Market forces unleashed a sizable rally in U.S. equities in 2023. Although policymakers and equities traders were not out of the woods yet on the macroeconomic front, many positive signs in recent economic data fueled optimism. The Federal Reserve has already projected rate cuts most likely during the latter half of 2024, given how the December CPI report came in unexpectedly hot. Either way, interests will likely come down. Now is the time for investors to equilibrate and choose which stocks are poised to rally. Below are three of my ideas.
Advanced Micro Devices (AMD)
Chipmaker Advanced Micro Devices (NASDAQ:AMD) has made many of my lists before, and I still stress investors do not count this stock out in terms of having a great impact on artificial intelligence (AI). AMD’s relentless innovation and strong business model allowed the chipmaker to overtake Intel (NASDAQ:INTC) in the CPU market during the last decade. Last year, the chipmaker announced how it would tackle the AI market. In particular, during its second-quarter earnings report, it finally announced the MI300x GPU chipset, competing directly with Nvidia’s (NASDAQ:NVDA) A100 and H100 chips — used to train LLMs. AMD announced it expects to sell $2 billion in AI chips this year.
If AMD can compete with Nvidia on pricing, its AI chips will likely have traction, leading to an unprecedented rally in the company’s shares.
First Solar (FSLR)
Shares in solar panel manufacturer First Solar (NASDAQ:FSLR) returned only just over 15% in 2023. Last year, investor sentiment soured on clean energy stocks due to relatively lower fossil fuel energy prices when compared to 2022. However, First Solar generated $3.2 billion in revenue on an LTM basis, and perhaps most importantly, the company is profitable with a 15% net margin over the last 12 months. The company also maintained volatility throughout that year. It was able to consecutively increase earnings while growing revenue by double-digit percentage points. First Solar also made gains on the manufacturing front, with an announcement of a new $1.1 billion manufacturing site in Louisiana and a signed 15-year Power Purchase Agreement guaranteeing power to a new manufacturing facility in Tamil Nadu, India.
Lower interest rates, government support from the Inflation Reduction Act, and a relatively cheap EV/EBITDA multiple could help incite a rally in First Solar in 2024.
Frontline (FRO)
Frontline (NYSE:FRO) is a large oil tanker company boasting a fleet of 84 vessels that transport crude oil and refined products across the globe. Frontline’s stock performed very well in 2023, nearly doubling in price. As a result of OPEC’s production cuts, oil tankers have found themselves increasingly traveling across to the Atlantic Ocean to ship crude from Brazil, the United States and Guyana to countries in Asia. Those longer distances have pushed up ton-miles, or the amount of crude shipped and the distance, and as a result, revenue.
Continued geopolitical tumult in the Middle East has led many leading shipping companies, including Maersk (OTCMKTS:AMKBY), to abandon their routes through the Suez Canal due to recent attacks by Yemen-based Houthi rebels. That means ships from Asia destined for Europe (and vice versa) are largely electing to go around Africa to access the European continent. That will put upward pressure on ton-miles, which could generate a huge profit windfall for shipping companies. Frontline, for its part, also provides a dividend that could be even more generous this year as profit margins expand.
Moreover, despite U.S. and U.K. strikes on Houthi targets in Yemen, the safety of the Suez Canal is still not secured, and it only takes a handful of successful Houthi drones to scare shipping companies off. Investors should expect shipping rates to remain elevated for the short and medium term.
On the date of publication, Tyrik Torres 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.
