Best Strong Buy Stocks for a Stock Picker's Market

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last updated 11 January 2024

There's plenty for investors to contend with right now including stock market volatility and uncertainty about the direction of interest rates. That's why those seeking out attractive investment opportunities might want to home in on Strong Buy stocks, or those names that analysts believe can outperform the broader market in the near term.

Current market conditions are ideal for what's called a stock picker's market. This is where folks choose individual stocks based on their singular merits, rather than put additional money into passive, broad-based equity index funds.

"We may be exiting the best S&P earnings per share era, but we are likely entering the best stock picker's market in our careers," says Savita Subramanian, equity and quant strategist at BofA Securities. "We recommend being invested in equities but selectively."

That is not to say investors should ditch their index funds; rather, see this as an opportunity to add strong, individual stocks to their portfolio. Here, the bottom-up approach to stock picking is preferred to the top-down, to find good companies worth adding to one's portfolio.

One group to consider is consumer discretionary stocks, which Subramanian recently double upgraded to Overweight from Underweight, the equivalents of Buy and Sell, respectively. The strategist cited several reasons supporting the bull case for this sector, including expectations that the Fed is done raising rates and a resilient consumer.

But the best stocks to buy are not found solely in the consumer discretionary sector. Here, we feature four Strong Buy stocks across a variety of sectors that analysts are bullish toward.

To narrow the list, we screened the S&P 1500 Composite Index to find some of the highest-rated stocks on Wall Street. We used data from S&P Global Market Intelligence, which surveys analyst ratings and scores them on a five-point scale. Those with ratings of 1.5 or below are considered Strong Buy stocks. Here are five that are worth consideration.

Data is as of January 10. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price. Analysts' ratings are courtesy of S&P Global Market Intelligence.

IQVIA Holdings

Market value: $39.6 billion
Dividend yield: N/A
Analyst ratings: 14 Strong Buy, 4 Buy, 2 Hold, 0 Sell, 0 Strong Sell
Analysts' consensus recommendation: 1.40 (Strong Buy)

IQVIA Holdings (IQV, $217.13) is a major contract research organization (CRO) that runs clinical trials for pharmaceutical companies as they seek regulatory approval for their drugs. It was formed from the 2016 merger of Quintiles, a leading CRO, with IMS Health, a life sciences data and analytics company.

Today, IQVIA leverages its extensive patient database to do such things as run virtual clinical trials with up to 90,000 patients globally without them having to leave home. It also uses data to model out what would have happened with placebos in a clinical trial, such that all patients enrolled get active treatment.

IQVIA compiles data from more than 150,000 suppliers that include pharmacies, medical claims and electronic health records, and the company has access to more than 1 billion patient records, according to Morningstar analyst Rachel Elfman.

"This unmatched database, layered with proprietary methodology, enables clients to set informed strategies to most effectively commercialize their drugs," Elfman said.

"[W]hile a competitor could theoretically replicate what IQV does with the data by purchasing the patient data, the real value is in IQV's ability to bring it all together and have a global breadth and depth of data," Truist Securities analyst Jailendra Singh writes in a recent note.

One of the biggest obstacles in clinical trials is recruiting volunteers. IQVIA overcomes this by leveraging artificial intelligence (AI) to build heat maps to find patients and sites. "We believe the generative AI can help CROs further significantly accelerate the process of drug discovery and development by identifying potential drug candidates, predicting their efficacy, optimizing their properties, and potentially bringing new treatments to market faster and at a lower cost," Singh said.

This data also is useful for post-market research and marketing, Singh said. By analyzing large datasets, companies can "gain a better understanding of the monetary value of their drugs, where they are being adopted and how to make them more valuable."

Singh has a Buy rating on the healthcare stock. The analyst also has a 12-month price target of $286, representing expected upside of nearly 32% for one of Wall Street's best Strong Buy stocks.

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Delta Air Lines

Market value: $27.1 billion
Dividend yield: 1.0%
Analyst ratings: 15 Strong Buy, 5 Buy, 1 Hold, 0 Sell, 0 Strong Sell
Analysts' consensus recommendation: 1.33 (Strong Buy)

Among major airline carriers, Delta Air Lines (DAL, $43.02) is uniquely positioned.

According to Raymond James analyst Savanthi Syth, Delta is the "best around" when it comes to airline stocks amid steady demand for travel and the company's efforts to deleverage and restore its balance sheet.

"We continue to believe Delta's balanced capital deployment strategy, structural advantages and opportunity to grow higher-margin businesses should enable it to retain its relative operational and financial leadership vs legacy peers," Syth writes in a note to clients. The analyst has a Strong Buy rating on DAL with a $55 price target, representing implied upside of nearly 28%.

Meanwhile, Morningstar analyst Nicolas Owens expects "continued growth" in the near term thanks to "strong domestic leisure travel, a strengthening business travel recovery, and increasing international travel due to fewer travel restrictions compared with 2022." And over the longer term, Owens believes Delta "can return to 2019 levels of capacity in 2024, and we expect revenue passenger miles will be approximately 19% higher in 2027, our midcycle year, than in 2019."

But even Strong Buy stocks carry risk, with Delta in particular susceptible to geopolitical uncertainty, volatility in the oil markets and stiff competition, Owens says.

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Synopsys

Market value: $76.8 billion
Dividend yield: N/A
Analyst ratings: 11 Strong Buy, 2 Buy, 2 Hold, 0 Sell, 0 Strong Sell
Analysts' consensus recommendation: 1.40 (Strong Buy)

As companies move toward adopting advanced technologies such as AI, there will be greater demand for more powerful and complex semiconductors or chips.

Enter Synopsys (SNPS, $505.18) – one of Wall Street's top Strong Buy stocks.

The company provides software tools and services for semiconductor companies, system-on-a-chip designers and electronics products manufacturers. Its software is used for various stages of the design process, including circuit simulation, logic synthesis and physical design. Synopsys is the largest player in the electronic design automation (EDA) market.

The company recently announced an expanded intellectual property (IP) and EDA partnership with Intel (INTC). Needham analyst Charles Shi believes this deal could have a "significant" impact to Synopsys' "revenue and backlog due to the likely breadth and duration of the contract."

Without a readily available foundational and interface IP, many fabless customers would find it difficult to adopt Intel and Samsung's foundry processes, Shi says. "Given Intel's ambition to grow its foundry business under the IDM 2.0 model, we think this agreement may be worth billions of dollars and add handsomely to SNPS' backlog.

Shi has a Buy rating and a $660 price target on Synopsys, reflecting implied upside of 31% over the next 12 months or so.

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Amazon.com

Market value: $1.59 trillion
Dividend yield: N/A
Analyst ratings: 40 Strong Buy, 14 Buy, 1 Hold, 0 Sell, 0 Strong Sell
Analysts' consensus recommendation: 1.29 (Strong Buy)

Like many companies, Amazon.com (AMZN, $153.73) tightened its belt as the economy decelerated. And while revenue grew at a slower pace in 2022 than previous years, the tide appears to be turning for Amazon.

In the third quarter of 2023, for instance, revenue jumped 13% year-over-year, while earnings arrived at 94 cents per share vs a earnings of 28 cents per share in the year-ago period. What's more, the company saw record sales for its July Amazon Prime Day shopping event and had a successful follow-up event in October.

Amazon's potential extends beyond retail sales. "Management sees a 'gigantic' opportunity for AI-driven demand, and we think Amazon Web Services (AWS) and greater visibility on Cloud AI revenues will be key positives in 2024," says BofA Securities analyst Justin Post.

Those making the bull case for Amazon say it remains the leader in e-commerce with around a 40% market share as its Amazon Prime membership helps attract and retain customers. Plus, its Amazon Web Services division is number one in the cloud computing market, which it invented, with around a 32% share, according to Synergy Research Group.

Meanwhile, Amazon CEO Andy Jassy said the company will continue to manage expenses to be in line with revenues. It already shut some of its physical stores such as Bookstores and 4 Star and cut development of devices "where we didn't see a path to meaningful returns," Jassy wrote in his annual letter to shareholders. Amazon has reorganized its fulfillment centers geographically as well and made internal operational changes in such areas as processes and physical operations, to lower costs and increase speed of delivery. Additionally, the company recently announced another round of layoffs.

AMZN is the highest rated of the Strong Buy stocks featured here. Plus, the mean target price of $180.81 indicates implied upside of nearly 18% over the next 12 months or so.

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Deborah Yao is an award-winning journalist, editor, and personal finance columnist who has held editorial roles at Kiplinger, The Wharton School, Amazon, The Associated Press, S&P Global (SNL Kagan) and MarketWatch. She specializes in writing and editing articles on finance and technology, with particular expertise in the areas of stock analysis, monetary policy, fintech, blockchain, macroeconomics, financial planning, taxes, among others. She has been published in The New York Times, USA Today, CBS News, ABC News, Wharton Magazine, and many other news outlets.