When digging into the best stocks to buy in 2024, the options are plentiful. However, the sheer number of companies can be intimidating for most investors.
Keep reading as we explore why buying stocks in 2024 is a good idea and why you might want to think twice. Plus, we’ll give our take on some of the best stocks to consider for the rest of 2024.
The Problem With Buying Stocks in 2024
People have been expecting and planning for a recession for a couple of years. Inflation has caused the prices of many consumer items to skyrocket. Credit card debt is at an all-time high, yet the stock market continues to soar. It was up 10% in the first quarter alone.
If the past indicates what we can expect for the S&P 500 through the rest of 2024, investors could be pleased at the end of the year—or will they?
Inflation has started creeping back up again, which has put the Federal Reserve back into focus on what they’ll do with interest rates. Add geopolitical friction in the Middle East and the fact that it’s a presidential election year, and anything can happen.
As we continue through 2024, here are a few things to watch out for.
- Does the Federal Reserve cut rates as it has said or hold them where they are due to inflation?
- Do the issues in the Middle East settle down?
Why Buy Stocks in 2024
Even though you should be somewhat cautious about investing in stocks for the rest of 2024, there are many reasons why it’s a good idea.
- U.S. GDP was 3.4% in Q4 2023, and the economy continues to show signs of solid growth.
- The unemployment rate was 3.8% in March 2024, which is only slightly below the target range of 4% to 6%.
- In 20 of the last 24 presidential election years, the S&P 500 finished the year in positive territory.
Stock Market Projections for 2024
The S&P 500 reached an all-time high in March and has pulled back slightly since. As we get deeper into the second quarter and move into the second half of the year, there are a few things to know.
Rate Cuts
In recent months, the Federal Reserve has hinted that it plans to make several interest rate cuts in 2024. These cuts have already been priced into the S&P 500’s current price.
Even though the Consumer Price Index (CPI) was higher than expected at 3.8% in March, a recent Reuters poll of 100 economists shows they feel up to three rate cuts will still happen in 2024. However, instead of the first rate cut at the June meeting, most feel they will begin in September.
Earnings Season
Higher interest rates mean it costs more for businesses to borrow money, which can affect their overall earnings. Despite higher rates, S&P 500 companies had a year-over-year (YoY) earnings growth of 3.4% in Q4 2023.
Q1 2024 earnings season is underway, and so far, the results have been mixed. United Airlines surged more than 17% after forecasting stronger-than-expected profits for Q2. However, trucking company J.B. Hunt Transport Services fell more than 8% after missing Wall Street estimates.
How To Identify Best Stocks To Buy in 2024
When looking for the best stocks to buy, a few things need to be top of mind.
Pay Attention to Market News
It’s important to know that even the smallest piece of news can impact a company’s share price. Most investors use a stock screener to find companies that fit their criteria.
Once you have added your list of targets to a watch list, be proactive about learning what’s happening at the companies. Do they consistently beat estimates when announcing quarterly results? Are they increasing their dividend yield? Is management buying up shares of the stock? These are all pieces of news that show positive signs for a company.
Dig Into The Financials
Understanding a company’s financial performance is going to be crucial to finding solid companies to invest in. Here are a couple of numbers you’ll want to understand.
- Earnings Per Share (EPS): This number tells you how much profit a company generates for each outstanding stock share. To calculate this, divide the company’s net income by the total number of shares outstanding.
- Price-to-Earnings (P/E) Ratio: The price-to-earnings ratio is essentially how much an investor is willing to spend to purchase a share compared to the company’s earnings per share. To calculate this number, you divide the share price by the earnings per share. If a company has a P/E ratio of 25, that means someone is willing to pay 25 times the company’s earnings per share.
- Operating Margin: A company’s operating margin tells you how profitable it is. It can be calculated by dividing operating profit by total revenue.
- Return on Equity (ROE): Return on equity helps you understand a company’s profitability. It tells you how much revenue a company can generate with each dollar of invested capital. Ideally, you want to invest in companies that can generate a lot of profit with very little capital.
- Price-to-Earnings/Growth (PEG): This is a great way to understand the future growth potential for a stock. Ideally, you want to invest in inexpensive (low P/E ratio) companies, but you also want to know they have good growth potential. To calculate PEG, divide P/E by projected EPS growth.
Wide Moat
Successful companies tend to have a wide moat. This means they have a significant competitive advantage. Investing in a company with a lot of competition is risky, but investing in a company that is a step ahead of everyone else can put you in good shape to profit.
Stocks To Buy In 2024
As we approach the year’s second half, we wanted to provide a short list of the 10 best stocks to buy in 2024. To create our list, we’ve used our own Ziggma Score.
The Ziggma Stock Score is a product of proprietary, institutional-grade stock research. We apply big data analytics to fundamental analysis to rank stocks against their industry peers on a scale of 0 to 100.
Spectrum Brands Holdings Inc (SPB)
The first name on our list is Spectum Brands Holding Inc., which has a Ziggma score of 100. Currently priced at $80.62 (April 26, 2024), it’s trading at a 14% discount to the average analyst price target. We love this company because its PEG is below 1, meaning the stock is inexpensive compared to earnings growth. It’s also operating in an industry expected to grow by more than 11.54%.
Honeywell International Inc. (HON)
Honeywell International Inc. has a Ziggma Score of 94. The stock price is currently trading around 13% below analyst price targets. However, this stock has an upside due to its PEG being below 1 and a strong return on assets (ROA) of 9.20% for the trailing twelve months (TTM).
View Honeywell International Inc.
Meta Platforms Inc (META)
Meta, Facebook’s parent company, currently has a Ziggma score of 100 because of its incredible profitability and financial health. Its TTM profit margin is 29%, and its TTM return on assets is 18.80%. The company’s earnings per share growth is expected to be 34.5% in fiscal year 2024.
Steris Plc (STE)
Steris Plc is a medical equipment company that focuses on infection prevention and other procedural products and services worldwide. Due to its high growth potential, it scored a 100 Ziggma score. Revenue growth in 2024 is expected to be 10.11%. Currently, the stock is trading at a 19% discount to analyst estimates.
Salesforce Inc (CRM)
Salesforce, the customer relationship management software used by companies worldwide, has a Ziggma score of 100 due to its strong growth potential and healthy financials. The company’s current valuation based on next year’s profit is significantly below its current P/E. The stock price trades at a 20% discount to analysts’ price target.
Viemed Healthcare Inc. (VMD)
Due to its strong profitability, valuation, and financial health, Viemed Healthcare Inc. has a Ziggma score of 100. Revenue is expected to grow by 18.63% in 2024. The company’s return on assets is 7.53%, which signals strong asset allocation. The company’s PEG is below 1, trading 25% below the analyst’s price target.
Netflix Inc. (NFLX)
In its most recent earnings report, Netflix reported 16% year-over-year subscriber growth but announced it would no longer report subscriber numbers in Q1 2025. This caused a significant sell-off post-earnings. However, despite this news, Netflix still earns an 89 Ziggma score due to its strong profitability and financial health.
Netflix reported $2.1 billion in free cash flow and expects its FY 2024 free cash flow to be $6.1 billion. Additionally, they’re expecting strong revenue growth of 14.77% for 2024.
Lennar Corp. (LEN)
Homebuilder Lennar Corp. has a 100 Ziggma score due to its high growth potential and strong financials. Its P/E is 10.5x, slightly above the average homebuilder’s, but still an acceptable multiple. The company is trading 13% below the average analyst target price, and several analysts have revised their price targets upwards over the past couple of months.
Stride Inc. (LRN)
Technology-based education company Stride Inc. has a lot of upside potential due to its robust financial health. This is why it currently has a Ziggma score of 94. Trading near its 52-week high, it’s riding a lot of momentum going into the final two quarters of the year. Revenue growth is expected to be 10.12%, and its PEG is below 1, which means it’s inexpensive when adjusted for earnings growth.
NMI Holdings Inc. (NMIH)
Mortgage insurance company NMI Holdings has made a significant run-up over the past 12 months. Even with this increase in stock price, it’s still trading at a value with a PEG below 1. It’s also 12% below the average analyst price target. With an expected 2024 return on assets of 11.75%, there could still be upward room to run for the stock price.
Continuous Monitoring and Portfolio Rebalancing
Ensuring your investment portfolio is appropriately diversified is crucial for minimizing risk. With Ziggma, you’ll have a clear picture of how well your portfolio is diversified by asset class and company. You can even set alerts so that you know as soon as your portfolio needs to be rebalanced. Sign up for a free trial of Ziggma today.