When trying to find top stocks to buy now, I need to be careful. Choosing what not to buy is just as important as choosing what I do buy. After all, buying a stock that loses value can annoyingly tie up funds and be a drag on the overall performance of my portfolio. With that in mind, here’s a stock I like, but also one I’m staying away from.
A top stock worth considering
The top stock that I’d look to buy now is Experian (LSE:EXP). It’s a global consumer credit reporting company that operates in 37 countries. The share price is up 18% over the past year. As a business, it appeals to me in several ways.
Firstly, it’s heavily focused around technology. This is an integral part of the business, as it sells decision analytical results in order to help companies market their services correctly. The technology solutions available to consumers when dissecting their credit scores make up another powerful asset.
Secondly, I think the credit area of financial services is a good area to be in. Especially after the impact of the pandemic, I think consumers are going to be more active in using Experian products. The latest trading update showed evidence of this, with the last quarter of 2020 delivering 10% total revenue growth.
But a risk to Experian is potential reputational damage if data is proven to have been misused. Late last year, the Information Commissioner’s Office said the company needed to make changes to how it handles data or be hit with a fine. Experian is appealing against the ruling.
Nothing good to watch
On the flipside, I wouldn’t say that Cineworld (LSE:CINE) is a top stock to buy now. Last year, I wrote how I thought the share price was a buy at 60p. It now sits at 103p, and has rallied an impressive 70% over the past year.
However, I think that the current price more accurately reflects the position of the company and I don’t see much more upside left. That’s why I’d stay away from it as a new investor.
Revenue for 2020 declined 80.6%, and the company had to issue more debt to survive this period. Some $810m of new debt was raised, putting net debt at over $4.3bn. With low revenues and spiralling debt, I think that both problems will weigh on the share price, making it hard to justify it as a top stock pick right now.
I could be wrong, and the easing of lockdown restrictions across the US and UK could see Cineworld perform strongly in H2 2021. But with the taking of market share by online streaming services such as Netflix and Amazon Prime during lockdown, I’m unsure as to how much of a boost Cineworld will see this summer.
Ultimately, I just feel there are more reasons to be concerned versus optimistic with Cineworld at the moment. Therefore, when looking for a top stock to buy now, I’d much prefer to buy Experian instead.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Netflix. The Motley Fool UK has recommended Experian and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.