Wednesday's IBD 50 Stocks To Watch pick, auto leader Allison Transmission, is one of the best stocks to buy and watch right now, as it trades tightly despite an ongoing stock market correction.
Allison Transmission designs and manufactures traditional and electrified vehicle propulsion solutions. The company is also one of the largest global manufacturers of medium- and heavy-duty fully automatic transmissions for commercial and defense vehicles.
Allison Transmission products are used in a wide variety of applications, including on-highway trucks, buses, motor homes, construction and mining equipment as well as defense vehicles. The company has operations in around 150 countries with 1,400 independent distributor and dealer locations.
In January, Allison Transmission announced it had partnered with Nikola to test its Class 8 battery-electric vehicle and hydrogen fuel cell electric vehicles.
On July 27, Allison reported strong second-quarter earnings and revenue results. The company's earnings climbed 52% to $1.92 a share vs. the year-ago period. Sales grew 18% to $783 million.
"We are pleased to report record quarterly net sales as demand remains strong across our largest end markets and the Allison team remains focused on realizing our growth initiatives," said CEO David Graziosi in the news release.
Graziosi added: "During the second quarter, we paid a quarterly dividend of $0.23 per share and repurchased over 2 million shares of our common stock, representing over 2% of shares outstanding. Given second quarter results and current end markets conditions, we are raising our full year 2023 net sales guidance to $3 billion at the midpoint."
ALSN stock offers a 1.6% annual dividend yield.
ALSN Stock's IBD Ratings
Boasting a solid long-term fundamental track record, and strong earnings results in the most recent two quarters, ALSN stock shows a solid 88 Earnings Per Share Rating, according to IBD Stock Checkup. This rating takes into account EPS growth and stability of earnings over the past three years. The two most recent quarters are weighted more heavily. Two quarters ago, the company's earnings jumped 42% year over year, while they climbed 52% in the latest quarter.
ALSN stock displays a near-perfect 97 IBD Composite Rating, with solid long-term fundamentals coinciding with strong stock price performance since February 2022. The IBD Composite Rating is designed to help investors easily gauge the quality of a stock's fundamental and technical metrics.
Allison Transmission Is One Of Best Stocks To Buy And Watch
Auto leader Allison Transmission is trading about 2% away from a 60.17 buy point in a four-weeks-tight pattern, per IBD MarketSmith chart analysis. ALSN stock edged higher midday in the stock market today.
Meanwhile, ALSN stock continues to hold support at its key 50-day moving average line. It's pulling back to that line for the first time since a June 2 breakout past a 49.95 cup-with-handle entry. It has ridden its 21-day exponential moving average higher for much of that time.
A key technical indicator to watch is the relative strength line. Currently, the RS line is at new highs, a sign of big outperformance compared with the S&P 500. The RS line measures a stock's price performance vs. the S&P 500 and is the blue line plotted on every IBD chart.
Solid fundamentals, along with the tight trade in recent weeks, make ALSN one of the best stocks to buy and watch in today's stock market.
With the major stock indexes showing sustained weakness in recent weeks, the outlook was downgraded to a market in correction, per IBD's The Big Picture. In this climate, investors should be looking for top stocks holding up. Look for stocks with strong relative strength lines.
Best Stocks To Buy And Watch
Three recent IBD 50 Stocks To Watch picks, which are among the best stocks to buy and watch.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| Apollo Global | 79.45 | 10-week line | |
| Kinsale Capital | 369.00 | 10-week line | |
| XP | 24.48 | 10-week line |
Source: IBD Data As Of Aug. 23, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on the best stocks to buy and watch and the stock market.
