It’s no news that the market has had a rough year, with only a few groups really standing out from the crowd. This story highlights five A-list S&P 500 stocks to buy and watch that shine above the rest.
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Running an IBD screen is a way to narrow down a large list of stocks and find the gems with winning criteria.
The MarketSmith screening tools allow users to create a custom screen of metrics drawing from IBD’s database of companies. The following five stocks passed a stringent test of key measures including: Earnings Per Share Rating and Relative Strength Ratings of 85 or higher, a Composite Rating of at least 94, a 50-day average daily volume of over 400,000 shares, and a current stock price of 20 or higher.
Five S&P 500 Stocks To Watch
The screen produced a list of companies that checked pertinent metrics boxes. From those, here are five that stand out and are near buy points that could be appropriate for your watchlist.
UnitedHealth Group (UNH), a leading health care benefits provider, earned its way into the IBD 50 Index and IBD Leaderboard. The stock is coming out of a cup-with-handle base and above the 534.15 buy point. It is sitting in the 5% buy zone.
The company holds a 94 Relative Strength Rating.
UnitedHealth reported strong Q2 earnings on July 15, with a beat on earnings per share and sales. The company’s June-quarter EPS growth was 19% and its sales increased by 13%. UNH holds a 94 out of 99 Composite Rating.
Analysts are expecting 15% annual EPS growth for 2022 and 14% in 2023. Mutual funds have been adding the stock, with 5,260 holding it in June, up from 5,059 in March and 4,871 in December.
The “I” stands for institutional ownership in the CAN SLIM guidelines. Increased institutional ownership is positive for a stock because money managers can move the stock on large block purchases.
UnitedHealth is ranked No. 5 in the managed medical care group. The group is ranked in the top 10 of 197 groups IBD tracks. Argus Research raised its price target on UNH to 650 from 580 on July 25 and kept its buy rating.
IBD 50 System Design Stock Gaining Strength
Cadence Design Systems (CDNS), an electronic systems designer, is gaining strength on the right side of a 31%-deep cup base with a buy point of 192.80 on the chart. Cadence is in the IBD 50 Index.
The relative strength line has been rising and hit a new high, as designated by a blue dot on the MarketSmith chart.
Cadence reported a beat on Q2 sales and earnings, and raised its full-year guidance on July 25. The news added to the stock’s rally.
The company has seen EPS climb in seven of the past eight quarters. Analysts are expecting a 25% annual EPS growth rate in 2022 and 12% growth in 2023. CDNS stock holds a three-year EPS growth rate of 24%.
Cadence has the No. 2 spot in the computer software design group, which is ranked No. 64 out of the 197 industries IBD tracks. Cadence has a respectable 97 EPS Rating and a stellar 98 Composite Rating.
Mutual funds own 60% of shares outstanding. Fund ownership has been steadily climbing quarter over quarter, with 2,537 holding it in June, 2,508 in March and 2,496 in December. Recent analyst moves include Needham & Co. increasing its price target on the stock to 200 from 193 and Berenberg Bank raising its target to 206 from 180, with both companies maintaining buy ratings.
S&P 500 Stocks To Buy And Watch: Beer Company In Buy Zone
Molson Coors (TAP), the maker of Coors and Miller beers, rose above a cup-with-handle base with a 57.55 buy point and is in the 5% buy zone. That range goes to 60.43. The stock has a Relative Strength Rating of 95, meaning it’s performed better than 95% of the stocks in the IBD database in the last 12 months.
Beer buyers have been looking for cheaper ways to consume the beverage with the inflation pinch, such as purchasing single-can drinks and less-expensive brands. Molson Coors is rising to the need by marketing a new economy brand of Miller High Life and other campaigns targeting the budget-conscious consumer.
The company will be running a 30-second commercial in the 2023 Super Bowl, its first in 30 years. This comes after Anheuser-Busch gave up its exclusive rights to advertise alcohol during the Big Game. “It was a no-brainer. Literally the moment we saw the announcement, we got to work on securing the Super Bowl spot,” said Molson Coors Chief Marketing Officer Michelle St. Jacques.
One blemish on their score is that analysts are looking for a decline in earnings per share for 2022. But EPS is expected to climb 8% in 2023.
The company meets eight of nine criteria on the IBD checklist, with a 98 out of 99 Composite Rating and an EPS Rating of 87. Molson holds the No. 1 spot in the alcoholic beverages group, the No. 23 industry.
Molson is 63% owned by mutual funds, a high percentage, meaning the big money is behind it.
Utility Contractor Breaks Out
Quanta Services (PWR) — a contractor for utilities, communications and energy companies — broke out of a cup-with-handle base. The stock hit the 138.56 buy point and is in the 5% buy zone to 145.49.
Quanta is on IBD Leaderboard. It passes all nine criteria in the IBD checklist.
The company is ranked No. 1 in the heavy construction industry group, which is No. 45.
Quanta has shown good quarterly EPS growth, with the exception of the September 2021 quarter, when EPS rose only 6%. In an improvement from prior periods, quarterly sales growth ranged from 11% to 47% in the last three quarters.
Analysts are expecting a 28% EPS growth rate in 2022 and 9% growth in 2023. It holds a three-year EPS growth rate of 24%. The company earns a perfect 99 Composite Rating, and a 97 for both the EPS Rating and Relative Strength Rating.
Mutual funds own 59% of the stock, with the number of funds owning the stock accelerating, quarter over quarter.
Quanta is scheduled to report earnings on Thursday, and stocks can make unexpected moves on earnings reports.
S&P 500 Stocks To Buy And Watch: Candy Maker Looks Sweet
Hershey (HSY) is in a flat base with a buy point of 231.69. The base depth is an attractive 13% and is in a second-stage pattern of the long-term cycle, according to MarketSmith. That’s a sought-after trait.
Hershey has the No. 1 spot in the confectionary foods group. The group is ranked in the top 45 out of 197 industries.
Hershey has seen conservative but consistent quarterly EPS growth ranging from 13% to 32% in the last three quarters. Sales growth has been a tepid 6% to 16% in the same time. Hershey has an 91 EPS Rating and a 97 Composite Rating.
Analysts are expecting 13% annual EPS growth in 2022 and 8% growth in 2023. The company has an impressive 60% return on equity, a measure of profitability.
Mutual fund ownerships has been steadily climbing quarter over quarter, with an 8.4% increase in June from March.
These S&P 500 stocks to watch are worth taking a deeper look into as the market is now in a confirmed uptrend.
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