A popular strategy among traders is buying the strongest stocks. Strong buy stocks are referred to as “buying strength.” Others refer to it as momentum trading, and works best in bull markets. Trends typically go further than most traders anticipate, awarding traders profit who buy strong stocks.
This article details high flying stocks that are excellent buys right now. Market strength reaches across sectors in this bull market. For that reason we will focus on diversity in company profiles. This way traders are not responsible for playing favorites in sectors.
Strong Tech Buy Stocks
Twitter, Inc. (NYSE : TWTR) operates as a global platform for public self-expression and conversation in real time. This company flew high after its IPO, but fell out of favor after several quarters. Recently this firm has rejuvenated its business plan and returned to growth. Some believe the election of president Trump contributed to this revival. Whatever the reason, TWTR has many buyout rumors circulating, making bullish sentiment on the name.
Additionally, the company shows sales growth over the past 5 years over 85%. This amount of growth is rare in large cap companies. It is a cash rich company, showing a current ratio of over 10. The company is reaching its target market and growing. Recently, J.P. Morgan added the name to its conviction buy list.
Square, Inc (NYSE : SQ) is a mobile payment service provider for small businesses. Indeed, this is a payment company. However, the company claims to have blockchain initiatives in production. The recent explosion in popularity of cryptocurrencies caused the stock to surge over 200% last year.
Furthermore, the stock has over 10% short interest causing up moves to be extra violent. This strong buy stock is a new company and has much room to grow beyond speculative reasons. The firm shows over 30% sales growth quarter-over-quarter. The company provides technology that is first of its kind. They have a very strong say in where the industry heads next, which is more than many of its peers can say. This makes SQ a strong buy stock today.
Strong Healthcare Buy Stocks
Nektar Therapeutics (NASDAQ : NKTR) develops drug candidates based on its PEGylation and polymer conjugate technology platforms in the United States. This company recently drew buyout interest from the likes of Bristol-Meyers Squibb Co (NYSE : BMY). The stock shows returns close to 40% this year. Additionally, the stock shows over 5% short interest, greatly amplifying any positive news.
Some investors believe that biotech companies are inherently more risky. This may or may not be true, however, when a stock is this hot, negative news is very unlikely. Traders bid the price up in hopes of a takeover or more positive drug news. It is rare that professionals pay this high of a premium for shaky companies.
Abbvie, Inc. (NYSE : ABBV) discovers, develops, manufactures, and sells pharmaceutical products worldwide. This large cap drug maker has proven its space in the industry, having been in existence for over 5 years. This name shows sales growth over the past 5 years of almost 10%. This is very consistent for a drug maker. The company earned investors just over 90% last year, making this name a strong healthcare buy stock.
Most noteworthy, this stock has a price-to-earnings (P/E) ratio of just under 30, making it relatively cheap in this market. This is extremely rare for a high flier such as this. The company has a 52 week range between $60 and $120, showing its ability to move. Traders on the right side of this strong buy stock are rewarded handsomely.
Strong Retail Buy Stocks
Retail is somewhat of a laggard in this bull market. However, this is not a blanket statement as pockets of strength exist. Investors in these strong retail stocks enjoyed healthy returns, some even padded with dividends.
Kohl’s Corporation (NYSE : KSS) operates department stores in the United States. This company caters to middle class American families and shows extreme strength in an otherwise depressed retail environment. They offer a dividend of over 3%, returning cash to investors each quarter.
Furthermore, the stock appreciated over 50% last year and shows short interest over 15%. This scenario invariably leads to higher prices as shorts continue to lose and cover their position. A number of different analysts cover the stock and weigh in on the quarterly results. This coverage includes reputable firms such as Edward Jones and Morgan Stanley. Additionally, the analysts will give opinions on weightings of the stock in portfolios.
Target Corporation (NYSE : TGT) operates as a general merchandise retailer. This successful retailer dates back to 1902, proving its worth to investors and customers alike. This retailer also offers shareholders a 3% dividend.
Most importantly, this company is relatively cheap by many metrics. It has a P/E ratio of 15, giving it a deep discount to the market. A solid metric on which to value retails is price-to-sales (P/S) ratio. It shows how many dollars investors are paying for each dollar of sales produced by the company. Historically, P/S ratios under 1 outperform. TGT currently has a P/S ratio of .6, making it ripe for upsdie gains.
Furthermore, buying strength is historically a low risk approach to investing, measured by volatility. Stocks at highs have the lowest volatility in the market. This is an advantageous approach for investors who are judged in risk adjusted returns. We are currently in the longest and least volatile bull market in history. It makes sense that the best approach is buying the strongest and least volatile names in the market.
In conclusion, these companies and companies with these characteristics make safe bets for investors. Sector diversification makes sense since investors do not miss out on gains. These stocks show relative strength, boosting investor gains. A similar investing style is shown through CANSLIM investing. Furthermore, this strategy involves buying the strongest companies.
This method started in the 1950s and still shows success today. Investing styles do not need to be overly complex. In fact, typically the less complex approaches show the best returns. Finally, investors can use indicators such as moving averages or momentum tools to manage positions. The strength in these names makes them easiest for trade decisions. Once the stock becomes weak, it is simply time to exit the position.