2023 proved to be a wild year, as many investors’ top-performing stocks quickly swirled down the drain amid higher interest rates and tightened economic conditions. But, against all odds, the market outlook improved rapidly in early fall before kicking off an early start to the Santa rally.

While it’s too early to say for sure, it seems like we’re ready to enter 2024 with a bang as stocks tick higher daily, though still below past highs. Better yet, some of the market’s biggest losers got shaken loose from most portfolios as companies entered a “sink or swim” phase, forced to adapt by focusing on financial fundamentals rather than growth at all costs.

Among the many top-performing stocks that made waves throughout 2023, these three stocks stand apart. They’ve returned 500% or more thus far, making them hot stocks to buy before 2024.

Carvana (CVNA)

Carvana (NYSE:CVNA), against all odds, jumped a whopping 753% since January. Shares in the online car shopping stock faced choppiness over the past few years as supply chain concerns drove used car pricing sky-high before markets normalized. At the same time, investors nervous about Carvana’s prospects saw limited profitability and questionable balance sheet stats as harbingers of doom.

That all changed in July when the company navigated a tricky debt situation and slashed a crippling leverage load. The clever financial engineering proved a boon to Carvana’s stock, and shares jumped more than 50% over a short period amid renewed investor enthusiasm.

Despite the top-performing stock’s record run, shares seem (surprisingly) undervalued today. Carvana trades at just 0.62x sales, though the company remains unprofitable. Still, the company’s balance sheet management bought Carvana much-needed breathing room and, if consumer sentiment keeps buyers away from purchasing cars new, Carvana stands to gain from a continued preference for used cars.

Applied Optoelectronics (AAOI)

Applied Optoelectronics (NASDAQ:AAOI) hit an impressive 880% return this year, but that isn’t the end of the story for this fiber-optic stock. Shares saw their bullish catalyst kickstart growth in August, as AAOI posted a surprisingly strong earnings beat. Some, but not all, of AAOI’s improved position came from a strategic partnership with Microsoft (NASDAQ:MSFT), cementing its position as a top tech supplier.

Despite its recent strength, AAOI’s share pricing might be close to its upper limit. The company’s free cash flow (FCF) is, frankly, abysmal. The company is deep in the red, posting a negative $18 million FCF in the most recent quarter. To that end, AAOI’s current short interest is pushing past 25%, indicating institutional bearishness for this top-performing stock.

If you were lucky to get in on the ground floor of AAOI’s record bull run, you might want to consider taking some gains off the table. If you’re considering an investment in AAOI today, though, I’d be patient and give shares some time to settle into a more practical valuation before committing your capital.

Soleno Therapeutics (SLNO)

Soleno Therapeutics (NASDAQ:SLNO) is arguably 2023’s top-performing stock, as shares climbed more than 1,600% since January. Biotech stocks are always a risky and speculative play, and viability hinges on regulatory approval balanced with maintaining enough cash to keep research running.

Most of Soleno’s race to the top came from positive results in therapeutic trials designed to treat a rare genetic disorder as investors weighed FDA approval possibilities. There’s stil a long way to go before Soleno brings the product to market, though, introducing uncertainty and risk moving forward.

Still, the company’s cash balance is reassuring as staggered cash infusions tied to outcomes keep bearing fruit. An interesting note is that, as part of the genetic disorder treatment, patient outcome is tied to weight loss. While Soleno’s management says they aren’t planning to enter the broader weight loss treatment market that’s been so popular this year, FDA approval could trigger off-label opportunities to make Soleno a top contender against companies like Novo Nordisk (NYSE:NOVO). That’s enough to keep investors hot on Soleno and provide a unique value proposition for the top-performing stock.

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.