If you’ve been investing for a decent length of time, you’ve probably heard the debate over how many stocks you should own. Some investors believe you should own 15-20 stocks or more to be fully diversified. Others believe you can get by with far fewer stocks. If you believe that less is more, here is a list of what could be the only stocks to own in 2024.
That’s a bold claim to make, I know. And this list is far from comprehensive. But I dare say it would give you exposure to the key sectors that are likely to lead the economy forward this year. Not surprisingly, some of the same themes from 2023 are still in place: artificial intelligence (AI), cybersecurity, and consumer staples.
This list of stocks to own also includes a favorite in the energy sector. It also features a couple of stocks that were laggards last year. These stocks will do fine with interest rates where they are, and even better if the Federal Reserve becomes more accommodative.
Costco (COST)
Costco (NASDAQ:COST) is a consumer staples stock that continues to generate growth far beyond its blue-chip status. In the last five years, the COST stock price has increased over 218%, and it’s up 42% in the last 12 months alone.
The buying thesis for Costco is simple enough. The company has a membership model. As long as consumers are willing to pay that fee, and with inflation being particularly sticky in an area like food, they have an incentive to shop at Costco.
To the first point, based on independent data Costco has about a 90% retention rate. As for being a safe haven from inflation, that evidence can be seen in the company’s revenue and earnings which continue to grow year-over-year.
And the company also pays investors a safe and growing dividend which came with a special dividend of $15 at the end of 2023. That’s just another way the company continues to provide shareholder value.
At 43x forward earnings, you’re definitely paying a premium for COST stock. But that shouldn’t scare you away from a company that continues to deliver for shareholders.
Advanced Micro Devices (AMD)
You might be curious as to why Nvidia (NASDAQ:NVDA) isn’t on this list of stocks to own. And I believe that NVDA will have another strong year in 2024. But if you’re looking for a stock that may have a more 2023 Nvidia-like year, you may want to consider Advanced Micro Devices (NASDAQ:AMD).
A key reason is that after last year’s inventory glut, demand for semiconductors is expected to rise about 15% in 2024. One of the key applications will be AI. Currently, Nvidia simply can’t keep up with the demand. That opens the door for AMD and its new MI300 series accelerators. It’s priced lower than the NVDA H100 chip and is likely to fill a niche with companies that have indicated they want more choice.
AMD is targeting $2 billion in revenue from the MI300 in 2024. Since Nvidia made an estimated $37.5 billion off its H100 chip last year, that estimate may be too conservative. Regardless, the company is forecasting 50% earnings growth that does not appear to be priced into AMD stock at this time.
Fortinet (FTNT)
Cybersecurity will be another important theme for investors in 2024. Fortinet (NASDAQ:FTNT) is not the leader in this space. That goes to Palo Alto Networks (NASDAQ:PANW). But like Advanced Micro Devices with Nvidia, Fortinet has an opportunity to capture market share that offers the chance for outsized gains.
The reason is that Fortinet has a deep product portfolio geared towards companies who may not have the budget for the best-in-class products. But even “low-value” targets need to be concerned about cybersecurity.
Furthermore, Fortinet’s pioneering work around AI and machine learning (ML) powered security has made the company a leader in network firewalls specifically as it relates to its ability to execute.
Fortinet is forecasting 5.4% earnings growth in the next year and analysts are lowering their price targets in advance of the company’s earnings. This suggests that FTNT stock may continue to face resistance near its 200-day simple moving average. However, if earnings surprise to the upside, there is significant room for the stock to recapture its all-time high made in July 2023.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the one Magnificent 7 stock that I’m including on this list of top stocks to own in 2024. One reason is the company’s commitment to digital innovation. And you can’t talk about that without noting the company’s leadership in generative AI which started with its investment in OpenAI and ChatGPT.
If you work with the Microsoft 365 suite of products, you’re already familiar with one of the first fruits of that collaboration. That is, the company’s Copilot assistant software. Copilot will help fuel growth in Microsoft’s cloud computing division. It will also be an arrow in the company’s quiver if the PC market comes back as many analysts believe it will.
Beyond AI, Microsoft is also a leader in gaming. In 2023, the company generated over $15 billion in revenue from gaming. With its acquisition of Activision Blizzard that number is expected to reach $20 billion in a market that’s expected to grow at a compound annual growth rate (CAGR) of 9.3% through 2029.
And while investors should still expect significant capital gains from MSFT stock. The company’s dividend is becoming impossible to ignore. The yield of 0.73% isn’t noteworthy, but the annual payout of $3.00 per share which has been growing for the last 20 consecutive years adds a “forever stock” quality to this tech giant’s stock.
Visa (V)
At times the axiom to never bet against the American consumer seems trite. However, in 2023, it proved to be truly prescient. The consumer continued to spend. This was despite rising interest rates for much of the year, inflation that remained well above the Federal Reserve’s preferred rate, and predictions for a recession.
And according to the New York Fed, the consumer was piling up credit card debt at record pace. Specifically, total credit card debt climbed to $1.08 trillion in the third quarter of 2023.
That may seem like a cynical reason to invest in Visa (NYSE:V). But frequently investing is about understanding the facts on the ground. In this case, the consumer continues to spend on major purchases including travel. And there isn’t sufficient data that shows the trend changing.
With that in mind, investors can expect more quarters of sequentially rising revenue. That also means higher year-over-year earnings. And, you should also consider the company’s $25 stock repurchase plan approved by the company’s board of directors in October 2023.
PepsiCo (PEP)
The last two picks on this list of stocks to own could be called the comeback kids. That is, companies that underperform the market one year frequently outperform in the following year. Let’s start with the case for PepsiCo (NASDAQ:PEP).
Investors started the year concerned about the consumer’s appetite for discretionary purchases like soft drinks and snack foods in the face of rising food prices. The year ended with concerns that the weight loss craze would eat into the company’s revenue and profits.
That’s not showing up in the company’s revenue and earnings. Growth wasn’t spectacular, but it should justify a higher stock price for PEP stock. In summer 2023, the stock hit its all-time high of over $196. It’s pulled back sharply since then and is struggling to stay above its 50-day simple moving average.
Nevertheless, this looks to be a chance for investors to take a position in PEP stock while there’s some upside to be had. Pepsi is forecasting a 7.4% rise in earnings in the next 12 months. And even if the stock price growth is delayed by a quarter or two, you’ll still collect a dividend that yields over 3% and pays out $5.06 per share annually.
Occidental Petroleum (OXY)
One of Warren Buffet’s favorite stocks, Occidental Petroleum (NYSE:OXY) makes this list as a recovery play in the energy sector. Oil and gas stocks were among the stock market’s biggest underperformers in 2023. The expected rise in crude oil prices stalled out around $80 a barrel and at one point fell below $70.
But the long-term outlook for oil demand remains unchanged. And it’s still more likely than not that investors can expect $100 oil or higher at some point in 2024. That’s one reason that Buffett is buying OXY stock hand over fits. Another reason is that the company has aggressively paid down debt and improved its capital structure. Free cash flow is increasing, as is the company’s dividend, while the company’s share count is shrinking.
Buffett’s hedge fund, Berkshire Hathaway (NYSE:BRK.B) owns 34% of the company. It can – and likely will – continue to buy more shares of the company if prices remain below $60, a level becoming known as the Buffett buy zone.
On the date of publication, Chris Markoch did not have (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.
