Investing in stocks requires a well-defined strategy to ensure you choose the right stocks that can yield significant returns. With thousands of stocks available on the NYSE and Nasdaq, it’s crucial to identify the best stocks that present great opportunities. In this article, we’ll explore five stocks that stand out as prime candidates for investment and further examination: Chipotle Mexican Grill (CMG), Visa (V), Salesforce (CRM), DexCom (DXCM), and HubSpot (HUBS).
The Best Stocks to Buy: Key Factors to Consider
When selecting stocks for investment, it’s essential to focus on certain crucial ingredients that contribute to their potential for substantial gains. Here are some factors to keep in mind:
- Earnings Growth: Look for stocks with consistent quarterly and annual earnings growth of at least 25%. This signifies a company’s financial health and profitability.
- Game-Changing Products and Services: Consider companies that offer innovative and disruptive products or services, as these often lead to significant growth and market success.
- Revenue Growth: Not-yet-profitable companies, including recent IPOs, can still be excellent investment opportunities if they demonstrate exceptional revenue growth.
The CAN SLIM System: A Proven Investment Strategy
The CAN-SLIM system provides clear guidelines for identifying winning stocks. It has a track record of outperforming the S&P 500 and generating exceptional returns over the long term. Here are the key components of the CAN-SLIM system:
- C: Current Quarterly and Annual Earnings: Look for stocks with strong earnings growth over the past three quarters and years.
- A: Annual Earnings Growth: Identify stocks with consistent annual earnings growth of at least 25%.
- N: New Products, New Management, and New Highs: Consider companies with new and innovative products, effective management teams, and stocks that have reached new price highs.
- S: Supply and Demand: Analyze the stock’s supply and demand dynamics, focusing on leading stocks in top industry groups.
- L: Leader or Laggard: Invest in stocks that lead the market and their respective industries.
- I: Institutional Sponsorship: Look for stocks with strong institutional support, as it indicates confidence in the company’s potential.
- M: Market Direction: Invest when the overall market is in a confirmed uptrend and move to cash during market corrections.
The Importance of Stock Charts
Once you’ve identified a stock that meets the CAN SLIM criteria, it’s crucial to analyze stock charts to determine the optimal entry point. Here’s what you should consider:
- Base Formation: Wait for the stock to form a base, indicating a period of consolidation and stability.
- Buy Point: Purchase the stock when it breaks above the left-side high of the base, ideally accompanied by high trading volume.
- Market Trend: Monitor the overall market trend and align your investments with the direction of the market.
Analyzing the Best Stocks: Chipotle Mexican Grill, Visa, Salesforce, DexCom, and HubSpot
Now let’s delve into the specific details of these five promising stocks:
Chipotle Mexican Grill (CMG)
CMG stock is currently in a flat base with a buy point at $2,139.88. While it briefly cleared this entry on June 30 and July 3, it never closed within the buy zone. Currently, the stock has retraced back to its 21-day and 10-week moving averages.
Chipotle Mexican Grill operates a chain of over 3,000 fast-casual Mexican restaurants, primarily in the U.S., Canada, and Europe. Under new leadership since March 2018, the company has rebounded from previous food safety incidents and successfully implemented a digital strategy to improve the customer experience and increase sales. With a loyal customer base and strong earnings growth, Chipotle has demonstrated its potential for further success.
Visa stock is actionable after breaking out from a flat base with a buy point at $235.57. It has also rebounded above its 50-day line and broken a trendline, both of which offer early entry opportunities. The stock’s relative strength line is showing positive momentum after a period of consolidation.
As a leading payment processor, Visa benefits from the growth of digital payments and increased global transaction volumes. The company has consistently delivered strong earnings growth and posted eight consecutive quarters of sales and earnings gains. With a resilient U.S. consumer base and a positive outlook for international transactions, Visa is well-positioned for continued success.
Salesforce is currently bouncing off its 10-week/50-day moving average and has the potential to break above a short-term trendline at $214.62, offering an early entry opportunity. Alternatively, it is forming a flat base with a buy point at $225, which is still considered an early stage and presents an opportunity for substantial gains.
As a provider of software solutions for sales and customer relationship management, Salesforce has witnessed impressive earnings and sales growth over the past eight quarters. The company has expanded into various areas, including marketing, customer service, and e-commerce. Its efforts in generative artificial intelligence (AI) have the potential to further enhance productivity and drive future growth.
DXCM stock is currently within a buy zone after clearing a flat base entry point of $126.44. Although it experienced a brief setback after initially surpassing the buy point in early June, the stock rebounded and returned to the buy zone by the end of the month.
DexCom specializes in continuous glucose monitoring systems for patients with diabetes. The company’s innovative products have revolutionized diabetes care, and it has consistently achieved profitability over the past few years. With the recent launch of its newest sensor, the G7, DexCom is poised to further solidify its position as a leader in the market.
HubSpot stock is currently attempting to break out from a four-weeks-tight pattern with an entry point of $535.12. Although a previous breakout attempt faltered, the stock found support at its 21-day exponential moving average and 10-week lines, showing potential for renewed upward momentum.
HubSpot specializes in helping businesses automate their marketing and sales operations through its cloud-based platform. The company has experienced significant earnings and sales growth over the past eight quarters, with a strong focus on AI technologies. HubSpot’s strategic initiatives in the AI space, including its content assistant and ChatSpot.ai, position it for continued success and value creation for customers.
When it comes to investing in stocks, conducting thorough research and analysis is crucial. By following a proven strategy like the CAN SLIM system and considering factors such as earnings growth, new products and services, and market trends, you can identify the best stocks with the potential for substantial gains. Chipotle Mexican Grill, Visa, Salesforce, DexCom, and HubSpot are all worth considering for investment or further monitoring due to their strong fundamentals, performance, and growth prospects. Remember, the stock market can be unpredictable, so it’s essential to stay informed and adapt your investment strategy accordingly.