Just like a fresh musical act that stormed up the charts, the curse of the sophomore effort clouds the hottest stocks to watch in 2024, if we’re being perfectly honest. After dodging the recession bullet last year, the Wall Street gods might not grant us good tidings over the next 365 days. Still, that doesn’t mean we should give up.
No, with the market providing thousands upon thousands of opportunities, it’s invariable that some ideas will slip under the radar. And we’re not talking about junk plays but diamonds in the rough – good enterprises that just slipped into rough circumstances. Further, with fundamental prospects possibly set to change in 2024, it’s time to keep your eyes on the prize.
Below are enticing ideas for hot stocks to watch in the new year.
Albemarle (ALB)
A specialty chemicals manufacturing firm, Albemarle (NYSE:ALB) garners attention for its lithium market. It’s a great business to be in. Per Grand View Research, the global lithium market reached a valuation of $8.2 billion last year. Experts anticipate that the sector will expand at a compound annual growth rate (CAGR) of 12.8% from 2024 to 2030. At the culmination point, we’re talking about annual revenue of nearly $19 billion.
Now, here’s the opportunity. According to investment data aggregator Gurufocus, ALB trades at a forward earnings multiple of 10.16X. That’s lower than the sector median, which comes in at 14.35X. And per Gurufocus’ proprietary calculation for intrinsic value, ALB is significantly undervalued. At a broader view, it’s difficult to argue the point. For instance, Albemarle’s three-year EBITDA growth rate stands at a blistering 45.7%.
Of course, the concern is whether ALB can continue its robust financial performance. I think it can because if the Federal Reserve lowers interest rates, electric vehicle sales may rise due to lowered borrowing costs. If so, ALB would likely rank among the hottest stocks to watch.
Devon Energy (DVN)
An intriguing idea for hot stocks to watch, Devon Energy (NYSE:DVN) is a hydrocarbon exploration firm. That means it specializes in the upstream component of the energy value chain. And make no mistake, it’s a relevant sector. According to Mordor Intelligence, the U.S. upstream market produces 12.4 million barrels per day. Further, this production should expand at a CAGR of 2.3% through 2028.
Let’s be brutally honest. While we all appreciate the upside possibilities of enterprises like Albemarle for their EV relevancies, the world still runs on oil. When you consider areas such as air transportation, the world may continue running on oil for decades to come. Fundamentally, that’s where the opportunity for DVN as one of the hottest stocks to watch lies. I don’t think DVN’s loss of 22% last year has baked in the long-term relevance.
No matter, you can pick up DVN at a forward earnings multiple of 7.14X. That’s a discount compared to the 8.22X sector median. Analysts also assign shares as a moderate buy with a $56.28 target, implying 24% upside.
Caesars Entertainment (CZR)
A hotel and casino entertainment company, Caesars Entertainment (NASDAQ:CZR) had an okay performance last year. However, gaining 11% of equity value isn’t exactly thrilling stuff when the benchmark equities index popped up nearly 25%. Still, with enough patience, CZR may prove to be one of the hottest stocks to watch in 2024.
According to ReportLinker, the U.S. casino gaming market should grow by $13.26 billion between 2022 through 2027. That would translate to a CAGR of 4.53%. Further, the trend aligns with global statistics. Per Mordor Intelligence, the worldwide casino gambling market should reach a valuation of $182.33 billion by 2028. If so, we’re talking about a CAGR of 4.95%.
Further, if policymakers decide to lower borrowing costs, consumer sentiment may improve. In addition, Caesars being local to Americans may benefit as a more efficient entertainment idea; in other words, it provides bang for the buck. It also trades at a discount at 12.59X forward earnings, below the sector median 16.13X.
Analysts rate CZR a strong buy with a $61.45 target, projecting 31% upside potential.
Geo Group (GEO)
I’m going to be brutally honest with you. The reason I believe Geo Group (NYSE:GEO) represents one of the hot stocks to watch comes down to Donald J. Trump. Based on the current political trajectory, Trump stands a great chance of winning a second non-consecutive term. Reuters provided the critical insight. While President Biden’s policies are popular, he is not.
Further, let’s also raise another honest point. Trump commands masculine energy and to American voters, there’s something satisfying about a man slamming his fist down and saying enough is enough. And we all know that Trump is not afraid to say some incredibly controversial things, things that normal folks would never utter for fear of reputational and financial damage.
Of course, one of those controversial subjects centers on the whole law and order theme. Trump loves talking about it and it will almost certainly be a central campaign strategy. Worse yet, I’m not sure Biden has an answer for the criticism that’s coming his way.
With that being the case, the thesis for GEO as one of the hottest stocks to watch is self-explanatory.
Bunge (BG)
A global leader in agribusiness, Bunge (NYSE:BG) represents a key member of the global food value chain. However, its market performance in 2023 belies its relevance, gaining a very modest 5.6%. Even worse, BG shares slipped more than 8% in the trailing month to end the year. How then could BG be one of the hot stocks to watch?
From a monetary policy perspective, cheaper credit could encourage farmers to invest in land and equipment. Downstream, that could help lift demand for Bunge. Further, I don’t anticipate geopolitical flashpoints to ease up in 2024. If anything, tensions could expand, particularly as China has been flexing its military muscle recently. That could drive up food prices, which cynically could improve Bunge’s profitability.
Further, deserves closer examination as one of the hottest stocks to watch in the new year. Per Gurufocus, BG trades at a forward earnings multiple of 8.49X. In contrast, the sector median comes in at 14.92X.
Again, the permanent relevancy of the food supply chain should see an expanded opportunity for Bunge. Analysts agree, rating shares a strong buy with a $137.50 price target.
Build-A-Bear Workshop (BBW)
Based in St. Louis, Missouri, Build-A-Bear Workshop (NYSE:BBW) sells teddy bears and other stuffed animals and characters. To be sure, BBW ranks among the higher-risk entities for hottest stocks to watch in 2024. Last year, shares lost a bit more than 6% of equity value. That’s not an encouraging backdrop by any measure. Still, lower rates could boost sentiment for BBW.
During the recent holiday shopping season, consumers turned to buy now, pay later (BNPL) platforms. Stated differently, demand for consumer discretionary goods didn’t necessarily fade. Rather, the mechanism for paying for such products change. Presumably, then, lower borrowing costs should buttress consumer sentiment. In turn, that should help a specialized discretionary retail play like Build-A-Bear.
Further, the U.S. toys market reached a valuation of $24.34 billion in 2022. Experts project that the sector will expand at a CAGR of 4.5% through 2028. That being the case, I find BBW’s lowly forward earnings multiple of 6.68X to be a credible discount.
Analysts concur, pegging shares a moderate buy with an average $37 price target. That implies nearly 61% growth.
DRDGold (DRD)
If the Fed goes through with interest rate cuts – especially if they’re sizable cuts – then precious metals miner DRDGold (NYSE:DRD) belongs on your radar for hottest stocks to watch. Historically, gold represents an inflation hedge. Lower borrowing costs imply a devaluation of the dollar relative to other currencies. In that case, commodities should rise, which will almost certainly affect precious metals.
Of course, many other stable or dare I say it sensible alternatives exist to DRD. However, we’re talking about hot stocks to watch, not blue chips to fall asleep to. If you’re on the young side of a 40-year retirement plan, be my guest. However, if you want the robust performance of 2023 to continue into the new year, DRD offers the right mix of volatility and rationality to move the needle.
Enticingly, the gold miner trades at 10.14X trailing-year earnings. In contrast, the sector median comes in at 15.83X. Given the prospect of lower rates, investors may find DRDGold’s discount credible.
Finally, H.C. Wainwright’s Heiko Ihle rates DRD a buy with a $13.25 target, implying almost 67% upside.
On the date of publication, Josh Enomoto 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.
