A bullish end to 2023 has left stock market investors pondering the top stocks to pick for 2024. Fuelled by the potential for central banks to lower interest rates, some investors are moving into risk-on assets. Picking the best stocks for your portfolio offers the chance to factor in a degree of risk management while optimising the potential for returns.
NVIDIA (NVDA)
Past performance is not an indication of future results.
- Chip designer NVIDIA (NVDA) has a strong position in the growth gaming and AI sectors. Its dominance stems from a track record of pioneering advances in parallel processing technology in GPUs (Graphics Processing Units), which are used in both industries.
- Sales of graphics chips reached $11.9bn in 2023 and account for more than half of NVIDIA’s total revenue. While that lack of diversity is a risk factor, as long as demand for GPUs continues to grow, additional earnings are expected to be reflected in the share price. The firm is also investing in new income streams, which might contribute to growth in 2024.
- NVIDIA’s technological head start on its competitors is demonstrated by the cutting-edge NVIDIA DRIVE™ PX2 product, which has consolidated its position as the obvious partner for auto-manufacturers developing autonomous vehicles.
- The relative immaturity of the artificial intelligence sector could leave investors wondering which is the best AI stock to pick. NVIDIA helps investors to navigate the sector by offering a service to the entire sector. NVIDIA products can be used in areas ranging from machine learning to data management, leaving the company well positioned to benefit from AI, regardless of which sub-sector takes off first.
- Meanwhile, Meta has committed to spending billions on NVIDIA’s chips in 2024. Mark Zuckerberg, Meta’s CEO announced plans for Meta’s computing infrastructure to incorporate 350,000 Nvidia H100 graphics cards by the end of 2024, indicating a multi-billion dollar investment in AI as the company’s primary focus.
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First Solar (FSLR)
Past performance is not an indication of future results.
- Operating since 1999, sustainable energy company First Solar (FSLR) offers investors the security that comes with well-established companies and growing industries, as well as the potential for returns given the development of market-leading technology.
- The continued rise in average global temperatures is sure to keep climate change at the top of the political agenda, and a lack of alternative investments in the renewable energy sector is likely to support First Solar’s share price.
- This competitive edge positions First Solar as a major player in a hot sector. The firm has developed innovative products such as Cadmium Telluride (CdTe) thin-film photovoltaic (PV) modules. These offer several advantages over traditional silicon-based modules, including greater efficiency and durability at lower costs. Innovative bifacial solar panels can currently increase energy production efficiency by 15%, but going forwards, First Solar is targeting 35%.
- First Solar’s bold prospects are backed up by data from the company’s balance sheet. The Q3 earnings report for 2023 posted year-on-year revenue growth of 27.4%, and analysts predict that Earnings Per Share (EPS) are likely to grow by 65% in 2024, up from $7.98 (2023) to $13.19.
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Schlumberger (SLB)
Past performance is not an indication of future results.
- Founded in 1926, Schlumberger (SLB) is a lead operator in the oilfield services sector, providing services to an international client base of gas explorers and producers. Global operations provide a degree of insulation from geopolitical risk and present investors with opportunities to support the expansion plans of non-Russian oil producers.
- The price of Schlumberger (SLB) stock has tripled since the pandemic-derived price lows of 2020. The impressive and consistent price rise consolidates SLB as a top momentum stock to buy in 2024.
- While investing in the carbon-fuels sector might appear to be in contrast with the move towards renewables, Schlumberger is investing in innovation, researching ways to use its core technologies to expand into carbon capture and developing geothermal energy sources.
- Revenues from established operations also allow the firm to engage in regular buybacks, and the company’s payout ratio of 29.1% means that investors were offered a dividend yield of 2.06%.
- A buoyant global economy and the fortification of investor risk appetite through 2024 could start a virtuous circle of investment and spending. This would increase demand for raw materials, and by facilitating the processing of these, Schlumberger will be well-positioned to potentially see increased revenue.
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Constellation Brands (STZ)
Past performance is not an indication of future results.
- Beer, wine and spirits manufacturer Constellation Brands (STZ) is the third-largest beer company in the US, forecast to post impressive double-digit revenue growth in the next few years.
- As long as the company can manage its expenses well, ensuring any increase in spending does not match additional earnings, then top-line growth should lead to robust cash flows. This growth could, in turn, result in Constellation Brands attracting attention from a new group of growth stock investors.
- The change in the dynamics of the firm are exemplified by cash flow growth in 2024 being expected to reach 3.2%, an increase on the annual average growth of 1.5%. This predicted upsurge in sales is yet to be fully reflected in the share price.
- Many of the products made by Constellation Brands are premium grade products, including a high-end wine range and popular beers such as Corona and Modelo Especial. These products target a demographic of higher earners, whose income levels are expected to be more immune to the cost-of-living squeeze brought about by inflationary pressures. Shareholders are subsequently offered a degree of insurance against the risk of prolonged high interest rates and recessionary economic conditions.
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Albemarle (ALB)
Past performance is not an indication of future results.
- Lithium mining company Albemarle (ALB) is currently trading at a discount of around 50% from its price at the start of 2023, due to a general price slump in its industry, which is known for its cyclical fluctuations. The medium to long-term prospects of the company remain positive, however, potentially making the stock an ideal pick for a value investor.
- Lithium mining is not a quick process. It can take years for new mines to start production, resulting in constraints in the short to medium-term supply of the metal. Investing in lithium as a commodity stock could be a strategic move if the demand increases, as it might do in line with increased adoption of electric vehicles. Capped supply could cause a demand surge, which could benefit companies such as Albemarle.
- If global interest rates fall as expected in 2024, there might be a boost in consumer confidence and spending, including on electric vehicles. An accompanying reduction in the cost of government borrowing could trigger increased investment in EV infrastructure and expansion of the industrial sector, which is an important driver of the Albemarle share price.
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Final thoughts
Smart investing involves building a diversified portfolio. These top stock picks for 2024 offer diversified exposure to different sectors, and can help investors to achieve their investment goals by being able to ride out the inevitable fluctuations in individual asset prices.
With 2024 already showing signs of being a good year for investors, now could be an ideal time to add the companies tipped to outperform their peer group to your watchlist.
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