With the new year comes the top stock choices. Here are 10 to look out for
A new year brings new questions for investors looking to find the top stocks for 2024. Will the long-forecast recession be confirmed? If so, how severe will it be? Will the Magnificent 7 continue to be magnificent? Are future earnings already priced into the stock market? What is the Federal Reserve’s thinking on the timing of rate cuts? Is the consumer out of gas?
You can add your own questions, but you get the idea. This is still a market that offers more questions than answers.
With that said, you also can expect some surprises. At this time last year, nobody was talking about the growth of artificial intelligence (AI). Now, companies are referencing AI in their earnings reports as never before.
And add to all of that, it’s an election year.
Investors hate uncertainty and there’s enough to keep them out of the market. But objectively speaking, the market had a great year in 2023 despite all the headwinds it faced. The difference between now and other years is that you have to really focus your efforts on the stocks that are growing earnings.
Fortunately, there are stocks to be found in many sectors. While dominate is a strong word, there are several reasons to believe these companies will be among the top stocks for 2024.
Nvidia (NVDA)
You’ll forgive me for starting off this list of top stocks for 2024 with an obvious choice, but Nvidia (NASDAQ:NVDA) still merits your consideration. The company saw explosive growth as demand for its AI chips outpaced the company’s ability to make them.
That’s not something to completely dismiss. Plus, as Luke Lango wrote recently, many companies are now looking for custom AI chips to support custom applications. That opens the door for other chip makers. Investors will be watching to see how soon those chips are available.
Nevertheless, Nvidia still projects earnings growth of more than 65% in the next 12 months. That easily covers a lofty price-to-earnings (P/E) ratio of 43.
That doesn’t mean I’m suggesting investors will get a 240% return on their investment as they did in 2023. But there is still more growth to be found in NVDA stock. This will be particularly true if the company experiences growth in its PC market.
Micron Technology (MU)
Micron Technology (NASDAQ:MU) is the market share leader in dynamic random-access memory (DRAM) chips. These are the kind of chips that will be critical for AI applications which are memory hogs. This will be particularly true as companies create custom AI applications.
To that end, Micron launched its HBM3E memory-chip module in late 2023. The company will begin producing the chips at scale early this year and is forecasting millions of dollars in revenue during this fiscal year.
As one of the top stocks for 2024, Micron is not without its detractors. Whereas a company like Nvidia gets the benefit of the doubt despite expectations for slowing growth, some analysts are viewing those revenue projections a bit more skeptically. The company does face competition that is eating away at its market share. And macroeconomic uncertainty may affect the company’s growth prospects.
Investors have to wait until the end of March for Micron’s earnings report. In the meantime, you can look at the analysts’ forecast for 15% growth in MU stock over the next 12 months.
Pfizer (PFE)
Pfizer (NYSE:PFE) has been a polarizing and volatile stock over the past four years. Investors were treated to all-time highs in 2021 and 2022 spurred by demand for its COVID-19 vaccine and therapeutics. But 2023 was a different story. PFE stock is down more than 40% in the last 12 months and is trading at levels not seen since 2016.
But before you dismiss Pfizer, you should at least understand the bullish case, which has nothing to do with its COVID-19 therapeutics and vaccines.
The company has 13 drug candidates in Phase 3 clinical trials. That will go a long way to replacing declining revenue and earnings as sales of its COVID-19 products normalize. In fact, the company expects to see $20 billion in growth from its own pipeline by 2030.
The company’s full-year earnings forecast for 2024 came in at $2.24 on the high end. That’s lower than the $2.31 that analysts expected, but it still would be a 49% gain in the next 12 months. With a stock that’s trading at 19x earnings, that kind of growth is not priced into the stock.
Analysts see high single-digit growth for PFE stock in 2024. And with a dividend that currently has a yield of 5.61%, investors can expect Pfizer to be one of the top stocks for 2024.
Match Group (MTCH)
I found Match Group (NASDAQ:MTCH) on a list of top-ranked stocks via a stock screener and wanted to see if it would be a match for portfolios in 2024. As it turns out, if you can stomach what may be a short-term correction, this is a stock that could be in for significant gains later in 2024.
A lot of the interest in MTCH stock has to do with Tinder, it’s most recognizable name and a favorite among Gen-Z users. However, my thesis for Match Group hinges (pun intended) on Hinge – one of the dating app brands owned by Match. The company is leaning into AI in an effort to improve on its aim to be the app that was “designed to be deleted.”
In the company’s most recent earnings report, the company projects 14% earnings growth in the next 12 months and analysts have a consensus upside of 14% for MTCH stock. It was reported that usage levels for Hinge were at an all-time high. It’s now the most downloaded dating app in the U.K and Australia and is in the top three within the United States. All of which supports the company’s goal to reach $400 million in annual revenue.
Select Medical Group (SEM)
Using the same stock screener that gave me Match Group, I found Select Medical Group (NYSE:SEM). Select Medical employs over 53,000 throughout the United States. The company owns long-term acute care, inpatient rehabilitation hospitals, occupational health, and physical therapy clinics.
SEM stock is known for being a dividend payer, but it may have some opportunity for explosive growth in 2024. This may be a case of the market overlooking the company’s solid earnings growth in 2023. In the first three quarters, earnings are up 61% year-over-year. And the company expects earnings growth of 18% in the next 12 months.
Still, as of this writing, the stock is basically flat for the last 12 months. But it’s up 9% in the last month and analysts see a 23% upside for SEM stock. Despite that surge, SEM stock still trades at an appealing 11x forward earnings. Investors looking for a momentum stock to buy should pay close attention as the company moves closer to earnings in February.
Delta Air Lines (DAL)
Another way to find the top stocks for 2024 is to look at stocks that are trading at a historically low P/E ratio. That’s the case with the next two stocks. The first is Delta Air Lines (NYSE:DAL) which continues to be a solid performer as demand for travel continues unabated.
You shouldn’t expect Delta to deliver 280% earnings growth as it has in the first three quarters of 2023. But the company is still forecasting over 9% growth in the next 12 months. Yet, despite that strong growth the stock is “only” up about 13.5% in the last 12 months.
Some of that is due to expectations for higher jet fuel costs that never materialized. And that could become an issue if the Federal Reserve begins cutting rates earlier than expected.
But that’s a problem for another day. Right now, investors should look at a forecast for growth that includes a reinstated dividend that has plenty of room to grow in the coming years.
Devon Energy (DVN)
While we’re on the subject of a potential rise in oil prices, another one of the top stocks for 2024 is likely to be Devon Energy (NYSE:DVN). Like many oil and gas stocks, DVN stock is down 20% in the last year as crude oil prices fell below $70 a barrel.
Those prices look to be stabilizing as does the price of natural gas. That should allow investors to focus on a company like Devon Energy that continues to increase its reserves.
And if the Federal Reserve cuts rates as is widely expected at some point this year, oil prices are likely to go much higher. The thesis is simple. If the Fed cuts rates, it will because the economy is slowing dramatically, or they are expecting it to do so. Given the Fed’s track record, we’ll say they’ll be late rather than early.
This will be bullish for DVN stock. Renewable energy is here to stay. But getting a trillion-dollar jump started will require a lot of King Oil. And we will continue to need oil for decades to come. So, with Devon Energy projecting nearly 10% earnings growth in the next 12 months, it’s a good time to consider adding DVN stock to your portfolio.
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) was a superstar performer in 2023 rewarding investors with a gain of over 170%. While the company isn’t likely to pull that kind of growth in 2024, there are still catalysts that are likely to make DKNG stock one of the top stocks for 2024.
Consider that 38 states currently allow sports betting in some fashion. And out of those 38 states, 26 allow sports betting via smartphone apps or websites. In 2024, there are at least two states, Maine and Vermont, that plan to launch sports betting at some point.
It’s hard to predict when other states will legalize sports betting. But it’s safe to say that the company has done the heavy lifting. And with revenue clearly growing, the company is showing that there are good profit margins in sports betting.
The company is not profitable yet on an EBITDA basis and it’s not expected to be for at least the next 12 months. But analysts don’t appear to be too concerned about that. The consensus price target for DKNG stock is $40.31 which is 22% higher than the closing price on January 4, 2023.
Expedia Group (EXPE)
Expedia (NASDAQ:EXPE) is one of the world’s largest online travel agencies. And despite tough comparisons with 2022, the company has beaten revenue and earnings expectations in the first three quarters of the year. And there’s every expectation that trend will continue when the company reports earnings in early February.
However, EXPE stock is up 59% in the last 12 months and at least two institutional investors sold a significant amount of the company’s stock in the third quarter. That may explain, in part, why the stock has started off the trading year down around 4%.
That’s a nice pullback, and investors may even see the stock go lower. That’s okay because this is one stock you’ll want to play the long game with. Consumers are voting with their wallets. And the winners of their discretionary dollars are travel and experiences. That’s Expedia’s wheelhouse and why it’s fair to presume that the company’s projection for 34% earnings growth in the next 12 months is likely.
If it is, analysts will quickly bid the stock higher. That’s why you can use any pullback as a reason to buy EXPE stock.
Wendy’s (WEN)
Many investors have profited by investing in McDonald’s (NYSE:MCD) stock. The company is a dividend aristocrat that continually delivers a solid total return. But at over $180 a share, investors may be looking for a less expensive, yet still profitable alternative.
I offer up Wendy’s (NASDAQ:WEN) for your consideration. Like many companies on this list of top stocks for 2024, Wendy’s has been posting solid top and bottom line growth in the face of difficult comparisons to 2022.
Despite that, WEN stock is down 16.8% in the last 12 months as investors have largely steered clear of what is seen as a discretionary stock. But it may be time to take a closer look. The company is projecting 12% earnings growth and pays a dividend with a yield of over 5%. Analysts have a consensus price target which gives the stock 15% growth in the next year. That makes for an attractive total return.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.