Before we get to my 2024 stock picks, let's first recap the performance of my annual list of 10 stock selections for 2023. These delivered a positive return in a tumultuous year, but the benchmark S&P 500 Index did better: up 13.1% roughly a year since we published, compared with my collection's 7.9%.
Still, for the past decade the average performance of my list was an annual gain of roughly 13%, including dividends, compared with less than 12% for the S&P. (Returns throughout the story are through October 31; my 2024 stock picks are in bold.)
Stocks go up and down, but they have proven to be fabulous investments over the long run. Between the start of 1957, when the S&P 500 assumed its current size and form, through October, the index has returned an annual average of 10.2%. No guarantees, of course, but at that rate, your original investment doubles in about seven years. At the end of 30 years, $100,000 becomes $1.6 million.
Through the genius of modern finance, you can now stash your nest egg in an S&P 500 index fund and do awfully well in the long term. So why pick stocks? As I've shown over the past decade and more, you might do better. Also, you'll be engaging in an exercise that millions of people find intellectually stimulating, fun and, unlike other forms of diversion, profitable. Picking stocks is not for everyone, but my guess is that it's for you – otherwise you wouldn't be reading this.
My 2024 stock picks
Annually since 1993, I have offered a list of the best stocks to buy for the year ahead. I select nine from the broader choices of experts that I trust, and I include one of my own. The best performer for 2023 was Nu Holdings (NU), a Latin American fintech company whose shares had recently been added to Warren Buffett's Berkshire Hathaway equity portfolio. Nu returned a juicy 68%.
According to tradition, Buffett, as the top picker, gets the first choice for the upcoming year. Among his new purchases in 2023 were three home-building stocks: D.H. Horton (DHI), Lennar (LEN) and my own favorite, NVR (NVR), which serves the Mid Atlantic, Midwest and South. High interest rates have knocked NVR off its peak, but with resale inventory tight (owners hesitate to sell if it means giving up a cheap mortgage), sales of new homes continue to rise.
Another leading performer last year was Lululemon Athletica (LULU), chosen from the holdings of Fidelity Growth Company fund, which has a stellar record. Steve Wymer, manager for the past 27 years, has lately been buying more shares of Tesla (TSLA), a stock he has owned since 2011. The future of mobility is clearly electric, and Tesla has a huge edge over the legacy automakers. The price is right: down nearly $100 from its mid-summer peak.
In his first appearance on my list, Tobias Fabian Mueller, the manager of the T. Rowe Price European Stock fund, was a big winner last year with LVMH Moët Hennessy Louis Vuitton (LVMUY), the luxury goods conglomerate. The fund, like the continent, has been sluggish for a decade, but the portfolio has some attractive assets, such as ASML Holding (ASML), a Dutch company with a monopoly on the technology used to mass-produce advanced semiconductors. After soaring, share prices have dropped considerably in the past two years, offering a good entry point.
Terry Tillman, the Truist Securities software analyst, was far and away my best source of big winners for nearly a decade. But he has had three tough years in a row. For 2024, I'm trying something different: going with a stock that Tillman rated Buy immediately after an initial public offering (IPO) in September. It's Klaviyo (KVYO), a marketing platform that sends personalized e-mails to customers. Klaviyo is a young company with fast-rising revenues.
At the end of last year, Parnassus Endeavor changed its name to Value Equity, which is a good description of its orientation. The fund's pick last year, Merck (MRK), was a mediocre performer. This year, I am going with one of the fund's top 10 holdings, Bank of America (BAC). There's still considerable risk that consumers and businesses will cause loan losses for the bank if the economy goes into recession, but if the yield curve reverts to its traditional configuration, Bank of America can make rich profits by borrowing short term and lending long term.
In a sector that has performed poorly, Oberweis Micro-Cap is a standout, outpacing the typical small-company fund by an average of eight percentage points over each of the past five years. One of the fund's top holdings is Blue Bird (BLBD), a school bus manufacturer with a market capitalization (price times shares outstanding) of just $600 million. Recently, the company delivered its 1,500th electric bus – a category that could bring burgeoning profits as school districts convert their fleets.
Amazon.com (AMZN), the online retail giant, carries a forward price-earnings ratio of 40-plus, based on analysts' profit forecasts for 2024. But Alibaba Group Holding (BABA), its China-based analogue, has a P/E in the single digits. The comparison is far from exact, but Alibaba is definitely cheap, and the main reason is the political risk created by the animosity between the U.S. and China. Shares have fallen by more than two-thirds in three years, and my guess is that all the risk (and more) is already reflected in the price. Alibaba is the number-one holding of Matthews China, managed by an excellent team of Asia specialists.
Few stocks are given the top ranking ("1") for both timeliness and safety by the Value Line Investment Survey, and I usually choose one for my list each year. For 2024, it's Brown & Brown (BRO), an 85-year-old Florida-based property and casualty insurer that also manages health claims. The mid-cap stock's earnings have risen in what I like to call a beautiful line, year after year. So has the share price, but it's still reasonable.
ARK Innovation, the tech-focused exchange-traded fund, has had its ups and downs (gaining 153% in 2020, losing 67% in 2022), but manager Cathie Wood has lots of good ideas. One is DraftKings (DKNG), the online gaming company, which has gained 75% over the past year. Competition is intense, but this is one of the great businesses of the future. Revenues are soaring, but be aware that the company still loses money.
My own choice last year, Alphabet, the former Google, was the second-best performer on the 2023 list. For 2024, I'm picking a stock that has been kind to my own portfolio, ONEOK (OKE), the well-managed Oklahoma-based natural gas pipeline and processing company. Natural gas exports are booming, and the fuel will be essential domestically – as a complement to solar and wind – to run the power plants that make electric vehicles run.
Some warnings: I project these stocks will beat the market in the coming 12 months, but I don't advise buying stocks unless you intend to hold them for at least five years. Supplement my brief descriptions with your own research, and please diversify. Happy hunting!
James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for DeRisking Your Investments in a Time of Turbulence. Of the stocks recommended, he owns NVR, Tesla and ONEOK. You can reach him at JKGlassman@gmail.com.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
