Stocks took a strong turn upward in 2023, sparked by the slowing pace of rate hikes, declining inflation and a resilient job market: a trio of good omens that could portend the elusive but highly desired “soft landing” for the U.S. economy.
That momentum has continued throughout 2024, with all three major U.S. stock market indexes hitting all-time highs this year.
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Heading into the final third of the year, 2024 inevitably still holds surprises for investors — and not all of them are bound to be positive. But there are good reasons to be optimistic about each of the following stocks through the rest of the calendar year and beyond. Here are the 10 best stocks to buy for 2024:
— Alphabet Inc. (ticker: GOOGL)
— Discover Financial Services (DFS)
— Walt Disney Co. (DIS)
— PDD Holdings Inc. (PDD)
— Occidental Petroleum Corp. (OXY)
— Match Group Inc. (MTCH)
— Grupo Aeroportuario del Sureste SAB de CV (ASR)
— Target Corp. (TGT)
— Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ)
— Citigroup Inc. (C)
Alphabet Inc. (GOOGL)
At the time of writing, Google parent Alphabet is one of just four publicly traded companies with a valuation of more than $2 trillion. It’s a proven Big Tech powerhouse offering not only its dominant search engine, but also smart devices, Pixel smartphones, YouTube and a suite of Google-branded services including Google Cloud and the Google Play store, among many others.
In late 2023, JPMorgan named Alphabet a “top stock” for 2024, citing improving ad growth, higher margins following successful cost cuts, and, of course, artificial intelligence.
While OpenAI’s ChatGPT has stolen the spotlight as the most visible consumer-facing AI chatbot, Google recently released Gemini as the company’s competitor to GPT-4. Unfortunately, Gemini’s reception has been less than stellar; the company took some heat after a bizarre rollout of its image generation feature, which inaccurately depicted the race of a wide number of historical figures.
As a result, GOOGL stock was down by as much as 5% year to date in early March, but its fortunes have rapidly reversed since. Alphabet’s swift market comeback was cemented in its April 25 first-quarter earnings report, when the search giant reported comfortable beats on both earnings and revenue. The company also announced its first-ever dividend, and approved a new $70 billion share buyback program.
Even after the stock’s comeback — it’s now up about 19% through late August — there’s still more potential upside ahead based on valuation alone.
At 21.6 times forward earnings, if GOOGL shares were to earn enough respect from the market to command Apple Inc.’s (AAPL) forward price-to-earnings ratio of 30.3, there’s still 40% upside from current levels. It’s not unreasonable to expect that gap in multiples to compress. Alphabet has grown revenue and earnings far faster than Apple over the last five years — a trend analysts expect to continue in the near future.
Year-to-date (YTD) performance through Aug. 26: +19.1%
Discover Financial Services (DFS)
As the prospect of a soft landing looks more and more likely, companies like Discover should be primed to benefit if the economy avoids a recession. As a credit card issuer, DFS is a fraction of the size of industry heavyweights like Visa Inc. (V), Mastercard Inc. (MA) and American Express Co. (AXP). In contrast to most issuers, Discover also loans money to consumers instead of just taking a cut of every transaction. That means the health of the American consumer is paramount to DFS’ success, and thankfully the American consumer is strong.
In February, DFS shareholders got a healthy dose of unexpected good news: Capital One Financial Corp. (COF) agreed to acquire Discover in an all-stock deal, in what would create an even more viable competitor to the other credit card giants. The deal, which still needs regulatory approval, is expected to close in late 2024 or early 2025. With DFS shareholders receiving 1.0192 shares of COF for each DFS share they own, the purchase represents a 9.4% premium to Discover’s stock price as of Aug. 26.
Since the proposed deal is an all-stock transaction, you can expect Discover stock to more or less track the success of Capital One shares; DFS stock’s prospects will also track the likelihood of deal approval as it moves through the regulatory process.
YTD performance through Aug. 26: +20.1%
Walt Disney Co. (DIS)
A return pick from last year’s list, Disney is a global entertainment giant with a diversified portfolio that includes its parks, cruises, broadcast and streaming platforms, film studios and well-known platforms like ESPN and Disney+.
Led by renowned CEO Bob Iger, who returned to the top C-suite spot in late 2022 after costs had spiraled out of control, the House of Mouse recently announced that it would be growing its cost-cutting goal by more than 35%, from $5.5 billion to $7.5 billion. Disney faced a proxy battle with activist investor Nelson Peltz in the early part of this year, with Peltz pushing for two board seats and arguing that the board was too loyal to Iger. Iger and Disney won the battle, with shareholders voting to approve the company’s proposed slate of directors in early April.
There’s reason for shareholders to have confidence in Iger; his leadership has led to some of the company’s savviest acquisitions, which include Pixar, Marvel Entertainment and Lucasfilm.
YTD performance through Aug. 26: +2.1%
PDD Holdings Inc. (PDD)
PDD is an out-and-out growth stock, so it may not be an appropriate holding for all investors, but its growth trajectory is truly stunning. The Chinese e-commerce company spun up in 2015, less than a decade ago, and yet it has already emerged as a viable competitor to the likes of Chinese e-tailers Alibaba Group Holding Ltd. (BABA) and JD.com Inc. (JD).
PDD is the parent of Pinduoduo and Temu, the latter platform being the company’s endeavor into e-commerce outside of China. The venture is going swimmingly: A year after its September 2022 launch, Temu was already in 40 countries.
Revenue at PDD surged 86% year over year in the first quarter, driven primarily by a 234% boost in transaction revenue. Known for its low-cost items and mobile-first online stores, PDD hooks customers in with affordable merchandise, free shipping and free 90-day returns. Trading at 8.5 times forward earnings, PDD looks like a steal on paper. The state of the Chinese economy, plus the degree to which the Chinese Communist Party flexes its authority, as it did in its 2021 crackdown on Chinese Big Tech, are two of PDD’s bigger risk factors. But the company is already comfortably profitable, so shareholders should be confident that it’s here to stay.
The stock is fresh off a horrendous day on Aug. 26, when shares fell more than 28% following weaker-than-expected earnings and an acknowledgment from the company that competition was heating up. This can happen from time to time with high-risk growth stocks like PDD: When expectations are so high, even 86% top-line growth can be a disappointment to the market.
After the sudden decline, PDD shares are far harder to ignore from a valuation perspective. Still, only risk-tolerant investors need indulge.
YTD performance through Aug. 26: -31.7%
Occidental Petroleum Corp. (OXY)
It never hurts to follow in the footsteps of the greatest investor of all time: Warren Buffett. The Oracle of Omaha, through his sprawling holding company Berkshire Hathaway Inc. (BRK.A, BRK.B), has been steadily building his position in this oil and natural gas stock. Trading for about 14.8 times forward earnings and offering a modest 1.5% dividend, OXY fits Buffett’s mold for his favorite type of stock to buy: It’s a well-run company in value stock territory.
Berkshire first invested in the company in 2019, when it helped finance Occidental’s buyout of Anadarko Petroleum. Since then, Berkshire has amassed a gargantuan stake in OXY that continues to grow. Having gained regulatory approval to purchase as much as 50% of the company, Berkshire has taken its stake from 196 million shares to nearly 255 million shares as of Aug. 14, representing about a 28% stake in the firm.
Ever the opportunist, Buffett has mostly been timing his buys when OXY shares trade below $60. This has provided a bit of an artificial floor on the stock’s price. In its 2019 funding deal, Berkshire also obtained warrants to purchase another 83.8 million shares at $56.62 per share, giving Berkshire an even greater incentive to see prices above that level. While energy prices declined in 2023, leading OXY to underperform, a reversion to more elevated oil prices in 2024 would be good for OXY, which is also a nice stock to own as a buffer against potential inflation, should it prove to be stickier than expected.
YTD performance through Aug. 26: -3.2%
[SEE: 10 Highest-Paying Dividend Stocks in the S&P 500]
Match Group Inc. (MTCH)
Online dating giant Match Group has had a rough go of it in recent years, slumping in 2021, 2022 and 2023. A big part of its multiyear decline was simply the inconvenience of rapidly rising rates and an already-overvalued stock that, at times in 2021, was trading for 132 times forward earnings estimates.
Just as that figure was too high, Match’s current forward P/E of 18.2 is low. MTCH owns premier online dating brands like Tinder, Hinge, PlentyOfFish, OkCupid and, of course, Match.com. Simply put, online dating should be in secular growth mode as younger generations become ever-more phone-obsessed and increasingly push back marriage — the median age of a first marriage in the U.S. is now 30 for men and 28 for women, compared to ages of 26 for men and 24 for women in 1990.
That said, shares have treaded water in 2024 due to a slowdown at its flagship app, Tinder, where paid users have been on the decline in recent quarters. But the company at large is still growing, and there’s a fair price for everything. For a company expected to grow earnings at a 20% compound annual growth rate over the next five years, MTCH looks like a company to swipe right on in 2024.
YTD performance through Aug. 26: +2.4%
Grupo Aeroportuario del Sureste SAB de CV (ASR)
Earning a third-straight year among U.S. News’ best stocks to buy list is Grupo Aeroportuario del Sureste, a Mexican airport operator whose stock rose 32.1% last year. This followed a 17% gain in 2022’s bear market. Impressive performance in the recent past can indicate a well-run company but doesn’t necessarily make a stock a buy: It’s ASR’s valuation alongside future macroeconomic prospects that make the stock a buy in 2024.
Shares trade for about 13 times forward earnings, which is more than reasonable for a profitable company expected to post 20% revenue growth and 62% earnings growth next fiscal year. The tailwind at the company’s back is the trend of “nearshoring” — U.S. companies bringing production closer to the States in an effort to control transportation costs, avoid supply chain snags and dodge tariffs on Chinese goods.
Since sweeping tariffs were imposed on imports from China in 2018, Mexico has leapfrogged China to become the top source of U.S. imports. As of the first quarter of 2023, Mexico accounted for 15% of imports to China’s 13% — a far cry from the 13% and 21% figures for Mexico and China, respectively, in 2018. Air travel is a good proxy for economic activity, and Mexico’s economic future is bright. Plus, income investors will be happy to know that ASR currently boasts about a 4.3% dividend yield.
YTD performance through Aug. 26: -3.4%
Target Corp. (TGT)
While it may not be the most exciting stock on the list, TGT, like its merchandise, is trading at an eminently reasonable price. At just 17.3 times forward earnings, Target trades at a meaningful discount to other discount retailers like Walmart Inc. (WMT), at 31.3, and Costco Wholesale Corp. (COST) at 50.5. That seems a bit unjustified, especially for a company expected to grow earnings by 7% this fiscal year and 10% next fiscal year. 2023 was a rough year for the retailer, which shuttered nine stores — supposedly due to high levels of retail theft — and also suffered the wrath of intolerant customers who began boycotting the retailer for acknowledging Pride Month in its stores.
Historically, TGT has weathered recessions well as consumers penny-pinch and seek out deals at the big-box store, so Target also serves as one of the more defensive picks on this list. Income investors will find something to like here, too, as Target pays a 2.8% dividend.
Target is coming off an impressive second-quarter report in which the retailer beat on revenue and earnings expectations, and raised its full-year earnings per share guidance, causing shares to surge 11% on the news.
YTD performance through Aug. 26: +14.1%
Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ)
Little can be taken for granted in the stock market, but one thing that seems more or less clear in 2024 is that interest rates have likely peaked.
A straightforward play on falling rates is the Pimco 25+ Year Zero Coupon U.S. Treasury Index ETF, which invests in zero-coupon Treasury Strips with long-dated maturities. Long-duration bonds are far more sensitive to changes in interest rates, and bonds gain value as interest rates fall. With an effective duration of 27 years, the value of ZROZ should increase by 27% for each percentage point decline in interest rates. Keep in mind that this dynamic is only in play for each percentage point decline in long-dated Treasurys, so it’s technically possible ZROZ could fall even if short-term rates decline.
This pick, which was chosen in December 2023, languished in the first half of this year as inflation remained stickier than hoped, which pushed out the likely date of the Federal Reserve’s first rate cut as the central bank kept rates where they were for the time being. That dynamic has changed a bit recently, and ZROZ has trimmed its losses as the Fed all but vowed to cut rates at its next meeting in September.
As an ETF, ZROZ isn’t technically a stock, but it trades freely throughout the day just as stocks do. ZROZ should act as a good portfolio hedge if the economy weakens quickly or in the unfortunate event of a recession. Recent concerns over rising unemployment figures have caused ZROZ to advance more than 7% in the last month, as of the time of this writing.
YTD performance through Aug. 26: -1.2%
Citigroup Inc. (C)
The last name on this list is the third stock that’s a repeat pick from 2023: megabank Citigroup. A value stock trading for about 11 times forward earnings and paying a healthy 3.5% dividend, Citigroup has gotten off to a strong start this year, adding 23.5% through Aug. 26. While that shows the stock has gotten some love from Wall Street, the rally hasn’t been enough to erase the severe discount to book value Citigroup stock still has: Shares still trade at just 0.62 times their book price.
Perhaps that’s because the company is in the middle of a turnaround plan, cutting costs and selling non-core parts of its business. Good things take time and so will Citigroup’s restructuring, but in the meantime the stock is another holding for Buffett’s Berkshire, which started buying the stock in early 2022. Analysts also think Citigroup could be a steal, and CFRA has a four-star “buy” rating and a $73 target price for shares, implying 18.1% upside from its closing price of $61.79 on Aug. 26.
YTD performance through Aug. 26: +23.5%
More from U.S. News
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10 of the Best Stocks to Buy for 2024 originally appeared on usnews.com
Update 08/27/24: This story was previously published at an earlier date and has been updated with new information.
