2022 was a tough year for many of the best stocks to buy and watch, hurt in part by rising interest rates and an increasingly hawkish Federal Reserve.But a handful of the best stocks to buy and watch in the technology sector are holding up well as the stock market tries to bottom.
X Interest rates have been dropping, but they haven’t been dropping due to lower inflation expectations; instead, they’ve been falling in anticipation of a sharp slowdown for the economy this year.The 10-year Treasury yield recently fell all the way down to 3.33% after hitting a high of 4.3% in October.
Fear of a recession and concerns about contagion in the financial sector after the collapse of SVB Financial ( SIVB ) and Signature Bank ( SBNY ) have made it an extremely challenging environment for many of the best stocks to buy and watch.But buyers have lifted the stock market off lows as hopes grow for a soft landing for the U.S.
economy.
Stocks with high P-E ratios like Tesla ( TSLA ) and Nvidia ( NVDA ) were hit hard by institutional selling in 2022, along with security software stocks like CrowdStrike ( CRWD ) and Zscaler ( ZS ).
A rising interest rate environment isn’t good for the best stocks to buy in the tech sector with high multiples.
Why? Because it makes for a more challenging operating environment.
If the stock market senses any possibility of a slowdown in earnings growth from high P-E names, the selling will hit these stocks first.
Top Traits Of Best Stocks To Buy The best stocks to buy and watch aren’t hard to find, as long as you’re fishing in the right pond.Top stocks like Iridium Communications ( IRDM ) and Impinj ( PI ) don’t get a lot of attention, but both have characteristics seen in past stock market winners before big price moves.
The best stocks to buy and watch boast strong fundamentals along with leading price performance in their industry group.Many also show favorable fund ownership trends.
The best tech stocks also tend to show resilience in down markets.Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.
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Screening for the best stocks to buy and watch is as easy as looking at the MarketSmith Growth 250 , a daily screen of high-quality stocks.Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating , or stocks trading up in price with the heaviest volume.
The best stocks to buy and watch aren’t guaranteed to be huge stock market winners.But they do have qualities seen in past stock market winners before big price gains.
The best tech stocks to buy and watch now include Impinj, Lam Research ( LRCX ), Iridium Communications, Fortinet ( FTNT ) and Workday ( WDAY ).
With the stock market fluctuating, and fresh signs of distribution in the major stock indexes, new buys will most likely have a hard time making meaningful headway.
But when new institutional money starts to come in from the sidelines, the best stocks to buy and watch could easily resume their market leadership, helped in part by strong fundamentals.
Best Stocks To Buy: Impinj Impinj, a dominate chip provider for the Internet of Things (IoT) reported strong earnings on Feb.8, but a 9.5% intraday gain faded to 0.3% by the close.
The stock is prone to volatile swings, and it’s trading just below a prior 129.12 buy point as it tests support at the 10-week moving average .
Quarterly profit soared 156% to 41 cents a share.Revenue increased 46% to $76.6 million.
For the current quarter, the midpoint of Impinj’s revenue guidance was $83.5 billion, well above the consensus estimate at the time of $77.4 million
Annual earnings estimate are also strong.For 2023, full-year profit is expected to soar 63% from 2022.
In 2024, profit is expected to rise 32%.Estimates have been heading higher.
The company makes tracking chips, mostly used for inventory management that can connect items to the internet cloud for customers in retail, transportation, logistics and other industries.It uses a wireless technology called Rain RFID .
Many of the best stocks to buy make their biggest moves from early-stage bases.Impinj still looks early stage after a 58% pullback that started in late December 2021 shook enough sellers out to reset the base count.
Composite Rating : 99 (on 1-99 scale with 99 tops)
Latest-quarter EPS: +156%
Latest-quarter sales % change: 46%
Five-year EPS growth rate: n/a
Annual return on equity: n/a
Up/down volume ratio : 0.8
Fortinet Stock Fortinet turned a lot of heads when the security software firm reported its third straight quarter of accelerating earnings growth on Feb.7.Goldman Sachs on Feb.
14 initiated coverage with a buy rating and price target of 73.
Quarterly profit surged 76% to 44 cents a share.Revenue increased 33% to $1.28 billion.For the full year, revenue was up 32% to $4.42 billion.Total billings increased 34% to $5.59 billion.
Commenting on the results, CEO Ken Xie said: “Our market share gains are being driven by Fortinet’s integrated and single platform approach to cybersecurity combined with FortiASIC technology, which lowers the management costs and the total cost of ownership for organizations.Given our cost-for-performance advantage, the convergence of security and networking, and the consolidation of products and vendors, we expect to continue our solid growth trajectory.”
The bullish earnings report was enough to break FTNT stock out of a downtrend that started all the way back in January 2022.FTNT traded sideways from there while holding support at its 21-day exponential moving average .
The strength and support after the gap up resulted in a bullish move above its mid-February high of 63.02.
A pullback to the 10-week moving average, currently around 62, could present a new entry.But only if FTNT bounces with conviction.Another scenario is that Fortinet could move sideways again and form a flat base .
Composite Rating : 99
Latest-quarter EPS % change: +76%
Latest-quarter sales % change: +33%
Five-year annualized EPS growth rate: 36%
Annual return on equity: 385%
Up/down volume: 1.6
Lam Research Stock The chip-equipment firm is another one of the best stocks to buy as it trades near its 10-week moving average.It still has a ways to go to get to a 533.19 entry.
In January, the company reported a 26% rise in quarterly profit, with revenue +25% to $5.28 billion.Cash and cash equivalents totaled $4.8 billion at the end of 2022.
China, Korea and Taiwan accounted for nearly two-thirds of total revenue in the quarter.
“Lam closed out 2022 with record revenue and earnings per share for both the December quarter and calendar year, despite supply chain challenges and inflationary pressures,” said CEO Tim Archer.
“Given the decline in wafer fabrication equipment spending expected in calendar year 2023, we are taking proactive steps to lower our cost structure…”
Composite Rating : 99
Latest-quarter EPS % change: +26%
Latest-quarter sales % change: 25%
Five-year annualized EPS growth rate: 22%
Annual return on equity: 76%
Up/down volume ratio: 0.9
Iridium Stock Iridium bounced off its 50-day moving average on Feb.16 after the company said Q4 sales jumped 24% to $193.8 million, well ahead of the consensus estimate of around $174 million.
Service revenue, which represents mostly recurring revenue from Iridium’s subscriber base, was 71% of total revenue for Q4.
The company is a provider of mobile voice and data communication services.
“2022 was another strong year for Iridium, driven by continued strong subscriber growth and revenue gains across all business lines,” said CEO Matt Desch.”Our strong liquidity position and growth in free cash flow supported ongoing return of capital to shareholders, including the initiation of dividends in 2023.”
Iridium closed out the year with 1,999,000 total billable subscribers, up from 1,723,000 in the year-ago period.Total billable subscribers grew 16% year-over-year, driven by growth in commercial IoT.
From a technical perspective, Iridium blasted out of a lengthy consolidation in early October.It held gains pretty well after that and eventually formed a flat base near its 10-week line with a 53.71 entry.
A bounce off the 10-week line during the week ended Feb.17.put IRDM in an alternate buy zone.
IRDM broke out powerfully from this base during the week of January 6.The catalyst was news of a partnership with Qualcomm ( QCOM ) to enable satellite messaging and emergency services to Android phones.
IRDM is trading near its 10-week moving average as it forms a flat base with a 65.51 entry.
Composite Rating : 91
Latest-quarter EPS % change: n/a
Latest-quarter sales % change: +24%
Five-year EPS growth rate: n/a
Annual return on equity: 1%
Up/down volume ratio: 1.1
Workday Stock The enterprise software stock is also among the best stocks to buy and watch as it holds above a new entry of 193.74 entry.WDAY cleared a bottoming base with a 184.60 entry on Feb.
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