The stock market looks set to close out 2023 with a bang.
After slumping through most of the second half of the year, the S&P 500 has gained 8.6% month to date through Nov. 28, and investors are increasing their wagers that interest rates will come down in 2024, which should help lift stocks in the new year.
If you're looking to capitalize on the renewed stock market rally, you're in the right place. Keep reading to see three stocks you can buy right now without batting an eye.
Image source: Getty Images.
1. Taiwan Semiconductor
If you're not familiar with Taiwan Semiconductor Manufacturing Company (TSM 1.26%), it might be the most important company you've never heard of.
TSMC is the world's biggest manufacturer of semiconductors and its market cap of around $500 billion is representative of its importance in the global economy. While chip designers like Nvidia and Advanced Micro Devices might get more attention, TSMC plays a vital role in the chip supply chain as it's the biggest fabricator of semiconductors, and its top customers include Apple, Qualcomm, Broadcom, AMD, and Nvidia.
TSMC even just signed a new deal with Intel, which is one of the few major chip designers that does its own fabs. More specifically, Intel has contracted some fabricating work to TSMC, which is making its consumer-facing graphics processing units.
TSMC produces about 55% of third-party chips in the world, and it makes around 90% of advanced semiconductors, the kind that are used for high-tech applications like artificial intelligence (AI) and quantum computing, areas that tend to have higher barriers to entry.
That scale and expertise give TSMC a huge economic moat. You might expect a stock with this much market power to be expensive, but shares actually trade at a discount to the S&P 500, valued at a price-to-earnings ratio of 18, and it should benefit from the rebound in the chip sector and strong demand for AI chips. TSMC also offers a dividend with a yield of 1.9%, making the stock suitable for any portfolio.
2. The Trade Desk
Sector leaders are always attractive and one stock that has a long track record of beating the market is The Trade Desk (TTD 1.67%), the leading independent demand-side platform (DSP) in adtech.
The Trade Desk helps agencies and brands run digital ad campaigns and maximize their return on investment. The company has grown rapidly by developing strong relationships with agencies; making an easy-to-use, self-serve, programmatic ad-buying platform; and consistently releasing new technology like its cookie-less tracking protocol Unified ID 2.0 (UID2) and Kokai, its new AI-based algorithmic ad-buying platform.
The Trade Desk's customers are clearly pleased with its services as the company has reported a retention rate of at least 95% every quarter for the past nine years. It's also delivered strong growth even during a cyclical downturn in the digital advertising industry. However, the stock recently fell after management gave subpar guidance in its third-quarter earnings report, which sets up a buying opportunity for investors.
The stock isn't cheap, but the digital ad market seems to be on the mend as earlier fears of a recession now seem overblown, and leading digital platforms like Google and Facebook are seeing an acceleration in ad spending. Going into 2024, The Trade Desk seems well positioned to benefit from the ongoing rebound in ad spend, a post-cookies world as Google is expected to ban third-party cookies from Chrome in the second half of the year, and as it rolls out new innovations from Kokai.
3. Bank of America
Few sectors are more cyclical or at the mercy of outside forces than banking, but the rebound in the stock market, increasing expectations that interest rates will fall, and a recovering initial public offering (IPO) market bode well for Bank of America (BAC -0.21%) heading into 2024.
The company's own forecast no longer calls for a recession as it sees economic growth hitting a trough in the middle of next year, and shares of the stock look well priced right now if you believe the economy will soon be on a stable path to growth. Bank of America trades at a P/E ratio of just 8.3, close to the lowest it's been in the last decade, and an environment in which consumer and business spending is recovering and interest rates remain high could be ideal for the Wall Street bank. If its P/E multiple expands back to 12, a more normal valuation for the company, that would translate into near 50% growth for the stock even without any increased profits.
The bank stock also offers a strong dividend yield at 3.3%, and the company has plenty of firepower to lift the stock through dividend hikes and share buybacks as well.
Bank of America CEO Brian Moynihan is regarded as one of the best in the industry and has been lauded by Warren Buffett, whose Berkshire Hathaway conglomerate counts Bank of America as its second-largest holding.
Even if the economic recovery doesn't come as expected, Bank of America's low valuation and strong balance sheet will help the stock withstand a potential recession and rebound successfully over the long run.
