If you’ve been investing for a decent length of time, you’ve probably heard the debate over how many stocks you should own. Some investors believe you should own 15-20 stocks or more to be fully diversified. Others believe you can get by with far fewer stocks. If you believe that less is more, here is a list of what could be the only stocks to own in 2024.
That’s a bold claim to make, I know. And this list is far from comprehensive. But I dare say it would give you exposure to the key sectors that are likely to lead the economy forward this year. Not surprisingly, some of the same themes from 2023 are still in place: artificial intelligence (AI), cybersecurity, and consumer staples.
This list of stocks to own also includes a favorite in the energy sector. It also features a couple of stocks that were laggards last year. These stocks will do fine with interest rates where they are, and even better if the Federal Reserve becomes more accommodative.
Costco Continues to Stand Tall (COST)
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Costco (NASDAQ:COST) is a consumer staples stock that continues to generate growth far beyond its blue-chip status. In the last five years, the COST stock price has increased over 218%, and it’s up 42% in the last 12 months alone.
The buying thesis for Costco is simple enough. The company has a membership model. As long as consumers are willing to pay that fee, and with inflation being particularly sticky in an area like food, they have an incentive to shop at Costco.
To the first point, based on independent data Costco has about a 90% retention rate. As for being a safe haven from inflation, that evidence can be seen in the company’s revenue and earnings which continue to grow year-over-year.
And the company also pays investors a safe and growing dividend which came with a special dividend of $15 at the end of 2023. That’s just another way the company continues to provide shareholder value. At 43x forward earnings, you’re definitely paying a premium for COST stock. But that shouldn’t scare you away from a company that continues to deliver for shareholders.
Advanced Micro Devices (AMD) Rises to the Challenge
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You might be curious as to why Nvidia (NASDAQ:NVDA) isn’t on this list of stocks to own. And I believe that NVDA will have another strong year in 2024. But if you’re looking for a stock that may have a more 2023 Nvidia-like year, you may want to consider Advanced Micro Devices (NASDAQ:AMD).
A key reason is that after last year’s inventory glut, demand for semiconductors is expected to rise about 15% in 2024. One of the key applications will be AI. Currently, Nvidia simply can’t keep up with the demand. That opens the door for AMD and its new MI300 series accelerators. It’s priced lower than the NVDA H100 chip and is likely to fill a niche with companies that have indicated they want more choice. AMD is targeting $2 billion in revenue from the MI300 in 2024. Since Nvidia made an estimated $37.5 billion off its H100 chip last year, that estimate may be too conservative. Regardless, the company is forecasting 50% earnings growth that does not appear to be priced into AMD stock at this time.
Fortinet: A Fortress in Cybersecurity (FTNT)
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Cybersecurity will be another important theme for investors in 2024. Fortinet (NASDAQ:FTNT) is not the leader in this space. That goes to Palo Alto Networks (NASDAQ:PANW). But like Advanced Micro Devices with Nvidia, Fortinet has an opportunity to capture market share that offers the chance for outsized gains.
The reason is that Fortinet has a deep product portfolio geared towards companies who may not have the budget for the best-in-class products. But even “low-value” targets need to be concerned about cybersecurity. Furthermore, Fortinet’s pioneering work around AI and machine learning (ML) powered security has made the company a leader in network firewalls specifically as it relates to its ability to execute. Fortinet is forecasting 5.4% earnings growth in the next year and analysts are lowering their price targets in advance of the company’s earnings. This suggests that FTNT stock may continue to face resistance near its 200-day simple moving average. However, if earnings surprise to the upside, there is significant room for the stock to recapture its all-time high made in July 2023.
Microsoft: The Crown Jewel of Tech (MSFT)
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Microsoft (NASDAQ:MSFT) is the one Magnificent 7 stock that I’m including on this list of top stocks to own in 2024. One reason is the company’s commitment to digital innovation. And you can’t talk about that without noting the company’s leadership in generative AI which started with its investment in OpenAI and ChatGPT. If you work with the Microsoft 365 suite of products, you’re already familiar with one of the first fruits of that collaboration. That is, the company’s Copilot assistant software. Copilot will help fuel growth in Microsoft’s cloud computing division. It will also be an arrow in the company’s quiver if the PC market comes back as many analysts believe it will. Beyond AI, Microsoft is also a leader in gaming. In 2023, the company generated over $15 billion in revenue from gaming. With its acquisition of Activision Blizzard, that number is expected to reach.
Unlocking the Potential: Top Stock Picks for 2024
Microsoft (MSFT)
With a substantial market share of $20 billion and an expected compound annual growth rate (CAGR) of 9.3% through 2029, Microsoft (MSFT) continues to be a beacon of potential for investors.
Although the company’s dividend yield of 0.73% may not turn heads, the annual payout of $3.00 per share, which has been consistently increasing over the last two decades, bestows a “forever stock” appeal upon this tech giant’s shares.
Visa (V)
Despite the constant cliché of never betting against the American consumer, the credo rang true in 2023 as spending continued to surge. This was particularly notable given the prevailing economic challenges, including escalating interest rates, persisting high inflation, and ominous recession forecasts.
Moreover, with total credit card debt surging to $1.08 trillion in the third quarter of 2023, according to the New York Fed, the investment case for Visa (NYSE:V) becomes increasingly compelling. The sustained consumer expenditure in various areas, encompassing significant purchases such as travel, presents a perceptive rationale for investment.
Expectations of sequentially rising revenue and higher year-over-year earnings further bolster the investment appeal of Visa, not to mention the company’s board approved $25 stock repurchase plan, greenlighted in October 2023.
PepsiCo (PEP)
In a narrative reminiscent of the comeback kids, PepsiCo (NASDAQ:PEP) emerges as a compelling investment prospect. Despite initial apprehensions regarding consumer spending on soft drinks and snack foods amidst escalating food prices, the company’s revenue and earnings defied the prevalent concerns.
While the growth trajectory may not have been exceptional, it is certainly potent enough to underpin a higher stock price for PEP shares. Coupled with a projected 7.4% earnings upsurge in the coming year, investors also stand to benefit from a dividend yield exceeding 3% and delivering $5.06 per share annually.
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE:OXY) lends itself as a promising recovery play within the energy sector and finds favor as one of Warren Buffet’s preferred stocks. Despite the tepid performance of oil and gas stocks in 2023, the enduring outlook for oil demand remains robust.
Furthermore, with solid progress in debt repayment and capital structure enhancement, accompanied by burgeoning free cash flow and an amplified dividend, Occidental Petroleum remains a compelling investment option. Additionally, Berkshire Hathaway (NYSE:BRK.B) holding a 34% stake in the company, combined with a buy zone near the $60 mark, further adds to its allure.
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