(This is “The Best Stocks in the Market,” brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — In honor of this weekend’s Kentucky Derby, Sean and I are giving you the Triple Crown this morning. Just a quick update on the last three articles that have literally hit the ground running. Okay, enough of the horse racing analogy. I don’t want to beat a dead horse. Oops, I did it again. I’ll quit while I’m still ahead and get down to business. Casey’s General Stores (CASY) was added to the S&P 500 index last week, effective April 9, replacing Hologic. We first wrote about CASY’s potential exit on March 19th, theorizing that higher gas prices would cause earnings and cash flow to soar. That was done. In the most recent quarter, diluted EPS was $3.49, up nearly 50% year over year, and EBITDA was $309 million, up 27.5%. The inclusion of S&P was an exclamation point. It may sound crazy, but Zoom Communications, Inc. (ZM) is the last man standing and the only software stock on our list of best stocks on the market. No one could have predicted this just six months ago. That’s why we follow technology over story. And there’s something else going on with this stock that many people weren’t paying attention to (and now they are!). Back in May 2023, Zoom Ventures invested $51 million in Anthropic, hidden in SEC filings as a “strategic investment.” Baird analysts currently estimate the stock’s value to be between $2 billion and $4 billion. Why it keeps going up: Anthropic has received offers to raise about $50 billion at a valuation of $850 billion to $900 billion, which would make it the world’s most valuable private AI company. Zoom also has approximately $7.8 billion in cash and marketable securities on its balance sheet. There’s a lot going on here below the surface. eBay, Inc. (EBAY) was already having a good year when Friday evening brought new trouble. The Wall Street Journal reported that GameStop is preparing a bid for eBay, with CEO Ryan Cohen quietly acquiring a stake in the company ahead of a formal bid announced this morning for $125 per share. This would be significant since GameStop’s market cap as of Friday was about $11.8 billion, while eBay’s market cap was about $46 billion. If eBay’s board says no, Cohen is reportedly willing to take the offer directly to shareholders. Cohen may not have the firepower to pull this off, but will his interest lead to him giving his name to a bigger suitor? Or, at the very least, does it strengthen the investment case for the stock, given its low-growth but very stable and profitable business? Sean has a basic knowledge of all three names below, as well as a higher level look at the list’s statistics. As of May 4, The Best Stocks in the Market list has 192 names. Top Sector Rankings: Top Industries: Top 5 Blue Chip Stocks by Relative Strength: Sectors to Watch: Triple Crown Casey’s General Stores, Inc. (CASY) Sean — It’s official. Breakfast pizza is now driving profits into the world’s most important stock index. Casey’s General Store is graduating from the S&P 400 mid-cap index and moving to the big leagues, replacing Hologic (HOLX) in the S&P 500. Last week on March 19th, I wrote about CASY, which returned an impressive 26% last week following news that the company had been included in a new index. A lot of research has been done on what happens to stock prices after index adoption. According to a study conducted in 2023, it was even stronger before. Throughout the 1990s, abnormal returns were found to have ranged from approximately 3% to 7% after the index was adopted, but despite large-scale passive flows, abnormal returns have declined to 0.3% over the past decade. CASY will likely garner more attention within its new index home, but the reaction appears to be contrary to the latest research, with the stock up 7% after the drop on this news. Casey’s operates 2,900 convenience stores and entered the second quarter as the third-largest convenience retailer and fifth-largest pizza chain in the United States. Josh — This isn’t nosebleed territory, but if you’ve been riding this far, this would be a reasonable place to strengthen your position or at least roll up your stops. But yes, we still like it. CASY is one of the cleanest charts you’ll find anywhere. The stock has made higher highs and lower lows since its low in 2023, and the move toward inclusion in the S&P 500 has rapidly accelerated. Currently (at the time of writing this article) it is $837, well above the rising 50-day price of $720 and 200-day price of $598. An RSI of 75 is extended, but not unusual for a stock in this kind of momentum phase. This is not a depleted inventory. It’s a stock that continues to find buyers at every level. For traders, the 50-day line at $720 is the line. You might say, “Hey, that’s $100 cheaper!” I understand that, but I like to think of it this way. Imagine an $83 stock drops to $72. A close below that level puts the uptrend at risk. For investors, this chart is given the benefit of the doubt as long as it continues to make new lows. The pattern of rising lows goes back several years. Nothing changes the character of the trend. Long-term holders do not need to do anything. Zoom Communications, Inc. (ZM) Sean — Zoom has had a chaotic start to the year. This stock was on our list heading into February, but got caught up in SAASmageddon and ended up trading 24% below its 52-week high. This stock was removed from the list as soon as it fell below its 200-day moving average, which happened on 2/25. The advantage of using momentum and technicals is that you can miss the downside when a trend breaks, but you often miss the initial move off the low. The stock fell another 15% following the stopout, but missed out on the 12% rise that the stock followed before it appeared on screens again on April 29th. Zoom is currently the only software stock on our list. The stock closed last week at a new 52-week high. ZM is 25% above its 50-day moving average and RSI is 25% above its 200-day moving average at 77. This isn’t the first time a name has appeared on our list, stumbled, and then come off a low, and it won’t be the last. Managing risk means accepting this trade-off. You’ll miss out on the first leg off the low, but you’ll also miss out on names that will never come back. Rather than ride to $75 in hopes that ZM will find support, I would choose to buy back ZM at $92 when the trend is confirmed. Josh — ZM is a different animal than CASY. This thing is annoying and has already confused us once this year. The chart has spent most of the past year going nowhere, moving in a wide range between $67 and $95 while the 50-day and 200-day converge. This stock has violated the 200-day standard multiple times, which is exactly why it was removed from the list in February. What has changed is the breakout above $100, which is now occurring on significant volume and pushing the RSI up to 77. The 50-day price at $82.50 and the 200-day price at $82.95 basically overlap, with the zone around $83 providing thick support. For traders, $83 is an important number. That’s where the two moving averages are and where we define risk. The question for investors is whether this is a genuine trend change or just a spike caused by the human story. Given how messy the chart is, investors should use the $83 zone as a pivot and be suspicious of anything below there. If you don’t believe in Anthopic, you’re left with your core business as a potential driver. The core business is admirable, but no one has been impressed with it in recent years. eBay, Inc. (EBAY) Sean — eBay was added to our Best Stocks list in early April. It’s been a great start to the second quarter, with the stock up 14% in the last month and pushing it into the top five consumer discretionary stocks of the year, joining inaugural champions CASY, ROST, and SBUX (the latter of which I wrote about last week). On Friday, the Wall Street Journal reported that GameStop is preparing a formal offer to acquire eBay. This deal will be a bit of a mismatch in size. GME’s market cap is about $12 billion, while eBay’s market cap is about $46 billion. CEO Ryan Cohen has been quietly increasing his stake in eBay ahead of a bid that could be filed as early as this month. Apparently, if eBay’s board rejects the proposal, Cohen reportedly intends to make the offer directly to shareholders. GME stock rose 7% on the news, and EBAY rose 12% in after-hours trading on the news. EBAY has been performing great lately. Current shareholders shouldn’t be too dissatisfied with the company’s performance, as the annualized share price has been 33% over the past three years and 17% last quarter. EBAY also reported better-than-expected top and bottom lines last week and announced that it plans to complete its $1.2 billion in cash acquisition of DePop, a fashion resale marketplace with 7 million active buyers, nearly 90% of whom are under 34, from Etsy. eBay’s revenue for the quarter was up 19% year-over-year, and EPS was up 21%. Trading card performance was impressive in the first quarter, with the collectibles category contributing the most to gross merchandise value (GMV), up 24% year-over-year. As the collectible category heats up again following the huge boom in the early 2020s, it will likely become a hot category. Josh — Remember when you saw me pitch EBAY live to the legendary Al Michaels on the halftime report? Thanks for the good work. You don’t want to disappoint the GOAT. EBAY’s chart tells you everything you need to know before reading the news. The stock has been on an orderly upward trend for several months, hitting hard bottoms at 50-day market price of $94.67 and 200-day market price of $90.29. Then Friday happened, and the GameStop headline sent the stock soaring to $116.76, straight through the biggest volume resistance on the chart in a year. The RSI of 74.76 reflects that spike. The question now is whether stocks can sustain this level or whether this is purely a news-driven atmosphere. The level to watch for traders is $100. This was the area of resistance before the spike and is now the dividing line between a legitimate breakout and a fadeback into the range. For investors, the lower limit is the $90 to $95 zone, where the two moving averages are located. As long as EBAY remains above that zone, the trend is intact and this news simply accelerated a move that was already underway. I recently bought and sold this in my personal account and made a profit before the Ryan Cohen news came out. Sorry for the early sale! It happens. Disclosure: (none) All opinions expressed by CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, its parent or affiliates, and may have been previously disseminated on television, radio, the Internet, or another medium. This content is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice or a recommendation to purchase any securities or other financial assets. The Content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not be appropriate for your particular situation. Before making any financial decisions, you should strongly consider seeking the advice of your own financial or investment advisor. Investments involve risk. The analysis examples included in this article are examples only. The views and opinions expressed are those of the contributors and do not necessarily reflect the official policy or position of Ritholtz Wealth Management, LLC. Josh Brown is the Chief Executive Officer of Riholtz Wealth Management and may maintain securities positions in the securities discussed. The assumptions made within the analysis do not reflect the position of RITHOLTZ WEALTH MANAGEMENT, LLC until the end of the disclosure. Click here for full disclaimer.
