My 8 favorite stock picks for 2024
The forecast season is underway
2023 has been a good year for the stock market. 2024 promises to be more complicated: geopolitical tensions, not so soft landing of the European and US economies, western elections.
And my investment style will not change: priority to quality, as quality companies better perform over the time. Consequently, my 10 picks are not bets with potential use returns but quality stocks that may perform well… over the next years, and not just next year!
The selection is displayed by alphabetical order.
Alphabet GOOGL 0.00%↑
Sector: Technology / Country: US
Expected 2024 revenue growth: 11.3% / Expected 2024 EPS growth: 14.6%
PE23: 24.6x / PE24e: 21.2x
Net profit margin: 23.9%
ROE / ROCE / ROIC: 29.1% / 27.7% / 32.3%
This Magnificent Seven has a reasonable valuation and is a great FCF machine. 2024 will continue to see the development of AI, and even if Alphabet is behind Microsoft, they have the financial and technical resources to be a significant actor.
ASML ASML 0.00%↑
Sector: Industry / Country: Netherlands
Expected 2024 revenue growth: 1.0% / Expected 2024 EPS growth: -0.2%
PE23: 35.2x / PE24e: 34.9x
Net profit margin: 28.1%
ROE / ROCE / ROIC: 66.5% / 41.9% / 22.9%
2024 is expected to be a blank year for ASML. They will use their order backlog to maintain the same activity. So why buying a pricey stock without growth? Because 2024 could be the bottom of the semiconductor cycle. If that is the case, the revenue should increase by 20% in 2025 and EPS by more than 35%. If that happens, a lot of investors will reinforce their position before… so in 2024.
Evolution $EVVTY
Sector: Consumer Discretionary / Country: Sweden
Expected 2024 revenue growth: 17.8% / Expected 2024 EPS growth: 7.7%
PE23: 22.0x / PE24e: 20.4x
Net profit margin: 59.3%
ROE / ROCE / ROIC: 30.2% / 28.3% / 30.6%
In 2023, Evolution did not fully recover from a very complicated year in 2022. It is still 30% under its ATH around 1,700SEK. However, its qualities are still intact. A small drop is expected for margin as the tax rate will increase, but they continue to develop quickly in a promising market. Recent stock buybacks might please the market and create a new momentum for the stock. Regulation is the main risk.
Microsoft MSFT 0.00%↑
Sector: Technology / Country: US
Expected 2024 revenue growth: 14.7% / Expected 2024 EPS growth: 15.0%
PE23: 35.2x / PE24e: 33.5x
Net profit margin: 34.1%
ROE / ROCE / ROIC: 41.8% / 35.4% / 27.2%
Yes, Microsoft is a mainstream pick. Yes, Microsoft is expensive. But impossible not to select it as the AI is already taking over from the Cloud to help the company growth - and the Cloud is still growing fast.
Novo Nordisk NVO 0.00%↑
Sector: Healthcare / Country: Denmark
Expected 2024 revenue growth: 21.4% / Expected 2024 EPS growth: 19.1%
PE23: 37.7x / PE24e: 31.0x
Net profit margin: 36.1%
ROE / ROCE / ROIC: 97.2% / 96.0% / 30.0%
It should be a great year for Novo Nordisk, again. The potential of a new rise like the one we saw in 2023 is limited as it becomes very pricey, but a consolidation of the stock during the year could be a good opportunity to enter if you are not already in.
Paypal PYPL 0.00%↑
Sector: Financials / Country: US
Expected 2024 revenue growth: 8.6% / Expected 2024 EPS growth: 5.8%
PE23: 16.9x / PE24e: 15.4x
Net profit margin: 13.8%
ROE / ROCE / ROIC: 20.7% / 16.1% / 17.9%
Paypal is one beaten down stock that didn’t recover, being still almost 80% under its ATH. At $300 Paypal was very expensive, at $60/$65, it could be a good opportunity and more importantly a good compounder. Its growth is expected to be in the high single digit for the next years and it is a huge FCF machine. They will use this cash for buybacks and some potential acquisitions. The PE is now at a very low level. If they don’t present bad news, it is hard to think valuation could go lower.
Unitedhealth UNH 0.00%↑
Sector: Healthcare / Country: US
Expected 2024 revenue growth: 7.9% / Expected 2024 EPS growth: 11.2%
PE23: 21.9x / PE24e: 19.5x
Net profit margin: 6.0%
ROE / ROCE / ROIC: 28.0% / 20.4% / 11.1%
2023 has been difficult for a lot of healthcare stocks, including Unitedhealth. However, their results and reports have been satisfying. They could benefit from a healthcare rebound and their capital intensive business model will probably benefit from the rate cut of the FED and the ECB.
Visa V 0.00%↑
Sector: Financials / Country: US
Expected 2024 revenue growth: 10.0% / Expected 2024 EPS growth: 14.7%
PE23: 27.8x / PE24e: 26.6x
Net profit margin: 52.9%
ROE / ROCE / ROIC: 48.2% / 34.4% / 27.2%
The payment giant is an obvious choice for long-term portfolio. The valuation appears to be reasonable compared to the growth and quality. They are now debt-free, so they can focus their $20B free cash flow to shareholders and acquisitions. Diversification coming from new services (data, analytics, …) is also interesting.
The investment themes
This top 8 selection follows some investment themes.
2023 huge winner (AI, anti-obesity drug) will continue to win - Microsoft, Alphabet, Novo Nordisk
Healthcare should do a better year in 2024 - Unitedhealth
Volatility will need some quality and visibility - Visa, Evolution
Semiconductor cycle will reach its bottom - ASML
Beaten down stock might bounce back - Paypal
I am a shareholder of these 8 stocks. As I explained, they might not be the highest performing stocks in 2024 but they are long-term quality compounder. Knowing that, I could sleep quietly!