Two aerospace stocks, GE Aerospace and industry leader Heico, are among weekend stocks to watch as both form bases. Aon, part of a hot insurance sector, biotech Alkermes and medical products maker Boston Scientific are others that are setting up in favorable chart patterns, showing strong relative strength.
Aon is in IBD Leaderboard, while Heico and Alkermes are both in the IBD 50.
In the current weak market, IBD suggests stocks with average true range (ATR) of 3 or lower. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior.
Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
Although the major indexes remain above their mid-March lows, the stock market has not made a rally confirmation. IBD's recommended exposure remains 0%-20%, meaning investors should avoid new buys and hold only their best stocks until exposure can be raised.
Stocks To Watch: GE Aerospace Forms New Base
GE Aerospace shares formed a flat base with a 212.19 buy point after consolidating for five full weeks. The pattern formed mostly above a prior base from October to January, so this can be treated as a base-on-base formation with the same buy point.
On Wednesday, GE climbed above a trendline touching the highs of the pattern. That gave the stock an early entry around 202. But this is a higher-risk buy point, especially since the market correction makes any entry riskier than usual.
GE Aerospace — formerly part of the General Electric conglomerate that broke up about a year ago — is not a top-five stock in the aerospace and defense industry group. Yet, it has a solid Composite Rating of 97 and a three-year EPS growth rate of 60%, according to IBD Stock Checkup.
The company is in the complex business of making jet engines, giving it few competitors worldwide. Demand remains high for the current generation of fuel-efficient engines. In the fourth quarter, 77% of sales came from its aircraft engine business, with the rest from its insurance and Defense and Propulsion Technologies divisions, according to FactSet.
GE stock has a 21-day ATR of 2.97.
Heico Among Stocks To Watch As It Leads Industry
Heico, another stock in the aerospace and defense industry, is forming a cup-with-handle base. The buy point is 270.37. The base shows a decline of 25% and the handle 8%, which are ideal dimensions. Volume has quieted as the handle forms, which is another good sign. Add to that a relative strength line that is near new highs.
The company has the highest Composite Rating (99) of 71 stocks in the aerospace and defense industry group, which makes this an intriguing stock to watch. Earnings growth accelerated from 16% to 31%, 34% and 39% the past few quarters, according to IBD MarketSurge.
Sales growth has slowed, however, from 44% to 39%, 37%, 8% and 15% the past five quarters.
The stock shot up nearly 14% in more than double its average volume Feb. 27 on a January-quarter report that blew by expectations. Heico earned $1.20 a share, well above the consensus of 95 cents and the highest estimate of $1.04, according to FactSet. Sales of $1.03 billion exceeded expectations for $979.7 million.
The company gushed about its Flight Support Group, which saw quarterly operating income rise 22% on 15% higher net sales vs. the year-ago quarter. Aftermarket replacement parts and repair and overhaul parts and services saw strong results. Acquisitions are bearing fruit, too.
Heico, which makes and services aircraft equipment, serves the majority of the world's airlines and overhaul shops. It also works with multiple defense and space companies and militaries around the globe, in addition to some health care and electronics manufacturers.
Heico has the fifth-best EPS Rating in the group, which has jumped to the top 10 from No. 43 four weeks ago. The group is rising largely on the strength of European defense stocks.
The stock's ATR is 3.02.
Stocks To Watch: Aon Dips Below Entry
Aon pulled back below its most recent buy point at 395.33 but hasn't triggered any sell signals. On Friday, it traded below its 21-day exponential moving average but held above the 10-week moving average. Watch for a rebound from that line.
Investors also could use 412.97 as the buy point for a high handle.
Another way to trade Aon is by using a trendline that offers an entry around 395, or basically the same price for the latest breakout.
Aon stock is a fund favorite, with more than 2,400 funds holding shares at the end last year, as the number of holders kept growing. One of those funds in Fidelity Contrafund (FCNTX), which is outperforming the S&P 500 so far this year and over the past 12 months, according to MarketSurge.
While Aon is not a fast-growing company (three-year EPS and sales growth rates of 8%), the stock is part of an insurance sector that is outperforming the stock market this year. Aon is in the highly ranked insurance brokers group.
Aon has a Composite Rating of 96, sixth-highest in its industry. MarketSurge shows return on equity of 125% and cash flow from operations of $18.53 a share (19% above 2024 earnings of $15.60 a share), a reflection of solid fundamentals.
Aon stock has a 1.81 ATR.
Alkermes A Stock To Watch In Biotech
Alkermes has formed a flat base with a 36.45 buy point with shares trading tightly for several weeks around the 21-day line, just above the 10-week line. A trendline provides another possible buy point around 35.
The relative strength line is at a 52-week high. The ATR is 2.92.
The biotech develops difficult-to-treat psychiatric and neurological disorders. Its pipeline includes treatments for schizophrenia and bipolar disorder. It currently has three proprietary drugs in the market for those ailments plus addictions.
Alkermes has a Composite Rating of 96. That's 11th highest in the industry group, which is not bad considering the group has more than 700 stocks. Most of those are unprofitable, but Alkermes has been profitable for years. Its EPS Rating is 91 and its three-year EPS growth rate is 65%.
The stock most recently broke out to new highs on Feb. 12, when shares climbed nearly 5% following the fourth-quarter report. Earnings and sales beat expectations. The next day, the stock rallied another 7.5%.
Stocks To Watch In Medical Products
Boston Scientific is in a flat base with a buy point at 107.17. Shares are just below the 50-day moving average, and a clear move above it could present an early entry. A trendline entry perhaps around 104 is also possible.
The relative strength line is at new highs. The ATR is 2.81.
A breakout for Boston Scientific would be significant because it is the industry leader. It owns the highest Composite Rating of 126 companies in the medical products industry group.
Boston Scientific provides minimally invasive technologies for coronary artery disease and aortic valve conditions. It also makes devices for endoscopy and urology, such as kidney stones, and an implantable device for chronic pain, among other products.
In February, the company beat Q4 estimates. Earnings rose 27% to 70 cents a share. Sales grew more than 22% on an as-reported basis and 19.5% organically to $4.56 billion.
More than 3,600 mutual funds own the stock, including four that are part of the IBD Mutual Fund Index. Yet, the Accumulation/Distribution Rating is a weak D-, reflecting three weeks of heavy selling in the last week of February and first half of March. Still, it is a stock to watch.
