Well, 2023 certainly hasn’t been perfect for stocks, but with volatility and uncertainty lingering after the chaos of 2022, it’s been better than expected for most investors. Many people braced themselves for a downturn this year amid Fed rate hikes, but the market has shown impressive resilience and even a nice recovery. As we round out the year, optimism outweighs pessimism as we look ahead to 2024.
Rate cuts are likely on the horizon for early next year, and economic outlooks are stabilizing. However, risks remain in this market, so our portfolios still require careful rebalancing. Now is the time for investors to take more opportunistic approaches while holding roughly 20% to 30% in stable, dividend-bearing stocks for defense.
Seizing opportunities in stocks today means more than chasing flashy growth stories. It can also mean trimming some positions that now look overvalued or may underperform. A savvy investor should always have their eyes open not just for promising stocks to buy but for weaker stocks to sell or short. Let’s explore these opportunities:
Stocks to Sell: Mullen Automotive (MULN)
I’ve written extensively about Mullen (NASDAQ:MULN) in recent months, and the more I analyze this company, the less I want any part of it as an investment. Mullen’s strategy has centered on continuous shareholder dilution to fund its EV development. But endless delays of its dated-looking vehicles now make me question if it will ever truly perform in this market.
While I think Mullen is beyond saving at this point, bearish traders may still profit by shorting the stock. Yes, it’s an extremely high-risk move, with Mullen being a prominent meme stock prone to short squeezes. However, the company’s dilution-dependent path ahead seems to guarantee further declines over time. With no leverage and modest position sizing, shorting could pay off since gravity will ultimately catch up to the price. Remember, Mullen has plans to reverse split shares again on Dec. 18 to meet Nasdaq’s minimum requirement. That will spur another wave of dilution as more shares are created.
Hyliion Holdings (HYLN)
Hyliion (NYSE:HYLN) doesn’t look much better than Mullen in my eyes. Its strategy to electrify commercial vehicles and reduce transportation emissions is noble. But I fail to see how Hyliion can deliver shareholder returns on this vision anytime soon — or possibly ever. Most analysts expect the company to remain unprofitable for the foreseeable future. Management recently pivoted away from its core hybrid powertrain business, signaling the strategy itself likely needs retooling.
On the one hand, Hyliion has an ample cash position above $182 million, which offers some breathing room. Revenue growth projections also look strong as the firm lands more fleet deals. However, with losses ballooning — $153 million last year — and potentially $120 million more in 2023, something needs to change fast. Otherwise, further dilution appears inevitable to keep operations funded if profits remain elusive. For this reason, cutting ties with Hyliion seems prudent before the cash drain worsens.
Stocks to Buy: FTAI Aviation (FTAI)
Shifting to the bullish side, FTAI Aviation (NASDAQ:FTAI) has been one of 2023’s biggest stock winners, with its shares up nearly 150% year-to-date. Yet even after this tremendous run, I believe FTAI still has ample runway ahead in 2024. Consensus analyst forecasts call for EPS to more than double over the next two years, rising from $1.44 to $3.28 per share. That puts the stock’s forward 2027 P/E ratio at just 13.5x — quite reasonable for a high-growth story.
Admittedly, FTAI’s projected revenue growth rate looks less exciting beyond this year’s 64% estimated jump. But it’s the company’s expanding profitability that should keep driving shares higher. When you find a growth stock that is actually enhancing margins and bottom-line returns amid expansion, it signals a sustainable winning strategy to me. For these reasons, I think FTAI can deliver strong returns next year as well.
Newell Brands (NWL)
On the flip side from FTAI, Newell (NASDAQ:NWL) is no high-flying momentum story. However, I view this deeply out-of-favor consumer products stock as an ideal turnaround candidate for 2024. NWL shares have cratered nearly 84% from their peak thanks to persistent margin pressure and mediocre performance from its legacy brands. But early signs now hint a comeback may be stirring.
Stabilizing margins and balance sheet health indicate management has executed necessary restructuring initiatives. Once macro volatility subsides, I expect Newell’s revenues to bounce back. Near its 2008 lows, NWL stock just seems far too cheap at current levels if you have a long-term mindset. Consensus forecasts call for sizable near-term earnings growth as well, with EPS potentially soaring from $0.75 this year to $1.38 by 2027. That equates to only a 6.4x forward P/E multiple three years out. With top-line growth projected to become positive in 2025, too, this paints the picture of a business poised to normalize again. Patience will be needed, but Newell could very well rebound strongly off multi-decade lows.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
