Kiplinger's annual investing outlook, which includes the best stocks to buy, has been a feature for our readers since 2012. As executive editor for Kiplinger's Personal Finance Magazine, I have authored the piece since then, surveying the stock market and economy and synthesizing my findings into key takeaways.
That's no small task, given the broad and dynamic nature of the market. Along with conducting plenty of research, I rely on my experience to draw out the most important trends and likely winners for the best stocks to buy. I've covered this story for over a decade now, but I've been an investing writer for far longer. I've seen investors through a lot of bull markets and bear markets.
How you can choose the best stocks to buy
When gathering research for where to invest, I quickly realized that the best line of defense for investors in the uncertain macroeconomic environment that we currently find ourselves in is to be disciplined and selective when seeking out high-quality companies.
That means when investors are attempting to find the best stocks to buy now, they should look beyond factors such as company size (small-cap and large-cap stocks, for instance) or investing style (such as growth or value) and search for stocks of companies with consistent profits, good cash flow and other indicators that reflect quality.
"If a company generates more cash than it needs to run its business, it can do a number of useful things with it, such as pay dividends, buy back its stock, acquire other companies, expand its business and knock out its debts," writes Kiplinger contributor Will Ashworth on the importance of good cash flow.
And while Kiplinger's outlook provides context and advice related to general market trends, individual investors must consider their own risk tolerance and time horizon when deciding what works best for them and their financial goals.
With that in mind, here are eight of the best stocks to buy now.
When assembling this list of Kiplinger's best stocks to buy, we sought out high-quality companies that boast solid fundamentals such as strong earnings and revenue growth, as well as free cash flow, which is the money left over after operating expenses and spending on assets. Additionally, many of the names featured here can be considered some of the best value stocks as measured by their forward price-to-earnings (P/E) ratios.
The names on our list of the best stocks to buy vary by size and industry and are not meant to make up a diversified portfolio. But all, for one reason or another, are well positioned to benefit in an uncertain market environment.
- Sector: Technology
- Market value: $72.0 billion
- Dividend yield: N/A
Chip designs are increasingly complex, and that's driving demand for Cadence Design Systems' (CDNS) products, which help companies design and test semiconductors. Customers such as Nvidia (NVDA), Broadcom (AVGO) and Tesla (TSLA) can't stay away.
Cadence's sales related to artificial intelligence (AI) tripled in 2023, and analysts at Zacks Investment Research expect even faster growth in 2024. They predict earnings growth of nearly 18% over each of the next three years, which is why CDNS is on this list of the best stocks to buy.
But the tech stock is pricey, so snap up shares on dips. Competition is stiff in the electronic design automation space – Cadence is No. 2 – and that may create opportunities as firms jockey for market share in this fast-growing industry.
- Sector: Consumer staples
- Market value: $304.2 billion
- Dividend yield: 2.7%
Coca-Cola (KO) is a stronger company than it was at the start of the pandemic, after slimming its offerings by 600 products and moving away from sugary sodas with acquisitions such as coffee company Costa, says Argus Research analyst Taylor Conrad.
Coke beat analysts' top- and bottom-line expectations in the second quarter and raised its full-year guidance. Conrad expects "the combination of more focused marketing and a more profitable brand portfolio to boost earnings and the share price over time."
Shares are a bargain as well, after underperforming the S&P 500 over the past year. Coke is one of the best dividend stocks too. It has raised its dividend for 62 consecutive years. At its current price, it boasts a 2.7% dividend yield.
- Sector: Energy
- Market value: $32.6 billion
- Dividend yield: 5.9%
Diamondback Energy (FANG), with a market value of more than $32 billion, is the premier pure-play shale driller in the Southwest's Permian Basin, according to analysts at The Carson Group, an investment management firm. Diamondback has an exceptionally low cost of production, they note, and generates attractive free cash flow – a key factor for those seeking out the best stocks to buy.
"If you're bullish on oil prices, which we are, then Diamondback is a good bet," they say.
Income-oriented investors will appreciate Diamondback's juicy 5.9% yield. And the oil stock trades at just 9.4 times the consensus of analysts' expected earnings for the next 12 months. The average price target for Diamondback's shares is $218.59, which implies a gain of roughly 20% from FANG's recent close.
- Sector: Healthcare
- Market value: $226.0 billion
- Dividend yield: 0.3%
Scientific research may ramp over the next several years, and that is promising for Thermo Fisher Scientific (TMO), which makes equipment that researchers need to do their jobs. The turnaround may take time, but patient investors could find that Thermo Fisher is one of the best stocks to buy now and hold on to for the long term.
The company's solid execution record is a plus, says R.W. Baird analyst Catherine Ramsey Schulte, who rates the stock Outperform, the equivalent of a Buy. A diverse array of customers, including biopharma firms, hospitals, diagnostic labs, universities and research institutions, among others, helps. Some of those end markets have been improving recently.
- Sector: Industrials
- Market value: $36.3 billion
- Dividend yield: 0.9%
Despite turbulence elsewhere in the travel industry, Delta Air Lines (DAL) is on a smooth course, with the seatbelt sign switched off for investors, according to analysts at Morgan Stanley, where Delta is a top pick.
Delta should generate per-share earnings of $7-plus in 2024 and more than $10 per share beyond, "which is still not close to being priced into the stock," they say. Domestic flights are "holding up" while corporate and international travel remain "robust."
Morgan Stanley analysts believe Delta's management has been conservative in its guidance about fuel costs but acknowledge potential volatility there. Still, the analysts see the stock soaring to a 12- to 18-month price target of $85 a share – more than 50% above its current price. This potential upside makes DAL one of the best stocks to buy.
- Sector: Healthcare
- Market value: $168.1 billion
- Dividend yield: 5.7%
Jefferies analysts say they're being contrarian with their buy call on Pfizer (PFE). Shares of the pharmaceutical giant are down 6% in the past 12 months on a total return basis (price change plus dividends), largely due to waning demand for COVID-related products.
But the bulls at Jefferies see several catalysts for better days, including a $3.5 billion cost-cutting program that will make earnings targets more achievable. Jefferies sees earnings of $2.61 a share in 2024 and $2.51 in 2025.
Other potential bright spots include the firm's oral obesity drug, currently in clinical trials. If viable, it has annual sales potential of $4 billion, according to Jefferies. The firm's price target for the healthcare stock is $33, implying upside of 11%.
- Sector: Basic materials
- Market value: $33.9 billion
- Dividend yield: 0.7%
Vulcan Materials (VMC) is the largest U.S. producer of construction aggregates – think crushed stone, sand and gravel. It's also a major producer of asphalt and concrete. The company faces challenges in its residential housing construction business, but that's offset by momentum in highways and other public infrastructure.
"We remain intrigued by the generational increase in funding" for projects driven by the Infrastructure Investment and Jobs Act of 2021, write analysts at investment firm Raymond James.
Vulcan isn't cheap, trading at 30 times forward earnings estimates from a consensus of analysts. But, even amid an October surge, analysts' average price target of $269.39 implies the materials stock could rally another 5% from recent levels.
- Sector: Financial services
- Market value: $37.0 billion
- Dividend yield: 1.9%
Stock in Discover Financial Services (DFS) trades at a discount to its fair value, says Morningstar analyst Michael Miller. However, this spread was narrowed after Capital One (COF) in February said it plans to buy the credit card company in an all-stock deal worth $35 billion, news that sent DFS shares soaring.
About 70% of Discover's revenue is interest income from its credit cards – a plus if interest rates remain high. He adds that Discover's credit card business has historically generated better results than most of its peers.
If economic wobbles mean consumers spend less – or worse, fail to make their card payments – that's a worry. But Discover is financially strong; Morningstar gives it an "A" for financial health, good news for investors looking for the best stocks to buy.
As for the potential buyout by Capital One, Miller is neutral on the deal. While the analyst sees the strategic value for it and believes COF is paying a fair price, he notes that "there will be meaningful integration risk, and some uncertainty surrounds regulatory approval, as the combined company would be the largest credit card issuer in the United States by loan volume."
Note: The original version of this article first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance, though it has since been updated. Subscribe to help you make more money and keep more of the money you make here.
