Buying a stock is deceptively easy, but purchasing the right stock at the right time without a proven strategy is incredibly hard. So what are the best Robinhood stocks to buy now or put on a watchlist?
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At the moment, Microsoft (MSFT), Apple (AAPL) and Nvidia (NVDA) are standout performers. Unlike GameStop (GME), which has been hitting the headlines of late, these stocks offer a mix of solid fundamental and technical performance.
Best Robinhood Stocks To Buy: The Crucial Ingredients
There are thousands of stocks trading on the NYSE and Nasdaq. But to generate big gains you have to find the very best. The best Robinhood stocks for investors will be those that offer a mix of earnings and stock market performance.
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.
The Market Is Key When Buying Robinhood Stocks
A key part of the CAN SLIM formula is the M, which 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 Dow Jones Industrial Average, Nasdaq and the S&P 500 are all near all-time highs. After falling towards or below their 50-day moving averages, they have rebounded powerfully. This is a bullish indicator.
With the market in an uptrend it is a good time to buy stocks showing fundamental and technical strength as they move past entry points.
One caveat: The Nasdaq is looking extended, raising the risks of another market pullback. Nevertheless, investors should also be on watch for the major indexes and leading stocks to rev higher amid the current bullish sentiment.
Best Robinhood Stocks To Buy Or Watch
Now let’s look at Microsoft stock, Apple stock, and Nvidia stock in more detail. An important consideration is that these stocks all boast solid relative strength. This means they are outperforming the broader S&P 500 index. They are also part of the Robinhood Top 100 Stocks, the platform’s most popular stocks among traders.
Microsoft Stock
Microsoft stock is around a buy zone after passing a consolidation pattern buy point of 232.96, according to MarketSmith analysis. It has been surging away from its 50-day moving average in recent sessions.
The relative strength line for Microsoft stock has also been moving in line after a recent spike strides of late. The RS line, the blue line in the charts below, tracks a stock‘s performance vs. the S&P 500. Its RS line performance is reflected in the fact MSFT stock has gained more than 10% since the start of the year.
Microsoft is one of only four U.S.-listed stocks with trillion-dollar market caps, and is nearing $2 trillion. In this case big is beautiful as Microsoft stock has a strong, but not ideal, IBD Composite Rating of 88. The Composite Rating is designed to give an instant overview of a stock’s fundamental and technical performance.
A key to Microsoft’s high rating is its excellent earnings performance, which is reflected in its EPS Rating of 96. Microsoft earnings growth has accelerated for the past two quarters, reaching 34% in the most recent quarter.
The software giant easily beat Wall Street’s targets for its fiscal second quarter thanks to growth from its cloud computing businesses. It also guided higher on current-quarter revenue.
Microsoft‘s successful pivot into cloud computing has been driving growth. It has benefited from the work-from-home and learn-at-home trends during the Covid-19 pandemic. Microsoft‘s cloud software and services are aiding at-home workers and students.
“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” CEO Satya Nadella said.
Analysts see Microsoft earnings rising by 28% in fiscal 2021 and by 9% in 2022. MSFT is on IBD’s Leaderboard and Long-Term Leaders stock lists.
Apple Stock
Apple stock is looking to reclaim a 138.89 buy point from a cup-with-handle base. However it has been rallying from its 10-week moving average, which can be used as entry point. Further up, the Jan. 25 all-time high of 145.09 + 10 cents could serve as an alternate entry.
Apple stock gave up 1% last week. Nevertheless it rallied back after slipping below its 21-day exponential moving average, which is a sign of institutional support.
The RS line has been slipping of late. Investors will want to see it make progress on this front going forward.
Apple is another of the select band of firms worth more than a trillion dollars in the U.S. stock market. It is worth even more than Microsoft, with a market cap of $2.3 trillion. Apple stock has a good, but not ideal, Composite Rating of 81 out of a best-possible 99. This puts it in the top 18% of stocks tracked
The IBD Stock Checkup tool shows earnings growth was hit amid the pandemic in recent quarters. Apple has averaged 16% growth over the past three quarters, which is shy of the 25% earnings growth sought by CAN SLIM investors. However EPS grew by a strong 34% in the most recent quarter.
Analysts see earnings growing by a very strong 35% in 2021, before moderating to 5% growth in 2022.
One reason to be bullish on Apple is it continues to produce new products, which is a major success factor in the CAN SLIM system. The firm recently introduced its first Mac computers with processors the company designed itself rather than those supplied by longtime partner Intel (INTC).
Apple executives showed off a lineup of Mac computers running the company’s new M1 processor. The M1 chip delivers up to 3.5-times-faster central processing unit performance than Intel-based Macs. Chip foundry Taiwan Semiconductor Manufacturing (TSM) will make the chips for Apple, using its 5-nanometer process technology.
The M1 news comes after the firm revealed its iPhone 12 lineup of 5G-enabled smartphones as well as the HomePod Mini smart speaker. Apple has also introduced its sixth-generation Apple Watch smartwatches, new iPad tablets, Apple Fitness+ service and Apple One subscription service bundles.
Nvidia Stock
Nvidia stock is in buy zone after breaking out of a flat base pattern. The ideal buy point is 587.76. An earlier entry of 560.07 may have been the more actionable.
The RS line for Nvidia stock looks to be turning positive again after a recent gentle decline. Such periods are common when a stock is consolidating.
Strong fundamental and technical performance has earned Nvidia stock a near perfect Composite Rating of 97.
The Stock Checkup Tool shows recent earnings growth has been impressive. Over the past three quarters, EPS has grown by an average of 81%. This is well clear of CAN SLIM requirements for 25% growth.
Further strong earnings growth could be another catalyst for the recent Stock Of The Day. The Santa Clara, Calif.-based company plans to report financial results for its fiscal fourth quarter on Feb. 24.
Analysts predict that Nvidia will earn $2.80 a share, up 48% year over year, on sales of $4.81 billion, up 55%, in the fiscal quarter ended Jan. 31.
It also could be getting a near-term lift from graphics processing units being used for cryptocurrency mining. Bitcoin is trading near record-high levels. However, GPUs are in short supply.
Elevated Bitcoin prices will “create a near-term demand driver that will soak up any excess supply of GPUs,” Bradley Gastwirth, chief technology strategist for Wedbush Securities, said in a recent note to clients.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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