Since 1993, I have offered an annual list of 10 stocks with the potential to beat the market in the 12 months ahead. My 2024 selections notched the highest return ever: an average of 48.9%. I beat the S&P 500 index by 10.8 percentage points, and every one of my stocks was up — six by more than 30%.
The past decade has been exceptional. Just remember that reversion to the mean is a powerful force, so don’t count on either the huge returns or my winning margin to continue. Still, there’s nothing wrong with a little celebration.
Following tradition, I have chosen nine stocks for 2025 from the broader choices of experts I trust, and I include one of my own. A theme for several selections is artificial intelligence (AI), which is in its infancy but will lead to enormous gains in efficiency and innovation. (Stocks I like are in bold; prices and other data are through October 31).
1. Cellebrite DI
The best 2024 performer, up 131.2%, was Blue Bird (BLBD), a bus manufacturer that is benefiting as school districts switch to electric vehicles. The stock, which still looks attractive at a forward price-earnings ratio of just 12, based on analysts’ consensus projections for 2025, remains a top holding of Oberweis Micro-Cap (OBMCX), a mutual fund that has far outpaced its competitors in the small-company growth stock fund category.
In 2024, Oberweis made a large investment in Cellebrite DI (CLBT), an Israeli company that uses digital tools, some based on AI, to help investigators in law enforcement, the military and corporations.
For example, Indiana police recently credited the company’s software, which investigators used to recover vital information from cell phones and computers, with cracking a drug ring after a string of overdoses. Cellebrite’s revenues rose 25% in the most recent quarter, compared with the same period last year. The company, which went public in 2021, is risky, but the upside is substantial.
2. Heico
Another big winner among our picks was NVR (NVR), which Warren Buffett added to the Berkshire Hathaway portfolio in 2023. So far in 2024, Buffett has been doing a lot of selling (Apple, Chevron and others), but he also bought Heico (HEI), which provides replacement parts for the aerospace industry and is benefiting from both the rise in global defense spending and the travel boom.
The stock has doubled in four years, but the price is still modest for a company growing so fast. The Value Line Investment Survey projects Heico’s earnings will rise by an average 17% for the next five years.
3. MGM Resorts International
Speaking of Value Line, last year I chose Brown & Brown (BRO), an insurer, from the stocks that Value Line rated 1 (tops for price appreciation), and it returned a hefty 51.3%.
I am tempted to stick with the stock even though Value Line has cut its appreciation rating to a middling 3, but to be consistent, I am picking another company recently promoted to the top rank: MGM Resorts International (MGM). Its share price has been stagnant for years, but MGM is in three accelerating businesses — casinos, hotels and online betting — and the valuation is attractive.
4. Zeta Global Holdings
Terry Tillman, who analyzes software companies for Truist Securities, has had a stellar record. He recently reiterated his “buy” rating for Zeta Global Holdings (ZETA), which uses AI to examine billions of data points to help its clients predict consumer preferences.
Zeta recently completed its acquisition of LiveIntent, which helps retailers monetize their e-mail lists — a wise acquisition. Zeta stock has nearly tripled in five years, but for a booming AI company, the potential for greater growth in value is evident.
5. iShares MSCI Malaysia
The U.S. economy is “the envy of the world,” says a recent cover story in The Economist. That it is — but Malaysia looks awfully good, too, with GDP growth of 5.1%, inflation of 2% and unemployment of 3.2%.
Malaysia has never managed to gain “Asian Tiger” status, but it’s getting there, thanks to its recent success attracting semiconductor makers. The best way to buy the market is through iShares MSCI Malaysia (EWM). After declining in five of the preceding six calendar years, the exchange-traded fund has returned 23.5%.
6. Adobe
Morningstar, the fund researcher, also analyzes stocks. The firm recently assembled a list of seven undervalued companies with “wide moats” — firms with strong defenses against competition through patents and other protections.
The one that caught my eye was Adobe (ADBE), a powerful force in software. Adobe could be a big winner by helping customers become more at ease with AI applications. The company is highly profitable, with both revenues and earnings rising at double digits.
7. Whirlpool
Our longtime small-cap value guru, Daniel Abramowitz of Hillson Financial Management, in Rockville, Md., likes Whirlpool (WHR), an appliance manufacturer that also owns such iconic brands as KitchenAid, JennAir and Maytag. Sales and earnings are well off their 2021 peak, and the stock has had a choppy past 12 months.
But Abramowitz sees strong prospects as the brands emphasized higher-margin small appliances, such as blenders and espresso machines. Lower interest rates and signs of life in the housing market will help, too. Plus, the stock is cheap, trading at a P/E, based on 2025 consensus forecasts, of just 9 and carrying a dividend yield of 6.8%.
8. Shopify
Despite its rock-bottom rating by Morningstar for its erratic returns, ARK Innovation ETF (ARKK) is a great source for ideas. Here’s one: Shopify (SHOP), the e-commerce check-out platform whose revenues have risen 20% annually for the past five years. Despite this impressive growth, the stock has dropped by half since late 2021, offering an enticing opportunity.
9. UnitedHealth Group
Once again, Parnassus Value Equity (PARWX), one of my favorite mutual funds, had a winning selection for 2024: Bank of America, returning 62.5%. The only new stock among the portfolio’s top 25 holdings this year is UnitedHealth Group (UNH), the insurance behemoth.
Earnings have risen in what I call a “beautiful line,” increasing every year since 2008, and I expect double-digit growth through this decade. The stock lagged far behind the market in the past year, returning just 6.9%.
10. Constellation Energy
My own 2024 choice of ONEOK (OKE), the Oklahoma-based natural gas pipeline company, returned 53.1%. This time, I am going with Constellation Energy (CEG), which generates and distributes electricity in states from Maryland to Texas.
Demand for electricity is booming thanks to AI data centers and electric vehicles, among other things, and Constellation is the most innovative provider. Its advantage is no secret. The stock has more than doubled over the past 12 months, but I think it has a chance to become a giant on the order of a big tech company.
As of October 31, 2024. *Based on estimated earnings for 2025. N/A not applicable.
SOURCE: Morningstar Direct, Yahoo Finance
Warning label
I believe these stocks will beat the market in the coming 12 months, but I don’t advise buying shares 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. He owns none of the investments recommended here. You can reach him at JKGlassman@gmail.com.
Note: This item first appeared in Kiplinger 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.
