Pundits are divided on their economic and financial market predictions for 2024. Some see lingering high interest rates prompting recession, while others see as the Fed starts to implement rate cuts.
Amid this uncertainty, picking the best stocks for the year ahead can be stressful.
Fortunately, there is a solution. Take the long-term approach: Invest in good companies with positive outlooks that you can hold indefinitely. You’ll have versatility as a result. If the market is strong, you can ride the wave. If the market turns sour, you can hang on and wait for a recovery.
Read on for a review of the benefits of long-term investing, followed by an introduction to 10 top stocks that may suit your portfolio perfectly in 2024 and beyond.
Long-term investing is forgiving under various market conditions, but there’s more to the story. Experienced and novice long-term investors also benefit from the potential for compound growth, lower transaction costs, tax efficiency and reduced market volatility impact.
Compound growth involves earning on your returns and on your original investment. Allowing your returns to grow alongside your original investment radically improves your wealth potential over time.
Long-term investors naturally realize compound growth by staying invested rather than selling to realize profits. As an example, say you own $100 worth of stock that grows 10% in a year. You’re up $10. If you stay invested and the stock grows 10% again, the second-year gain is $11—because you earned on the original investment and on the first-year return.
To be fair, you can also generate compound growth as a short-term investor by regularly reinvesting your profitsHyderabad Wealth Management. The trickier part is that the short-termer must execute a series of profitable trades. Under the long-term approach, you need only invest in one good company that grows over time.
If your broker charges per-transaction fees, you’ll have far fewer costs with a long-term strategy. While a few bucks a trade may not seem like much, those fees add up. Fees reduce the funds you have available to invest and chip away at your returns over time.
In a taxable account, you incur taxes on realized gains, interest and . You realize gains only when you sell. Long-term investing favors holding over selling, which keeps the tax bill low.
Market volatility is most damaging to your investment returns when you liquidate at temporarily low prices. Long-term investors generally avoid this fate by holding their positions through crashes and corrections.
Not every stock is suitable for a long holding period. The best picks are those with the financial strength and stability to power through bad economies and uncertain times. Remembering Warren Buffett’s advice to “never lose money,” I’m favoring large-caps that analysts love with ample margins, sizeable market share and good growth outlooks.
High-margin companies with loyal customers efficiently turn sales growth into rising profits—which is great in growing economies. But these same companies are also resilient in market downturns. Loyal customers insulate against severe sales declines while high margins protect profitability. Size and reputation also help with continued access to capital at competitive rates.
For more high-conviction investing ideas from the brain trust at Forbes to help you make money in 2024, .
The table below shows 10 top stocks for the year ahead. Two points to note here. One, I own positions in McDonald’s and Microsoft
. And two, these picks are heavy in . As such, they’re not intended to be a fully diversified portfolio.
Sector: Commercial services
Market cap: $521 billion
Stock price as of 12/05/23: $254.13
Fiscal year 2023 GAAP EPS: $8.28
Dividend yield: 0.82%
Annual dividend: $2.08
Dividend payout cadence: Quarterly
Visa runs a payment processing network and related services, including branded credit, debit and prepaid bank cards. The primary income source is fees generated from transactions over the company’s network. Visa’s key growth drivers are increases in payment volume and the number of processed transactions.
Visa’s massive operating margin of 64% delivers excess profitability that can support ongoing network investments to remain competitive, plus shareholder dividends and share buybacks.
The company’s dividend yield of less than 1% won’t compel you to buy on its own—but the Visa’s history of growing profitability and share repurchases might. During its fiscal year 2023, Visa repurchased 55.4 million shares of its class A common stock for $12.4 billion. In October, Visa approved a new multiyear $25 billion share buyback authorization.
Also, Visa’s business model has built-in inflation protection, which can be a source of comfort for investors. As prices rise, Visa processes higher value transactions and makes more money. For more inflation-resistant stocks, see .
In fiscal year 2024, Visa expects double-digit growth in its EPS over the prior year.
Sector: Consumer services
Market cap: $208 billion
Stock price as of 12/05/23: $286.98
Trailing 12-month EPS: $11.34
Dividend yield: 2.3%
Annual dividend: $6.68
Dividend payout cadence: Quarterly
McDonald’s operates and franchises its namesake fast-food restaurants in the U.S. and abroadJaipur Investment. With 36,000 restaurants in 100 countries, McDonald’s is one of the most recognizable fast-food brands in the world.
Growth can be challenging for a brand as ubiquitous as McDonald’s, but the fast-food operator has a plan. McDonald’s recently announced it would open 8,800 locations and expand its loyalty program to 250 million members by 2027. As the loyalty membership increases, the data collected from that program should be another competitive advantage for the chain. McDonald’s is also branching out from its hamburger-centric restaurants with a new pilot program of 10 CosMc’s cafes, which will mostly feature a variety of caffeinated beverages and a small menu of snacks, including pretzel bites, cookies and a brownie sundae. The Illinois restaurant recently opened and nine more are scheduled to open in Texas next year.
McDonald’s has also made artificial intelligence (AI) acquisitions with the goal of using the technology to improve operations and customer experience.
Over the last 12 months, McDonald’s produced a solid operating margin of 46%. The company expects similar results in 2024, along with sales growth of nearly 2% and free cash flow conversion of about 90%.
McDonald’s also produces a nice stream of with a dividend yield of 2.3%.
Sector: Technology
Market cap: $502 billion
Stock price as of 12/05/23: $96.83
Trailing 12-month EPS: $168.15
Dividend yield: 1.5%
Annual dividend: $1.47
Dividend payout cadence: Quarterly
Taiwan Semiconductor is a large and respected chip foundry that produces semiconductors under contract for other companiesJaipur Wealth Management. Apple is one of TSMC’s largest clients. Others include Nvidia, Intel and Advanced Micro Devices.
Mordor Intelligence estimates the global semiconductor industry will grow at a 10.9% CAGR between now and 2028. TSM stands to benefit from that growth, since the company dominates chip manufacturing with its estimated 56% global market share. This combined with a 40%-plus operating margin and the enviable client list imply strong upside for TSM.
The company does expect a sales decline in 2023 due to a slowdown in chip manufacturing. The business environment should stabilize next year, however. The expectation is that 2024 will be a “healthy growth” year for TSM.
Sector: Technology
Market cap: $2.8 trillion
Stock price as of 12/05/23: $372.52
Trailing 12-month EPS: $10.32
Dividend yield: 0.81%
Annual dividend: $3
Dividend payout cadence: Quarterly
Microsoft develops and supports software and computing services. The company’s personal computing applications Windows and Microsoft Office 365 are well-known in households around the world. Microsoft additionally is a major player in cloud computing.
Microsoft is the world’s second largest company (by market cap), behind Apple. Microsoft also holds the number 2 spot in the fast-growing cloud computing space with 22% market share, behind Amazon’s AWS.
The company is in the early stages of scaling its AI expertise into an estimated $10 billion business. Microsoft is an investor in OpenAI and currently uses ChatGPT to supplement search results. Next year, Microsoft will roll out an AI-powered version of Windows.
For investors who view AI as “the next big thing,” a position in Microsoft has a lot of appeal. The company has exposure to a new, potentially fast-growing market as well as mega cap financial strength. For investors, that’s an interesting blend of risk and reward.
For more investing ideas from the brain trust at Forbes to help you make money in 2024, .
Sector: Health
Market cap: $82 billion
Stock price as of 12/05/23: $179.65
Trailing 12-month EPS: $4.91
Dividend yield: 0.83%
Annual dividend: $1.50
Dividend payout cadence: Quarterly
Zoetis produces medicine and health products for pets and livestock across seven categories, including vaccines, parasiticides, medicated feed additives and animal health diagnostics. The company is a former subsidiary of Pfizer. which has been spun off and now operates independently.
In the U.S. and Latin America, Zoetis has leading market share in medicines and health products for companion animals, cattle, swine and even fish. That dominance is supported by 300 products and 27 manufacturing sites.
Zoetis should see a boost in 2024 from its new product Librela, an innovative pain treatment for dogsSurat Stock. Zoetis has a similar product for cats, Solensia, which launched in the U.S. in 2022. Solensia was a key driver of product sales growth in the company’s most recent quarter. Librela comes to the U.S. after two years of successful use in Europe.
Analysts expect Zoetis to grow its earnings in 2024 by 10.5%. Over the last 12 months, the company’s operating margin was 36%.
Sector: Technology
Market cap: $274 billion
Stock price as of 12/05/23: $602.22
Trailing 12-month EPS: $11.12
Dividend yield: NA
Annual dividend: NA
Dividend payout cadence: NA
Adobe develops and supports software for content creation, publishing and analytics. The company’s creative suite, Adobe Creative Cloud, has an estimated 30 million paid subscribers.
Adobe, like Microsoft, has upside in AI. Adobe has already proven its ability to implement practical AI features with mass-market appeal. An example is ”generative expand” functionality that’s built into Photoshop, the company’s flagship application.
Analysts expect further AI integration into Adobe’s applications will drive subscription revenue in 2024 and beyond. Double-digit topline growth combined with Adobe’s operating margin of 36% bodes well for investors.
Sector: Consumer services
Market cap: $109 billion
Stock price as of 12/05/23: $3,148.01
Trailing 12-month EPS: $141.37
Dividend yield: NA
Annual dividend: NA
Dividend payout cadence: NA
Booking Holdings is a leading online travel agency that sells reservations and travel-related services through several well-known properties. Those include booking.com, priceline.com, Kayak, rentalcars.com and OpenTable.
For the past four quarters, Booking Holdings has handily outperformed analysts’ earnings expectations. In the most recent third quarter, the company efficiently grew its diluted EPS 66% year over year on a 21% revenue increase.
BKNG’s size advantage and its expanding inventory of hotels and vacation rentals plus post-pandemic travel growth contributed to the 2023 outperformance. Continued inventory expansion positions this market leader for further market share gains.
Analysts expect 2024 sales and EPS growth for BKNG of 11% and 19%, respectively.
Sector: Technology
Market cap: $3 trillion
Stock price as of 12/05/23: $193.42
Trailing 12-month EPS: $6.13
Dividend yield: 0.50%
Annual dividend: $0.96
Dividend payout cadence: Quarterly
makes the iPhone, MacBook computers, Apple Watch, iPad and related devices and applications. The company enjoys a loyal brand following, thanks in part to a consistent user experience and deep integration across the product line.
Apple’s sales dipped in its most recent quarter and fiscal year. In the quarter, only the iPhone and services notched gains, while all other products showed sales declines.
Despite soft sales, the iPhone maker did grow its diluted EPS for the year and quarter. Growth in the high-margin services business contributed. But Apple’s strongest competitive advantage continues to be unwavering customer loyalty. Once customers come into the Apple ecosphere, they tend to stay thereAhmedabad Investment. That provides stability and some level of predictability to Apple’s business over time.
Analysts expect Apple to grow its topline 3.5% in fiscal year 2024 and 5.7% in fiscal 2025.
Sector: Consumer non-durables
Market cap: $56 billion
Stock price as of 12/05/23: $54.26
Trailing 12-month EPS: $1.48
Dividend yield: NA
Annual dividend: NA
Dividend payout cadence: NA
Monster makes, markets and distributes energy drinks. The portfolio includes the namesake Monster brand as well as NOS
, Full Throttle, Reign and Gladiator drinks.
Monster is dominant in the growing energy drink category. With pricing power, a strong product pipeline, a respectable operating margin plus a new acquisition, Monster is well-positioned to capture its share of growth in its category. A report from Ken Research Private Limited predicts global energy drink sales will expand 8% annually over the next five years.
Analysts expect Monster to increase its sales 11% and EPS 16% in 2024.
Sector: Transportation
Market cap: $141 billion
Stock price as of 12/05/23: $232.17
Trailing 12-month EPS: $10.42
Dividend yield: 2.2%
Annual dividend: $5.20
Dividend payout cadence: Quarterly
Union Pacific is a large and dominant U.S. railroad company that provides commercial transportation and delivery services. UNP’s customers include automakers, agricultural producers and distributors, and makers of construction materials and products.
UNP’s most recent quarter had mixed results due to soft shipping volume and inflationary pressures. However, the company’s new CEO notched some early wins in operating metrics like train length and terminal dwell time. Further operating improvements should be a headlining story for UNP going forward. Improved efficiency can help UNP manage through any continued volatility in shipping volumes.
As the business environment stabilizes, a more efficient UNP should generate lots of cash that can fund shareholder dividends and share repurchases.
In the face of an uncertain 2024 financial market outlook, invest in solid companies you are willing to hold for the long-term. Generally, the best stocks for resiliency and growth potential have business momentum, operating efficiency and recognized, respected brand names. Size helps, too.
Remember to choose and watch your holdings closely. The economic environment can change quickly. Even when you’re taking a long-term view, market changes may warrant portfolio updates.
Disclosure: I own shares of McDonald’s and Microsoft.
Agra Investment
