Best stock to invest in for long term growth

It's been a tough year for many of the best stocks to buy and watch, hurt in part by a sharp rise in the 10-year Treasury yield — making bonds an attractive alternative to stocks — amid an increasingly hawkish Federal Reserve. But a handful of the best tech stocks are holding up well as the stock market tries to bottom.

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Stocks with high P-E ratios like Tesla (TSLA) and Nvidia (NVDA) have been hit hard by institutional selling this year, along with security software stocks like CrowdStrike (CRWD) and Zscaler (ZS).

A rising interest rate environment isn't good for the best stocks to buy in the tech sector with high multiples. Why? Because it makes for a more challenging operating environment. If the stock market senses any possibility of a slowdown in earnings growth from high P-E names, the selling will hit these stocks first.

But the Nasdaq composite and S&P 500 showed bullish price and volume on Oct. 21, closing out the week with big percentage gains in higher volume. Both indexes confirmed a new uptrend on Day 7 of their rally attempts.

Now the debate starts as to whether or not it will be a tradable rally or the start of a new bull market.

Top Traits Of Best Stocks To Buy

The best stocks to buy and watch aren't hard to find, as long as you're fishing in the right pond. Top stocks like Iridium Communications (IRDM) and Medpace (MEDP) don't get a lot of attention, but both have characteristics seen in past stock market winners before big price moves.

The best stocks to buy and watch boast strong fundamentals along with leading price performance in their industry group. Many also show favorable fund ownership trends.

The best tech stocks also tend to show resilience in down markets. Use IBD Stock Checkup to quickly identify industry group leaders with the potential to be stock market leaders.

Join IBD experts as they analyze leading stocks in the stock market rally on IBD Live

Screening for the best tech stocks to buy and watch is as easy as looking at the MarketSmith Growth 250, a daily screen of high-quality stocks. Click on any column header to sort the screen as you wish, either by those closest to their highs, stocks with the highest Composite Rating, or stocks trading up in price with the heaviest volume.

The best tech stocks to buy and watch aren't guaranteed to be huge stock market winners. But they do have qualities seen in past stock market winners before big price gains.

The best tech stocks to buy and watch now include Pure Storage (PSTG), Iridium Communications, Super Micro Computer (SMCI), Medpace and Arista Networks (ANET).

With the stock market still in a correction, none of them are buys currently. But when new institutional money starts to come in from the sidelines, all five could easily resume their market leadership, helped in part by strong fundamentals.

Best Stocks To Buy: Pure Storage

The maker of flash-based storage systems is among the best stocks to buy and watch due to strong fundamentals and technicals. Earnings are due in the second half of November.

In late October, Morgan Stanley upgraded PSTG stock to overweight and raised PSTG's price target to 37. The upgrade came after PSTG was featured as IBD's Stock Of The Day pick on Oct. 28.

In early September, Pure Storage reported better than expected earnings and revenue and also raised its guidance for the current quarter.

The Zacks consensus estimate is for adjusted profit of 26 cents a share, up 18% year over year. Revenue is expected to increase 19% to $671.84 million.

Composite Rating:  93 (on 1-99 scale with 99 tops)

Latest-quarter EPS % change: +129%

Latest-quarter sales % change: 30%

Five-year EPS growth rate: 57%

Annual return on equity: 29%

Up/down volume ratio: 0.9

ANET Stock

On the weekly chart, Arista Networks' relative strength line has backed off highs. Shares gapped up on Oct. 27 after Meta Platforms (FB) reported dismal earnings. Meta's huge spending plans were expected to help data-center suppliers like ANET. But after Meta announced big job cuts on Nov. 9, the company also scaled back its infrastructure spending plans. That sent ANET stock down to its 10-day moving average.

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To its credit, ANET stock recently bounced off the 100 level, and its Accumulation/Distribution Rating of B has improved thanks to some recent above-average volume price gains. ANET stock is still inside a long consolidation with a 132.97 buy point.

Arista is a provider of cloud networking solutions to enterprise customers. Earnings growth has accelerated for four straight quarters, from 32% to 35% to 59% to 69%. Revenue growth is also accelerating, a sign of strong demand for the company's products.

Third-quarter revenue surged 57% to nearly $1.18 billion. ANET guided Q4 revenue above expectations.

Composite Rating: 99

Latest-quarter EPS % change: +69%

Latest-quarter sales % change: 57%

Three-year annualized EPS growth rate: 18%

Annual return on equity: 25%

Up/down volume ratio: 0.9

MEDP Stock

Medpace is a provider of clinical research-based drug and medical device development services. As a contract research organization, a big part of its business is managing clinical trials for big drug companies.

The company's earnings report on Oct. 24 turned a lot of heads, to say the least. Shares gapped up and soared 37% after the company reported strong than expected Q3 earnings and revenue. It also guided full-year earnings and revenue above expectations. It also raised its full-year revenue guidance for 2023 to a range of $1.68 billion to $1.74 billion, above the consensus estimate at the time of $1.5 billion.

Medpace, another one of the best stocks to buy and watch, is holding gains well after its bullish earnings gap. That's a sign of strength and support.

Composite Rating: 94

Latest-quarter EPS % change: 59%

Latest-quarter sales % change: +30%

Five-year annualized EPS growth rate: 32%

Annual return on equity: 21%

Up/down volume: 1.6

SMCI Stock

Super Micro Computer reported huge earnings on Nov. 2, fueling a gap out of a cup base. Bullish moves like this can present alternate entries, especially if SMCI holds gains and trades sideways from here.

The company makes server and storage systems for data centers, cloud computing and artificial intelligence.

Fiscal first-quarter revenue jumped 79% to $1.85 billion, marking the seventh straight quarter of accelerating revenue growth.

Guidance for the current quarter was also bullish. The company forecast Q2 revenue of $1.7 billion to $1.8 billion, well above the $1.5 billion consensus. It sees adjusted profit of $2.64 to $2.90 a share, also handily above the $1.91 consensus.

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Composite Rating: 99

Latest-quarter EPS % change: 490%

Latest-quarter sales % change: +79%

Five-year annualized EPS growth rate: 38%

Annual return on equity: 25%

Up/down volume ratio: 1.4

IRDM Stock

Iridium just came out of a long consolidation that started in February 2021. It's extended now, but if the stock pulls back to its 10-week moving average and finds support, that would put IRDM in an alternate buy zone.

The company is a provider of mobile voice and data communication services. Iridium is set to report its first annual profit this year, with growth surging in 2023, up 167%.

IRDM stock came down to its 50-day moving average on Oct. 20  after reporting earnings, but it didn't take long for it to find support.

Revenue increased 14% to $184.1 million, Service revenue, which represents primarily recurring revenue from Iridium's growing subscriber base, contributed 76% of total revenue. in the quarter.

Inside the earnings release, CEO Matt Desch said, "We have continued to see strong momentum across all commercial business lines. Based upon these trends we are increasing our full-year outlook for service revenue growth and OEBITDA, and we expect 2022 will be another record year."

A couple of analysts chimed in with comments after the results. Raymond James maintained a strong buy rating and lifted IRDM's price target to 60. Morgan Stanley, meanwhile, maintained an overweight rating and raised IRDM's price target to 66.

Composite Rating: 90

Latest-quarter EPS % change: n/a

Latest-quarter sales % change: +14%

Five-year EPS growth rate:  n/a

Annual return on equity: n/a

Up/down volume ratio: 1.2

Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.

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