10 of the Best Stocks to Buy for 2024 | Investing

After a rough 2022, 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.

With that backdrop, and with the Federal Reserve now projecting as many as three interest rate cuts in 2024, stocks have been given the green light to run, and all three major U.S. stock market indexes are sitting on healthy gains as the last days of December approach.

The coming year will inevitably bring many surprises for investors – some of them bad. But there are good reasons to be optimistic about each of the following stocks over the next 12 months and beyond. Here are the 10 best stocks to buy for 2024:

At the time of writing, Google parent Alphabet is one of just five publicly traded companies with a valuation of more than $1 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.

JPMorgan recently 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. While the company has been investing heavily in AI for years, the AI race has put more urgency behind its development at Alphabet. Gemini can handle input and output in the form of not just text, but also code, audio, image and video.

At just over 21 times forward earnings, GOOGL trades at about a 22% discount to Apple Inc.’s (AAPL) forward price-to-earnings ratio of 27, yet has grown revenue and earnings far faster than Apple in the last five years – a trend analysts expect to continue in the near future.

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.

Bank of America Corp. (BAC) CEO Brian Moynihan, speaking on Dec. 19, said: “Everything’s kind of normalized for the American consumer and how they’re spending money. They are in very good shape.” Moynihan has the benefit of insights from the largest consumer bank in the U.S., and that assessment is a good omen, as DFS seems priced for a recession at just nine times forward earnings. Investors will also get the comfort of a 2.4% dividend, which Discover uses less than 20% of its earnings to pay, leaving plenty of room for future increases. There’s reason to expect them, too: In April 2023, DFS announced a 16.7% increase in its quarterly dividend, marking the 13th straight year of increases in its quarterly payout.

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 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. Activist investor Nelson Peltz is currently advocating for two board seats at the company, arguing that the board is too loyal to Iger.

That said, Iger’s leadership has led to some of the company’s savviest acquisitions, which include Pixar, Marvel Entertainment and Lucasfilm. Morningstar’s Matthew Dolgin believes Disney’s streaming divisions (Disney+ and Hulu, and in the future ESPN+) should soon start making up for steady declines in Disney’s linear TV properties, which still account for meaningful revenue.

Dolgin assigns a fair value estimate of $115 per share to DIS, which closed at $92.02 on Dec. 21.

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 94% year over year in the third quarter, driven primarily by a 315% 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 about 20 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.

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 less than 13 times forward earnings and offering a modest 1.2% 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 244 million shares as of Dec. 21, 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, any reversion to more elevated oil prices in 2024 will be good for OXY, which is also a nice stock to own as a buffer against potential inflation, should it rear its ugly head once more.

Online dating giant Match Group has had a rough go if it in recent years, slumping in 2021, 2022 and – unless a Santa Claus rally saves it – 2023. A big part of its multiyear decline was simply the inconvenience of rapidly rising rates and an already-overvalued stock that, as recently as 2021, was trading for 132 times forward earnings estimates.

Just as that figure was too high, Match’s current forward P/E of 16 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.

For a company expected to grow earnings at a 26% compound annual growth rate over the next five years, MTCH looks like a company to swipe right on in 2024.

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 was up 34% in 2023 through Dec. 21. 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 14 times expected 2024 earnings, which is more than reasonable for a profitable company expected to post double-digit revenue growth in 2023 and more than 22% top-line growth in 2024. 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 4.4% dividend yield.

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 15.4 times forward earnings, Target trades at a meaningful discount to other discount retailers like Walmart Inc. (WMT) and Costco Wholesale Corp. (COST), not to mention bargain-bin stores Dollar Tree Inc. (DLTR) and Dollar General Corp. (DG). That seems a bit unjustified, especially for a company expected to grow earnings by more than 9% in 2024. 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 3.2% forward dividend. While 2023 was tough for shareholders, the stock enters 2024 with some momentum following a third-quarter report that topped both earnings and sales expectations, sending the stock up more than 17% on the news.

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 does seem clear heading into 2024 is that interest rates have likely peaked. The Federal Reserve all but confirmed this likelihood in its December meeting, with a majority of Federal Open Market Committee members projecting three 25-basis-point rate cuts in 2024.

A straightforward play on this 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 26.6 years, the value of ZROZ should increase by 26.6% for each percentage point decline in interest rates.

Sure, as an ETF, ZROZ isn’t technically a stock, but it trades freely throughout the day just as stocks do. In the Fed’s expected scenario, ZROZ should rise healthily next year, and it should perform even better in the unfortunate event of a recession. It’s a compelling bull case, and worthy of inclusion on this list – especially if you believe rates are coming down in 2024.

The last name on this list is the third stock that’s a repeat pick from 2023: megabank Citigroup. A value stock trading at roughly eight times forward earnings and paying a healthy 4.1% dividend, Citigroup is up 17% year to date through Dec. 21, including dividends. While that shows the stock received some love from Wall Street, the rally hasn’t been enough to erase the discount to book value Citigroup stock has: Shares still trade at just half 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 Morningstar has a four-star rating and a $66 fair value for shares, implying a 30.4% upside from its closing price of $50.60 on Dec. 21.