Investing in the stock market can be a rewarding way to grow your wealth, but it can also be daunting and confusing. With thousands of stocks trading on the NYSE and Nasdaq, how do you find the best ones to buy right now?
There is no simple answer to this question, as different investors may have different goals, risk preferences, time horizons and strategies. However, there are some common factors that can help you narrow down your choices and identify potential winners.
In this article, we will discuss some of these factors and provide some examples of stocks that meet them. These are not recommendations, but rather suggestions for further research and analysis. Always do your own due diligence before investing in any stock.
What to Look for in a Stock
While there is no one-size-fits-all formula for finding the best stocks to buy, there are some general criteria that can help you evaluate a stock’s quality, growth potential and value. Here are some of them:
Earnings and revenue growth. A company that consistently grows its earnings and revenue is likely to have a strong competitive advantage, a loyal customer base and a profitable business model. Look for stocks that have grown their earnings and revenue by at least 25% in the most recent quarter and year over year. You can also look for stocks that have beaten analysts’ estimates for earnings and revenue in the past four quarters.
Earnings and revenue stability. While growth is important, it is also important to look for consistency and predictability in a company’s financial performance. A company that has stable earnings and revenue growth is less likely to suffer from sudden shocks or downturns that could hurt its stock price. Look for stocks that have a low standard deviation of earnings and revenue growth over the past five years.
Profit margins and return on equity. A company that has high profit margins and return on equity (ROE) is likely to have a high-quality business that generates a lot of cash flow and reinvests it wisely. Profit margins measure how much of a company’s revenue is left after deducting all expenses, while ROE measures how much profit a company generates with the money shareholders have invested. Look for stocks that have profit margins and ROE above their industry averages.
Price performance and relative strength. A company that has a strong stock price performance and relative strength is likely to have strong demand from investors and positive momentum. Price performance measures how much a stock has risen or fallen over a certain period of time, while relative strength measures how a stock compares to the performance of the overall market or its industry group. Look for stocks that have outperformed the S&P 500 index and their industry peers over the past three, six and 12 months.
Technical indicators and chart patterns. A company that has favorable technical indicators and chart patterns is likely to have bullish signals that indicate further upside potential. Technical indicators are mathematical calculations based on price and volume data that provide insights into a stock’s trend, momentum, volatility and support and resistance levels. Chart patterns are shapes formed by price movements that indicate possible future price movements. Look for stocks that have positive technical indicators such as moving averages, MACD, RSI and Bollinger Bands, and bullish chart patterns such as cup with handle, double bottom, breakout and uptrend.
Examples of Stocks to Buy Today
Based on these criteria, here are some examples of stocks that could be worth considering as potential buys today. These are based on data from Yahoo Finance and Investor’s Business Daily as of May 4th, 2023.