free. A big test comes next year when generics come to market in the United States. Humira sales missed Q3 expectations, growing just 2.5% to $5.56 billion.
Nevertheless, third-quarter results show other AbbVie drugs are hitting the mark. Skyrizi, a Crohn’s disease treatment, is most notable. The compound booked a 75% year-over-year jump in revenue to $1.39 billion, aided by a recommendation from the European Medicines Agency.
Humira competition will likely hit AbbVie’s growth in the short term. But solid fundamentals and strong results in other segments make AbbVie an interesting play, best suited to income-seeking investors. These types of investments are especially hard to find in the biotech industry.
AbbVie currently ranks second in IBD’s Medical and Ethical Drugs group.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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