My best stocks to buy in a bull market

The bull market continues. Can technology stocks continue the march higher? Harshil Patel looks at the best stocks to buy now.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

I’m currently looking for the best stocks to buy for my Stocks and Shares ISA. In particular, I’m looking at stocks that should benefit from a continuing bull market.

Why now?

On Wednesday, the US Federal Reserve concluded a two-day meeting that I’d say was very important to share investors. Fed chairman Jerome Powell noted that inflation could end up “higher and more persistent” than expected. Despite this, he indicated that interest rates are unlikely to rise until 2023.

What does this mean for stocks?

In recent years, many growth stocks have benefited from ultra-low interest rates and plenty of financial support from Federal Reserve policies. That’s particularly so for fast-growing US technology stocks. I’m closely watching for any signs of a reversal in policy by central banks.

So far, it sounds like any reversal is a few years away. This could be a good sign for growth stocks in the near term. However, a word of caution. One day the bull market is likely to end. This means that growth stocks will likely enter a period of turbulence and even falling stock prices.  

Best stocks to buy now

But I don’t see that happening yet. So I think the best stocks to buy now might be found in the technology sector. Tech stocks with high sales growth can be particularly sensitive to interest rates. Low interest rates for longer can mean those technology companies can fetch greater valuations.  

So which do I think are the best stocks to buy? I like Nvidia (NASDAQ:NVDA) – a giant in the graphics processing world. As the saying goes, it has ‘fingers in many pies’. Nvidia should benefit from several fast-growing areas over the coming decade. These include artificial intelligence, autonomous driving, and data centres.

In recent years, its double-digit rate of sales growth was partly due to the rise of gaming and cryptocurrencies, both of which heavily use Nvidia’s graphics processing units.

Future growth could come from new business areas like self-driving cars. However, with new ventures, Nvidia faces potential execution risk. It will need to carefully and accurately forecast supply and demand to avoid additional costs. 

That said, I like that it is founder-led, with growing earnings, and offers nearly 30% profit margins. It’s an impressive company, in my opinion. I’d say it’s high up on my best stocks to buy list.

Technology stars

There are so many other fast-growing technology stocks that I’d like to buy for my portfolio too. My list includes Amazon, Apple, Microsoft, Alphabet, and Facebook.

I could buy each of these individual stocks. Alternatively, I could buy a fund or investment trust that holds all of them. It might also work out cheaper with lower transaction and foreign exchange fees for UK investors.

My favourite option is Polar Capital Technology Trust (LSE:PCT). It currently includes all of the six technology stocks mentioned and these form 33% of the total portfolio.

A word of warning, however. Investing only in one sector could be volatile for a stocks portfolio. Also, if interest rate hikes are brought forward, the entire sector could experience some turbulence. That said, the Federal Reserve has just recently updated the market. The bull market continues… for now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harshil Patel owns shares of Amazon, Apple, Microsoft, and Polar Cap Technology Trust. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Microsoft, and NVIDIA. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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