It’s no news that the market had a tough year, with only a few bands that really stood out. This story highlights five buy-and-watch A-list S&P 500 stocks that shine above the rest.
Running an IBD screen is a way to narrow down a large list of actions and find the gems with winning criteria.
MarketSmith’s filtering tools allow users to create a custom screen of metrics pulled from IBD’s company database. The following five stocks have passed a rigorous test of key metrics, including: an earnings per share rating and relative strength ratings of 85 or greater, a composite rating of at least 94, a 50-day average daily volume greater than of 400,000 shares and a current stock price of 20 or more.
Five S&P 500 stocks to watch
The screen produced a list of companies that checked the relevant action boxes. Of these, here are five that stand out and are close to buying points that might fit your watchlist.
UnitedHealth Group (UNH), a leading provider of healthcare benefits, has made its way into the IBD 50 Index and IBD Rankings. The stock breaks out of a cup base with handle and above the buy point of 534.15. It is in the 5% buy zone.
The company holds a relative strength rating of 94.
UnitedHealth reported strong second quarter results on July 15, with a beat on earnings per share and sales. The company’s EPS growth in the June quarter was 19% and its sales were up 13%. UNH holds a composite rating of 94 out of 99.
Analysts expect annual EPS growth of 15% for 2022 and 14% in 2023. Mutual funds added the stock, with 5,260 holding it in June, compared to 5,059 in March and 4,871 in December .
The “I” represents institutional ownership in the CAN SLIM guidelines. The increase in institutional ownership is good for a stock because fund managers can move the stock in large block buys.
UnitedHealth is ranked #5 in the managed medical care group. The group is ranked in the top 10 of the 197 IBD track groups. Argus Research raised its price target on UNH to 650 from 580 on July 25 and maintained its buy rating.
IBD 50 system design stock gains strength
Cadence Design Systems (CDNS), an electronic systems designer, is gaining strength on the right side of a 31% deep cup basis with a buy point of 192.80 on the chart. The frame rate is in the IBD 50 index.
The relative strength line has risen and reached a new high, as indicated by a blue dot on the MarketSmith chart.
Cadence reported a second-quarter sales and profit beat 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 last eight quarters. Analysts expect an annual EPS growth rate of 25% in 2022 and 12% in 2023. CDNS stock has a three-year EPS growth rate of 24%.
Cadence takes second place in the computer software design group, which is ranked No. 64 on the 197 industries IBD tracks. Cadence has a respectable EPS rating of 97 and a stellar composite rating of 98.
Mutual funds hold 60% of the shares outstanding. Fund ownership grew steadily quarter over quarter, with 2,537 holders in June, 2,508 in March and 2,496 in December. Recent analyst moves include Needham & Co. raising its price target on the stock to 200 from 193 and Berenberg Bank raising its target to 206 from 180, with both companies retaining their buy ratings.
S&P 500 stocks to buy and watch: A beer company in the buy zone
Molson Coors (TAP), the maker of Coors and Miller beers, topped a mug with handle base with a buy point of 57.55 and is in the 5% buy zone. This range goes to 60.43. The stock has a relative strength rating of 95, meaning it has performed better than 95% of stocks in the IBD database over the past 12 months.
Beer buyers have sought cheaper ways to consume the drink with the pinch of inflation, such as buying single-can drinks and cheaper brands. Molson Coors is responding to the need by marketing a new value brand of Miller High Life and other campaigns targeting the budget-conscious consumer.
The company will air a 30-second ad during the 2023 Super Bowl, its first in 30 years. It comes after Anheuser-Busch gave up its exclusive alcohol advertising rights during the Big Game. “It was a no-brainer. As soon as we saw the ad, we got to work securing the Super Bowl spot,” said Michelle St. Jacques, chief marketing officer of Molson Coors.
A flaw on their score is that analysts are looking for lower earnings per share for 2022. But EPS is expected to climb 8% in 2023.
The company meets eight of nine IBD checklist criteria, with a composite score of 98 out of 99 and an EPS score of 87. Molson ranks first in the alcoholic beverages group, the 23rd industry.
Molson is 63% owned by mutual funds, a high percentage, which means the big money is behind it.
Utility Contractor Breaks Out
Quantum Services (PWR) – a contractor for utilities, communications and energy companies – escaped from a mug base with handle. The stock reached the buy point of 138.56 and is in the 5% buy zone at 145.49.
Quanta is on the IBD ranking. It satisfies all nine criteria of the IBD checklist.
The company is ranked #1 in the heavy construction industry group, which is #45.
Quanta posted good quarterly EPS growth, with the exception of the September 2021 quarter, where EPS grew only 6%. Improving on previous periods, quarterly sales growth has ranged from 11% to 47% over the last three quarters.
Analysts expect an EPS growth rate of 28% in 2022 and 9% in 2023. It holds a three-year EPS growth rate of 24%. The company earns a perfect composite score of 99 and a score of 97 for the EPS score and relative strength score.
Mutual funds hold 59% of the shares, with the number of funds holding the shares accelerating quarter over quarter.
Quanta is expected to release earnings on Thursday, and stocks may make unexpected moves in earnings reports.
S&P 500 stocks to buy and watch: Candy Maker looks nice
Hershey (HSY) is in a flat basis with a buy point of 231.69. Basic depth is attractive at 13% and is in a second-stage setup of the long-term cycle, according to MarketSmith. It’s a sought-after trait.
Hershey ranks first in the confectionery food group. The group is ranked in the top 45 out of 197 industries.
Hershey’s has seen cautious but steady quarterly EPS growth ranging from 13% to 32% over the past three quarters. Sales growth was lukewarm from 6% to 16% at the same time. Hershey has an EPS rating of 91 and a composite rating of 97.
Analysts expect annual EPS growth of 13% in 2022 and 8% in 2023. The company boasts an impressive return on equity of 60%, a measure of profitability.
Mutual fund ownership rose steadily quarter over quarter, with an 8.4% increase in June compared to March.
These S&P 500 stocks to watch deserve a closer look as the market is now in a confirmed uptrend.
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