So, you've landed on this page looking for the best stocks to buy right now. I won't disappoint you. In the paragraph directly below, you'll find a link that fulfills the promise. Now, if you'd like to learn a method for consistently finding stocks that are both attractive and timely, consider sticking around -- and reading on -- after you've checked out the following recommendations:
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Finding the best stocks now -- on your own
I can't pretend to teach you in the space of a brief article how to pick stocks like the Gardner brothers, founders of The Motley Fool. But I can show you an effective tool relevant to the two adjectives used to describe investments in the title of this article: "best" and "now."
In basketball parlance, it's good to have "court vision." Suppose you're the point guard in a basketball game, the on-court leader responsible for directing your team's offensive flow. A teammate passes you the ball. You have three decisions. Do you dribble, pass, or shoot?
Court vision is the ability to understand at a glance how the two opposing teams are set up against each other within the flow of the game. What are the weaknesses in your team's offense in this exact moment? And perhaps more profoundly, where do the opportunities lie?
To understand the market as a whole, first break it up
In the stock market, knowing which economic sectors are improving and which ones are headed south gives an investor a tremendous advantage in identifying the best stocks in the present to buy and hold. It's the investing equivalent of court vision. Both institutional and retail shareholders seek to understand which sectors of the U.S. economy are experiencing increasing demand -- a key to corporate revenue growth.
When we view a stock in isolation, we can be lulled into thinking the corporation and its achievements exist in a bubble, but successful businesses often hit our radar screens when they're in growth mode, busily trying to win market share already held by other competitors in a flourishing sector.
Rising sectors attract money into stocks in other subtle ways. For example, steady price gains in a handful of leading stocks within a popular sector often propel investors to scour that sector in the hope that similarly promising, if more reasonably valued candidates will emerge.
11 ways to profit from a little bit of research
You may be familiar with the popular SPDR S&P 500 ETF (SPY -1.25%), which tracks the movement of the S&P 500 Index. It's far and away the biggest exchange traded fund (ETF) in existence, with over $184 billion of assets under management. Since the "SPY" ETF counts all 505 members of the S&P 500 in its holdings, it's seen by many as a representative investment for the broader U.S. stock market.
Perhaps less widely followed is a group of sister funds, known as the Sector SPDR ETFs, which break the S&P 500 Index into 11 separate economic sectors. Do you want to participate in the burgeoning market for healthcare? Purchase the Health Care Select Sector SPDR (XLV -0.90%). For a broad investment in technology, you could buy the Technology Select Sector SPDR (XLK -1.91%).
You can gain court vision on the entire market by using a tool called "Sector Tracker" provided by the administrator of the SPDR instruments, State Street Global Advisors (a link to the tool is found here). The tracker measures the performance of all sector SPDR ETFs against each other on a daily basis, as well as longer time frames.
While the sector tracker is, in essence, a marketing tool for the Sector SPDR ETFs, it also provides a quick and painless glance into trending sectors. Below is an image of a recent year-to-date search, from January 2016 through late June 2016, which I pulled using the tracker:
Perennial market leading sectors like financial services, healthcare, and technology are underperforming thus far in 2016. Investors appear to be looking for both safety and dividend yield as the utilities sector leads all investment areas. Stretching this out to the last trailing 12 months, it's apparent the year-to-date trend is part of a longer pattern:
Finally, we can push out further to a five year view. The results are again interesting:
Over a longer period of time, healthcare and technology have posted appreciable equity gains, which is what we'd expect given that these two sectors have played an outsized role in U.S. economic growth for many years.
But it may surprise some that at every snapshot we viewed, consumer staples exhibited a positive and meaningful return, even outpacing technology in the last five years. For those who like safe but steady returns, consumer staples is a sector worth a closer look.
And drilling down is easy with the tracker. We can click on the sectors in the charts to get a list of the top-performing S&P stocks in each area. Curious to know which companies are driving the stellar performance of utilities year to date? Here's the list:
The tracker not only isolates the most successful sectors of the economy as represented by stock return performance, it also helps us hone in on specific, actionable investment ideas.
Of course, these potential investments are limited to S&P 500 constituents. You can use the sector and stock information as a jumping-off point for your research to find additional opportunities in the broader market.
For example, considering top-performing American Water Works (AWK -1.29%) in the list above, we might conduct a search to find smaller-capitalization utilities that also specialize in the demand-rich industry of waste water services.
In sum, the sector tracker discussed in this article should be thought of as a launching point for research into the greater world of sector-based investing. It's an area worth devoting some time to -- one I believe will markedly enhance your ability to find the best stocks to add to your holdings.