Economists around the world are expecting muted U.S. economic growth in coming quarters, and some are still calling for a mild U.S. recession. It may become difficult for investors to find reliable growth stocks to buy if interest rates remain at 23-year highs for much longer. Buying a stock is easy, but buying the right stock without a time-tested strategy is incredibly hard. So what are the best growth stocks to buy now or put on a watchlist?
Inflation and the Federal Reserve tightening rates aggressively worried investors last year. But the market confounded expectations for difficulties and turned in an outstanding performance in 2023. More moderate gains were expected for 2024, but the benchmark S&P 500 turned in very strong gains for the first half of the year amid growing confidence that the Fed will reach its goal of a soft landing.
What is a growth stock?
Growth stocks are companies that increase their earnings faster than the average business in their industry or the market as a whole. Growth investing, however, involves more than picking stocks that are going up.
Usually the growth company has developed an innovative product or service that is gaining share in existing markets, entering new markets, or even creating entirely new industries. And the faster they grow, the bigger the potential returns.
How to invest in high potential growth stocks?
There are thousands of stocks trading on the NYSE and Nasdaq, but finding the top stocks for investment to generate massive gains is what one aims for.
- Top growth stocks are the one whose recent quarterly and annual earnings growth is up at least 25%.
- Always look for companies that have new, revolutionary products and services. Consider still trying to make a mark companies, often recent IPOs, that are generating tremendous revenue growth.
- Keep an eye on supply and demand for the stock itself, focus on leading stocks in top industry groups, and aim for stocks with strong institutional support.
A watchful eye on stock market before investment
To invest in best growth stocks one has to keep track of the market. Most stocks, even the very best, follow the market direction. Invest when the stock market is in a confirmed uptrend and move to cash when it goes into a correction.
Investors should be looking to buy high-quality issues with good growth prospects. The selections below are among the best stocks to buy or watch now.
Best Stocks To Buy Or Watch
Now let’s look at ServiceNow stock, Tenet Healthcare, Spotify, American Express and Texas Roadhouse in more detail. An important consideration is that these best stocks to buy and watch all boast impressive relative strength.
Salesforce Inc.
Salesforce is the world’s largest provider of cloud-based customer relationship management (CRM) software. In addition to its organic growth, Salesforce has grown via a string of acquisitions in recent years, including its 2020 buyout of Slack. Salesforce reported 11% revenue growth and 670% net income growth in the first quarter. Zino says Salesforce has potential for further market share gains. Revenue growth has slowed, but Zino projects Salesforce can continue to grow annual revenue in the 7% to 9% range through at least fiscal 2027. CFRA has a “strong buy” rating and $300 price target for CRM stock, which closed at $247.63 on July 19.
ServiceNow
ServiceNow has blasted clear of a handle entry of 806.52 and is actionable as high as 846.85.
It’s just below an entry point of 815.32 from the top of the consolidation, MarketSurge analysis shows. This is a third-stage pattern, which counts as midstage.
The stock surged July 25 after ServiceNow beat EPS and revenue views while also doing better than expected in a key growth metric.
ServiceNow bills itself as a digital workflow company. The enterprise software firm recently announced a partnership with Nvidia and Accenture called AI Lighthouse. This aims to accelerate adoption of business AI software.
This will enhances ServiceNow’s Now Platform, a workflow automation system used by pharmaceutical, financial services, manufacturing and health care companies.
Analysts have been impressed by the firm’s efforts, with TD Cowen analyst Derrick Wood saying it is “proving to be one of the most effective names in software to drive GenAI adoption.”
Tenet Healthcare
The health care stock gapped up and is just above the 5% actionable zone above an adjusted buy point of 147 from a flat base. Tenet Healthcare stock has spiked 98% so far this year.
Earnings performance is very strong for the hospital stock, netting it an EPS Rating of 97 out of 99. But Wall Street expects further improvement in 2024, with full-year EPS seen rising 44%.
Performance is already strong. Earnings have grown an average 75% over the past three quarters. This is well clear of the 25% growth sought by Investor’s Business Daily.
Tenet Healthcare is displaying leadership, with shares currently siting at the summit of the competitive Medical-Hospitals industry group.
Spotify
Shares have formed a flat base with an ideal buy point of 331.08, MarketSurge analysis shows. The stock is actionable as high as 347.63. Shares have taken off following an encouraging earnings repot.
The stock has been showing bullish action of late. It reclaimed its 50-day moving average after rallying from consolidation lows and is also clear of its short-term moving averages.
SPOT stock is up 83% so far in 2024. This means it is comfortably outperforming the benchmark S&P 500. It has rallied nearly 19% in the past four weeks alone.
Streaming play Spotify is also in the top 4% of issues in terms of price performance over the past 12 months.
Earnings performance is solid overall, with SPOT stock holding an EPS Rating of 81 out of a best-possible 99.
For the current quarter, Spotify forecast adding 5 million subscribers for a total of 251 million. It also expects to reach 639 million monthly active users in the third quarter.
American Express
Payments stock American Express is in a buy zone after clearing a flat-base entry of 244.41. This is an early-stage base, which means it is more likely to net big gains.
American Express is nearly 7% above its 50-day line after getting bullish support at the 21-day exponential moving average.
American Express has seen its stock price swell by 35% so far this year. This is a comfortably better gain than the benchmark S&P 500’s.
Last Friday, American Express reported better-than-expected Q2 earnings. EPS popped 44% to $4.15, the second straight quarter of accelerating growth. However, revenue of $18.4 billion was light, despite revenue from card fees topping $2 billion for the first time.
Texas Roadhouse
Restaurant stock Texas Roadhouse has been trading tightly for the past two months, with several weeks of support around the 50-day line. It is now flirting with the ideal buy point of 175.51. This is a second-stage pattern, which still counts as early.
The stock’s relative strength line is turning higher following a recent decline, though it remains below 12-month highs.
The firm has seen earnings rise an average 33% over the past three quarters, clear of the 25% level sought under IBD investing principles. EPS has accelerated for the past three quarters. Its three-year EPS growth rate comes in at a solid 17%.
Wall Street expects earnings to rise 39% in 2024 before slowing to 9% growth in 2025.
One concern is that while Texas Roadhouse looks strong, most other restaurant stocks have faltered of late.
