Despite concerns about inflation and the Federal Reserve implementing aggressive rate hikes, the market has defied expectations for challenges in 2023 and has delivered a robust performance so far this year. Market indexes have rebounded strongly after overcoming recent negative trends. The indications of a potential shift in the Federal Reserve’s approach have further fuelled the rally. However, the ongoing Russian invasion of Ukraine continues to cast a shadow over the markets, and the Israel-Hamas conflict adds additional uncertainty.
Best Stock to Buy or Watch:
- Microsoft
- Nvidia Amazon
- Alphabet Inc.
- Apple Inc.
- Citigroup Inc.
Now, let’s delve deeper into Microsoft stock, Nvidia stock, Alphabet stock, Apple stock, and Citigroup stock. It’s crucial to note that all these top stocks to buy and monitor exhibit remarkable relative strength.
Microsoft (MSFT)
The analysis indicates that MSFT stock is currently trading slightly above a cup base buy point of 366.78. Additionally, the stock has developed a five-week tight pattern, featuring an elevated buy point of 384.30. Following this week, it is expected to transition into a flat base.
Investors may consider utilizing the December 13 high of 377.65 as an alternative entry point.
The remarkable performance is evident in its robust IBD Composite Rating, scoring 94 out of 99.
Over the past three quarters, the company has witnessed an average EPS growth of 19%. Moreover, the earnings have displayed an average growth rate of 16% over the last three years, showcasing impressive expansion for a corporation of its size.
Recent trends in Big Money indicate stability in MSFT stock, with its Accumulation/Distribution Rating holding at C-.
In the September quarter, Microsoft Cloud revenue experienced a year-over-year increase of 24%, reaching $31.8 billion, surpassing expectations. This growth also outpaced the performance of Google Cloud and Amazon Web Services, both of which fell below-projected figures.
Over the last three quarters, there has been a notable acceleration in both earnings and sales growth.
CEO Satya Nadella expressed pride in the company’s artificial intelligence initiatives following the release of the results.
“We are swiftly integrating AI throughout every level of the tech stack, serving every role and business process to enhance productivity for our customers,” stated Nadella in a press release. “Through copilots, we are actualizing the era of AI for individuals and businesses worldwide.”
Microsoft’s position in Open AI may have been reinforced following the five-day span during which the AI start-up removed and subsequently reinstated CEO Sam Altman.
Consistent and impressive performance has earned Microsoft stock a place in the IBD Long-Term Leaders Portfolio.
Nvidia (NVDA)
Nvidia currently features a flat base with a 505.48 buy point, and an early entry may be considered at 504.33. This flat base is situated right at the summit of a double-bottom base.
Throughout most of the base formation, the volume has consistently trended below average. However, it finally exhibited above-average trading activity on the upside in the past week. Additionally, the relative strength line is hovering near its peak.
The initiation of this new pattern occurred subsequent to the specialty chip and AI stock reaching its then all-time high on August 24.
NVDA stock maintains an impeccable IBD Composite Rating of 99 and ranks in the top 2% of stocks in terms of price performance over the last 12 months, showcasing a gain of approximately 237% this year.
Earnings stand out as a significant strength, with its EPS Rating registering at 99. The recent impressive earnings growth is emphasized by the Stock Check-up Tool.
Across the last three quarters, EPS has exhibited an average growth of 334%, significantly surpassing the CAN SLIM requirements of 25% growth. Earnings growth has been on an upward trajectory for the past five quarters.
In the latest quarter, Nvidia witnessed a remarkable surge in earnings per share, soaring by 593% to $4.02. Additionally, revenue experienced an impressive surge, exceeding 200% to reach $18.12 billion.
Following the quarterly report, CEO Jensen Huang proudly declared, “Our robust growth reflects the widespread industry transition from general-purpose to accelerated computing and generative AI.”
Alphabet Inc. (GOOGL)-
As of the current moment, Alphabet, the parent company of Google, stands among the exclusive group of five publicly traded companies valued at over $1 trillion. Renowned for its dominance in Big Tech, Alphabet offers a diverse array of services, including its widely used search engine, smart devices, Pixel smartphones, YouTube, and a suite of Google-branded services such as Google Cloud and the Google Play store.
JPMorgan has recently designated Alphabet as a “top stock” for 2024, highlighting factors such as improving ad growth, enhanced margins resulting from successful cost-cutting measures, and the company’s substantial focus on artificial intelligence.
While Open AI’s ChatGPT has gained significant attention as a prominent consumer-facing AI chatbot, Google has introduced Gemini as its contender to GPT-4. Despite Alphabet’s longstanding investments in AI, the competitive landscape has accelerated the development of Gemini. This AI model can proficiently handle input and output not only in the form of text but also in code, audio, image, and video.
With a forward price-to-earnings ratio of slightly above 21, GOOGL is trading at approximately a 22% discount compared to Apple Inc.’s (AAPL) forward P/E ratio of 27. Despite this discount, Google has outpaced Apple in revenue and earnings growth over the past five years, a trend that analysts anticipate will persist in the coming years.
Apple Inc. (AAPL)-
Market cap: $3 trillion, Dividend yield: 0.5%. Apple holds the top position as the largest publicly traded stock on U.S. exchanges, significantly surpassing other technology stocks on Wall Street.
The company anticipates a revenue of approximately $420 billion in the upcoming year and currently possesses over $60 billion in cash and marketable securities. Given its colossal scale and the unparalleled value of its brand, particularly with the iconic iPhone, the continued dominance of AAPL stock appears nearly inevitable. Moreover, the tendency of investment funds to prioritize the largest stocks further reinforces the structural factors ensuring a consistent flow of institutional money toward Apple in the foreseeable future.
Apple solidifies brand loyalty through a dual strategy. Firstly, it positions and markets its products as premium, luxury items, creating a broader protective barrier against competitors offering lower-priced alternatives. Secondly, its continually growing array of services builds a strong user lock-in effect, presenting challenges for users contemplating a shift to Android devices. This is evident in the iPhone’s global market share, which expanded from 14% to 17% between the third quarter of 2021 and the second quarter of 2023, as reported by Counterpoint Research.
Citigroup Inc. (C) –
The final entry on this roster is a familiar choice from 2023: Citigroup, the megabank. Positioned as a value stock with a modest forward earnings multiple of around eight and a robust 4.1% dividend yield, Citigroup has witnessed a 17% year-to-date increase as of December 21, inclusive of dividends. Despite the positive response from Wall Street, the stock still lags behind its book value, trading at just half its book price.
The ongoing restructuring efforts at Citigroup involve cost-cutting initiatives and divesting non-core business segments. While these strategic makeovers take time to yield results, Berkshire Hathaway, under Warren Buffett’s guidance, began accumulating Citigroup shares in early 2022. Analysts perceive Citigroup as potentially undervalued, with Morningstar assigning a four-star rating and a $66 fair value for the stock, suggesting a substantial 30.4% upside from its closing price of $50.60 on December 21.