Stocks to Buy Now
Stocks to Buy Now: Set Your Portfolio for Success
Investors are wondering which stocks to buy now, as broad market indices like the Dow Jones Industrial Average (DJIA) and the S&P 500 are making new historical highs. At the same time, though, the year has witnessed some very volatile swing from the DJIA. Just look at the 10% fall for the Dow Jones Industrial Average between the beginning of 2016 and the middle of February.
So should investors buy into the stock market now? And what are the best stocks to buy now for investors looking to get in?
Here are your answers to all of those questions…
Over the years, the stock market has proven to be the best investment class overall. Yes, stock markets go up and down, and sometimes there are bear markets (pullbacks of 20% or more). Nonetheless, over a 10-, 20-, or 30-year time span, the stock markets have historically provided U.S. investors with the greatest returns.
They have consistently beat the returns of bonds, real estate, and precious metals over these long time periods.
Investors looking for the best stocks to buy today should pay close attention to earnings reports, particularly results for earnings per share (EPS) and price-earnings (P/E) ratio. EPS is the amount of earnings (profit) the company has, divided by its outstanding shares. The P/E ratio is calculated by dividing the current share price by the most recent EPS report.
An ideal portfolio first aims to find the best stocks for solid returns. But it should also protect an investor's wealth by having financially solid companies. The best stocks to buy are those tapped into expanding markets and those whose products will be needed year in and year out.
The following stocks are Money Morning 's best stocks to buy now because they are in either high-growth fields or have products the world cannot live without. They also offer investors solid growth potential, along with rock-solid financials. These are not speculative stocks, they are foundational plays.
Best Stocks to Buy Now, No. 1: Alibaba Group Holding Ltd. (NYSE: BABA)
Alibaba Group Holding Ltd. (NYSE: BABA) is a China-based online retailer that has developed products for financial services, entertainment, and more.
One of its products is a customer-to-customer interface payment system called Alipay. It also offers Yu'Bao, a money market vehicle whose returns are higher than that of Chinese banks. In its first year of operation, Yu'Bao reached roughly 100 million users.
In late 2015, BABA purchased Youku Tudou, a YouTube like site very popular in China. The marketing firm DMR estimates that it has more than 580 million customers.
BABA is poised to benefit from the rising middle class in China, which will be one of the country's major trends going forward.
Money Morning Executive Editor Bill Patalon terms Alibaba a legacy stock. Legacy stocks are good stocks to buy year in and year out because of their long-term appreciation potential. We believe that Alibaba stock is one of the best stocks to buy and hold for the next five, 10 or even 20 years.
Best Stocks to Buy Now, No 2: Apple Inc. (Nasdaq: AAPL)
Another one of Money Morning 's top picks is Apple Inc. (Nasdaq: AAPL). Apple stock is currently selling at $107.68 per share. Its share price was hit earlier in the year on weak quarterly earnings, but it is still a company whose long-term gains are expected to be robust.
It has a large cash hoard, which means it can continue to pay dividends for the foreseeable future. The dividend yield is currently 2.2%. It is also shifting from a company that sells devices to a company that sells services and devices – and services is a smart strategic move, as it is potentially more lucrative.
Apple stock is one of the best tech stocks that investors can buy today, even at its high share price.
Best Stocks to Buy Now, No. 3: Autodesk Inc. (Nasdaq: ADSK)
3D printing is a major technology trend now and is the industry's growth is expected to continue for years to come. Autodesk Inc. (Nasdaq: ADSK) is positioned to be a major beneficiary. ADSK is a 3D printing leader, as well as the #2 computer-aided design (CAD) firm worldwide.
ADSK makes Ember, a 3D printer. It also provides Spark, an open-platform website devoted to 3D printing. A number of tech titans, such as Microsoft Corp. (Nasdaq: MSFT) and HP Inc. (NYSE: HPQ), use Spark.
Money Morning Defense and Tech Specialist Michael Robinson forecasts that ADSK's shares could provide investors with increases in the triple digits over the next three to four years. Currently, ADSK trades at $59.61.
Best Stocks to Buy Now, No. 4: Walt Disney Co. (NYSE: DIS)
For most of 2016, Walt Disney Co. (NYSE: DIS) shares have been trading in a close range. It currently trades at $95.90.
But DIS has one of the strongest franchises of any U.S. business, and its future looks robust. Money Morning's Chief Investment Strategist Keith Fitz-Gerald points to Disney's strength in the "Star Wars" film franchise. USA Today reported that the late 2015 offering, Star Wars: The Force Awakens, returned receipts of $313 million in its debut weekend. It's a franchise that has legs as well. Disney will continue bring in revenue from the Star Wars franchise for years.
It also, of course, has theme parks worldwide. The latest, in Shanghai, opened this summer.
In addition, Disney hiked its theme park prices to reflect peak and off-peak demand, which is expected to add to its strength in revenue.
Best Stocks to Buy Now, No. 5: Facebook Inc. (Nasdaq: FB)
Facebook is a tech titan and one of the best stocks to buy now. Robinson believes that its shares could appreciate to $250 per share by 2020 – more than double its current price of $125.
One of the reasons FB is a top pick is because its businesses are more diversified than its social media image would suggest, and more than its Facebook brand. It is steadily increasing revenue through its purchase of Instagram, which is the favorite social media site of young people. eMarketer, a research firm specializing in the space, estimates that Instagram will provide FB with global advertising topline of as much as 10% next year.
FB's other large play is in the virtual reality (VR) sector. Digi-Capital, another research company, forecasts that VR will be a $150 billion market in 2020. Facebook founder Mark Zuckerberg plans to move into spaces such as medical and education with VR.
FB stock has climbed more than 230% in the last five years.
Best Stocks to Buy Now, No. 6: Lockheed Martin Corp. (NYSE: LMT)
Lockheed Martin Corp. (NYSE: LMT) is a classic example of one of the best stocks to buy now due to strong product demand year in and year out. They make products for military defense. As Robinson observes, military spending is rising. The budget for 2016 is 2% over last year's levels, but it's a 14% advance over 2014 levels.
Lockheed has a contract of $116 million with the United States Air Force for its Joint Air-to-Surface Standoff Missile-Extended Range (JASSM-ER). In addition, between now and 2021, Lockheed will be providing the United States Navy with submarines and ships to the tune of $81 million.
Over the last five years, LMT stock has soared more than 231%. LMT also provides an excellent 2.54% yield.
Best Stocks to Buy Now, No. 7: Northrop Grumman Corp. (NYSE: NOC)
Northrop Grumman Corp. (NYSE: NOC) is a top defense pick.
NOC is one of the best stocks to buy now because it is one of the top companies in a rapidly growing area of defense: C5ISR.
C5ISR is an acronym. The C5 stands for command, control, communications, computers, and cyber intelligence. The S stands for surveillance, and the R for reconnaissance. Essentially, that means they make drones, camera systems, and radar.
But that isn't all. The company also has a contract to develop the U.S. Air Force's B-21 Long Range Strike Bomber. The contract is for $80 billion.
NOC is up more than 300% in the last five years and currently offers a 1.64% dividend.
Best Stocks to Buy Now, No. 8: PowerShares DB Commodity Index Tracking Fund ETF
One of the best strategies in buying stocks is to diversify. If one sector you're invested in has a challenging month, other sectors could be having a period of high growth. It's part of maximizing your portfolio gains while protecting them.
PowerShares DB Commodity Index Tracking Fund ETF (NYSE Arca: DBC) is a Money Morning top pick because it provides a good way for investors to benefit from price moves in commodities futures while not having to worry about physically owning the underlying commodities.
The fund invests in 14 frequently traded commodities: natural gas, corn, silver, gold, light crude, and more.
Given worldwide turmoil – terrorism, the uncertain future of the European Union and the U.K. in the wake of Brexit, and the unclear outcome of the U.S. presidential election – investors will benefit from the traditional safe haven aspects of precious metals like gold and silver. That makes DBC one of the best investments to make now.
DBC has risen approximately 7% since the beginning of 2016.
Best Stocks to Buy Now, No. 9: Phillips 66 (NYSE: PSX)
Another way to ensure a diversified stock portfolio is to focus on dividend stocks. Phillips 66 (NYSE: PSX) currently has a 3.66% dividend yield. That makes it one of the best dividend stocks to buy in the energy sector. The annual dividend has tripled from 2012 levels.
It is also highly likely to reward investors with a long-term outlook.
Phillips is engaged in processing, refining, and marketing oil and natural gas. Revenue totaled $99 billion in 2015, primarily due to its operations in oil refining. Its natural gas operations counterbalance volatility in the oil patch.
Shares of PSX have climbed more than 108% since 2011.
Best Stocks to Buy Now, No. 10: Qualcomm Inc. (Nasdaq: QCOM)
One of the largest trends now and into the future is going to be the Internet of Things (IoT). The IoT refers to smart devices that can connect with each other and the Internet. Your tires may tell your car that they need replacing. Your refrigerator may send an order to the grocery store when you are out of milk. A company's computers will be told when it's time to replace equipment.
All of these systems and devices will need chips to run the information. That means companies making chips will be major beneficiaries from the growth of this sector. SEMI, an industry group, estimates that the IoT semiconductor market will rise to $53.1 billion in 2020. That's a climb of more than 100% from last year's $27.6 billion. It is expected to more than double again by 2025, to $114.2 billion.
Smart investors will see this as an area for the best stocks to buy now.
Our first pick in this sector is Qualcomm. It is currently providing IoT chips for cars, homes, and bodies (in tech you can wear). It has the highest number of patents of any firm.
QCOM, at $61.62 per share, is up more than 25% year to date. Yahoo! Finance projects its EPS for next year at $4.64. Given Qualcomm's price/earnings ratio of just over 18, its price target calculates to roughly $80 based on expected earnings.
QCOM also offers investors an excellent dividend yield, at 3.42% currently.
Best Stocks to Buy Now, No. 11: NVIDIA Corp. (Nasdaq: NVDA)
The second Money Morning pick in the IoT sector is NVIDIA Corp. (Nasdaq: NVDA). NVIDIA centers its chip provision to the self-driving car industry. Currently, 50 car manufacturers and startups make use of its Drive PX platform. This business is a logical extension of its computerization of standard autos, for which NVIDIA provides Tegra chips.
NVDA shares are up an impressive 77% year to date.
Best Stocks to Buy Now, No. 12: Texas Instruments Inc. (Nasdaq: TXN)
TXN is the #3 chipmaker globally. Its primary IoT offering is SimpleLink, a chip line intended to connect IoT devices to the internet and the cloud.
TXN stock has risen 30% since the beginning of the year, and currently stands at $70.10. Its share price is expected to continue to climb based on a projected annual rise in earnings of 10% until 2020.
Its dividend yield is currently 2.17%.
What are good stocks to buy now?
Investors looking for good stocks to buy now should focus on growing industries and industries that will always service a need. For example, the United States Internet Software/Services sector as a whole has climbed 8.6% so far in 2016. This includes companies like Alphabet Inc. (Nasdaq: GOOG, GOOGL) and Facebook Inc. (Nasdaq: FB), and). Another sector to consider is defense stocks. In 2016, the United States Aerospace & Defense sector is up 7.1%. This encompasses stocks like Lockheed Martin Corp. (NYSE: LMT) and Boeing Co. (NYSE: BA).
How do I find the best stocks to buy?
When looking for the best stocks to buy now, it's first important to find companies that have strong financial foundations. With a strong foundation, they won't be impacted by market sell-offs like momentum stocks are. It's also important to find companies that offer products and services that consumers can not live without. These companies will also have stocks that can weather any type of market.
What sectors should I target when looking for the best stocks to buy?
One of the best sectors when looking for the best stocks to buy is the technology sector. Every day, millions of people around the world log on to their smart phones, checking their social media pages, ordering food, and watching movies. Some of the best stocks in the tech industry that provide services we can't live without are Facebook Inc. (Nasdaq: FB), Apple Inc. (Nasdaq: AAPL), Amazon.com Inc. (Nasdaq: AMZN) and Netflix Inc. (Nasdaq: NFLX).