In the first two months of 2021, Sector Leaders — IBD’s most stringent stock screen — trounced the S&P 500 19.80% to 1.47%. Scroll down to see how the IBD 50 and IBD Big Cap 20 also more than doubled the S&P to kick off the new year.
Finding the best stocks to buy and watch begins with identifying stocks showing the seven telltale traits of top-performing stocks. While the names will change over time, the winning characteristics of stocks like Tesla (TSLA), Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Zoom Video (ZM) and Nvidia (NVDA) remain the same.
When looking at individual stocks to watch, always keep an eye on the general stock market. This is critical since three out of four stocks tend to simply follow the overall market trend. Stock market direction can change very quickly, driving leading stocks to new highs or new lows.
So while tracking current market trends — regardless of whether we’re currently in an uptrend or downtrend — regularly check stock lists like Sector Leaders, IBD 50, IBD Long-Term Leaders, and the IBD Big Cap 20.
As these stock lists did with the best stocks of 2020, they highlight companies like Apple and so-called FANG stocks — Facebook (FB), Amazon, Netflix (NFLX) and Google parent Alphabet (GOOGL) — in the early stages of their runs.
You’ll also find names like Tesla stock, Nvidia stock, ServiceNow (NOW), Veeva Systems (VEEV), DocuSign (DOCU), Palo Alto Networks (PANW) and Peloton (PTON) as they make exceptional moves.
Regularly check IBD Stock Lists Update to see which stocks were just added to — and removed from — these time-tested screens.
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Best Stocks To Buy And Watch: IBD Indexes Vs. S&P 500
The table below shows the recent and long-term performance of the indexes based on IBD’s stock lists — before, after and during the coronavirus crash.
In 2018, the indexes had a tough time as the market corrected, but Sector Leaders — IBD’s most stringent screen — still managed to pull out a 3.86% gain, as compared to a 6.34% loss on the S&P 500.
That outperformance continued in 2019, with Sector Leaders (+42.11%) more than doubling the S&P (19.18%).
Then came the coronavirus crash and powerful rebound of 2020.
After what became the longest bull market in history, the pandemic infected Wall Street with economic lockdowns and a sharp decline in the stock market. But with exceptional strength and resilience, the stock market shook off the initial pain, with the performance of IBD lists once again far outpacing the S&P 500 for the rest of the year.
In fact, in 2020 the IBD Big Cap 20 more than doubled the gains of the S&P 500. Sector Leaders and the IBD 50 essentially doubled the performance of that benchmark index.
In February, the indexes ran into resistance and the stock market came under pressure. Heading into March, the Nasdaq, S&P and Dow Jones are showing resilience as they try to find support and continue to rise.
Pay particular attention to stocks like Zoom stock, FB, NFLX, Ternium (TX) and other growth stocks are setting up or testing new buy zones.
Use these stock lists and the IBD Stock Screener to streamline your search for the best stocks to buy and watch.
|Index||2021 Performance (YTD)||2020||2019||2018|
|IBD Big Cap 20||4.54%||35.38%||3.37%||-5.23%|
Stocks To Buy & Watch: Why Do IBD Stock Lists Outperform?
The strategy behind IBD’s stock lists is simple.
Through an ongoing study of every top-performing stock over the past 100-plus years, we’ve identified seven common traits big market winners typically share just before they launch their major moves.
Using IBD SmartSelect Ratings and other screening criteria based on that research, we identify which stocks are most strongly showing those same traits right now. You can see that reflected in the appearance of Apple stock, Amazon, Veeva, DocuSign, ServiceNow and many others on IBD stock lists.
In other words, history shows what big market winners look like in the early stages of a new climb, and IBD’s lists alert you to stocks that have that same look today.
Also note that the screens are computer-generated and based solely on objective rules, not human emotions, guesswork or predictions.
While you should never just buy a stock because it’s on one of IBD’s screens, regularly checking Sector Leaders and other lists is a quick and efficient way to build your own watchlist and zero in on the next crop of potential big winners.
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Find Top Stocks To Buy Before They Break Out
Optimize your research with alerts to stocks in or near a potential buy zone and a brief chart analysis for each name on Sector Leaders, IBD 50, IBD Big Cap 20, IPO Leaders and Stock Spotlight.
For example, Veeva Systems was featured in the IBD 50 on May 16, 2016. The chart analysis noted that the stock was near a buy point: “New handle shows 28.05 buy point to cup base.” That gave you time to put Veeva on your watchlist and research the company before it broke out just days later.
From the breakout, Veeva stock began to soar. It’s formed multiple chart patterns since then and managed to survive the coronavirus crash and rebound to new all-time highs.
In April 2020, Veeva broke out from another base to launch another impressive run. After hitting yet another all-time high, the stock hit resistance last month and fellow below its 10-week moving average. Look for Veeva stock to establish support and retake that benchmark line.
Veeva Systems is just one example of why you want to regularly check IBD’s stock lists as part of your investing routine.
Not every stock on these lists will launch the types of moves Veeva, Nvidia, Zoom stock and other leaders have had, but checking these screens regularly is a proven way to help improve your investing results by building a high-quality, actionable watchlist.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
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