Investors must be cautious about the kinds of stocks with the most growth potential and good fundamentals to maximize returns while minimizing risks. Key fundamentals should lie at the helm of the strategy. Additionally, understanding the industry landscape, competitive advantages, and potential risks is essential. A good understanding forms the core of picking stocks in 2024 for long-term gains. That is about more than just the financial data; it requires a comprehensive approach toward investing in equities.
Such an approach will help investors make very informed decisions that best conform to the goals of investment and risk tolerance. Each company in the list is focused and seriously working on its diversification streams of revenues while improving financial performance through several innovative efforts in respective industries. Finally, the focus on cost-cutting measures driving long-term growth and margin expansion clearly defines these as must-buy stocks with a fair risk/reward balance.
Warner Bros. Discovery (WBD)
Warner Bros. Discovery (NASDAQ:WBD) leads in media and entertainment. The company has an extensive content portfolio across television, film, and digital platforms. Ad revenues signify sequential improvement, with a 70% increase in direct-to-consumer (D2C) advertising. This offsets a 7% drop in overall ad sales (Q1 2024). Strong revenue growth in important European countries like Germany, Italy, and Poland highlights the durability of legacy broadcast assets. Moreover, overall income volatility is reduced by offsetting decreases in traditional linear TV with notable increases in D2C advertising revenue.
Further, projects like the Ad-Lite service in Latin America and the next Disney and Hulu package demonstrate creative ways to increase income via collaborations. Seasonality notwithstanding, free cash flow increased by $1.3 billion in Q1 compared to Q1 2023, reaching over $400 million. The trailing 12-month free cash flow was $7.5 billion, which shows strong cash creation potential. Initiatives to reduce debt, such as a $1.1 billion payback in Q1, highlight the need for leverage management and financial restraint.
Overall, Warner Bros. Discovery stands out as one of the top must-buy stocks due to its strategic shift towards D2C offerings and innovative advertising solutions.
CVS Health (CVS)
CVS Health (NYSE:CVS) is a diversified healthcare services company that combines pharmacy services, health benefits, and retail operations. In Q1 2024, CVS Health had an adjusted operating income of almost $3 billion. Despite difficulties, CVS Health generated adjusted earnings-per-share (EPS) for the quarter of $1.31, demonstrating its operational resilience in handling demands from the Medicare Advantage business and other areas. Despite weaker results than Q1 2023, the firm generated high cash flow from operations. This amounted to $4.9 billion in Q1, highlighting sharp financial liquidity and operational efficiency.
Additionally, advancement and adaptability to market demands are reflected in CVS Health’s biosimilar endeavors through its Cordavis company and the introduction of transparent pharmacy models like CVS CostVantage. These programs improve client growth and retention and generate cost savings. Initiatives to increase margins, strategically reprice, and alter benefits for 2025 show a proactive strategy to boost profitability and position in the healthcare benefits market.
To sum up, CVS Health’s inclusion in the must-buy stocks list is justified by its strong financial performance, robust cash flow generation, strategic initiatives in biosimilars, and transparent pharmacy models.
Walgreens Boots Alliance (WBA)
Walgreens Boots Alliance (NASDAQ:WBA) leads in retail pharmacy and healthcare services, offering products and services through its pharmacy chains. Due to reduced adjusted effective tax rates and higher profitability in the US Healthcare division, adjusted EPS climbed by 3.4% to $1.20, or 2.8%, on a constant currency basis. Further, for fiscal 2024, Walgreens Boots Alliance is expected to save $1 billion in costs, primarily via organizational reforms, site optimization, and enhancements to the operating models of pharmacies and retail stores.
Moreover, even with the non-cash impairment costs associated with VillageMD and long-lived assets, Walgreens Boots Alliance has shown continued cost-cutting initiatives and increased profitability in areas like US healthcare. In addition to bolstering present profitability, the emphasis is on cost control and operational effectiveness, creating the groundwork for long-term development and margin expansion. These initiatives may boost working capital by $500 million. They will decrease CapEx by $600 million in fiscal 2024 and boost free cash flow.
To conclude, Walgreens Boots Alliance earns its place in the must-buy stocks list by focusing on cost efficiency, strategic cost-cutting initiatives, and optimizing its retail and pharmacy operating models.
As of this writing, Yiannis Zourmpanos held long positions in WBD, CVS and WBA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
