No one can predict what the stock market will do in 2024 or how any individual stock will fare. Investors can set themselves up for success by buying shares of companies with solid long-term prospects that are trading at reasonable valuations and holding on tight.
I'm betting that International Business Machines (IBM -1.05%), Intel (INTC -9.20%), AT&T (T 1.02%), Walt Disney (DIS -0.04%), and American Tower (AMT -0.70%) will deliver in 2024 and beyond. Here's why.
IBM
Cloud computing is complicated. So is artificial intelligence. For large enterprises and organizations with vast IT infrastructures and low risk tolerances, moving everything to Amazon Web Services (AWS) or tapping OpenAI may not be viable options.
IBM has positioned itself as a critical partner for enterprises looking to digitally transform and modernize their operations. The company's hybrid cloud platform can run anywhere, enabling clients to mix and match public clouds and their own private data centers. And watsonx, IBM's new enterprise AI platform, is tailor-made for enterprises that need to ensure their proprietary data remains safe and that they comply with regulatory requirements.
IBM expects to grow revenue by 3% to 5% this year, driven by strong demand for digital-transformation projects that deliver clear returns on investment for customers. IBM certainly isn't the fastest growing tech company, but valued at just 14 times forward free cash flow, it doesn't need to be to produce solid returns for investors.
Intel
What stands out about Intel is how many ways it can win. The company is best known for its PC and server central processing units (CPUs), but it also sells graphics cards, AI accelerators, and other specialized chips. In addition to making its own chips, Intel is building a foundry business to rival market leader TSMC. With the launch of the Intel 18A manufacturing process scheduled for late 2024, Intel expects to gain a technological advantage.
No matter where the semiconductor industry goes, Intel will benefit through its foundry business. As demand for AI accelerators continues to explode, not only does Intel sell its Gaudi AI chips and data-center graphics processing units (GPUs), but it could eventually manufacture AI chips for others. If Arm-based PCs become a thing, Intel will be ready to manufacture those Arm chips thanks to a collaboration with Arm. Once the Intel 18A process is ready, the company's total addressable market will expand dramatically.
Intel stock is down around 33% from its pandemic-era high, and the company has a market value below that of rival AMD. Neither will remain true for long as Intel's foundry strategy plays out over the next few years.
AT&T
Telecom giant AT&T has a lot of debt, and its expensive fumbles in the media industry should rightly give investors some pause. But the company has gotten back to basics. Fiber internet and 5G wireless are the core focuses. The wireless business continues to gain subscribers, albeit at a slower rate than last year, and the fiber business is steadily expanding.
AT&T expects to generate free cash flow of $16.5 billion this year, and the company's capital intensity should ease over the next few years as the 5G investment cycle winds down. A recent move to revamp its wireless infrastructure with more flexible hardware and software could free up some capital to grow other businesses, including fiber internet, a bit faster.
AT&T trades for just 7 times free-cash-flow guidance and sports a 6.7% dividend yield. The company's results are sensitive to economic conditions, but that valuation seems far too pessimistic to me.
Walt Disney
The reason to own Disney stock is simple: The iconic company will eventually figure out how to make its valuable intellectual property and assets work in the age of streaming. Disney's linear TV business has long been a cash cow, but that won't remain the case forever.
The company is focusing on four areas: Making the streaming business profitable, turning ESPN into a digital sports powerhouse, fixing the film business that's been stumbling in the post-pandemic era, and accelerating growth in the experiences business, which includes the company's parks and its cruise line.
Disney's superpower has always been its ability to have each business feed into and strengthen the others, fueled by its vast catalog of media assets. It will take time for Disney to fully right the ship, but there's little reason to believe the company won't eventually figure it out.
American Tower
American Tower owns cell towers and other communications assets around the world. While its growth depends on the capital spending of its telecom customers, long-term contracts make its revenue extremely predictable. As long as demand for mobile data continues to rise, American Tower will benefit as wireless providers race to keep pace with each other.
Shares of American Tower have rallied over the past two months, but the stock still looks like a solid deal. The company has been consistently raising its dividend, even throughout the pandemic. The stock currently has a dividend yield of about 3.2 %, more than double that of the S&P 500.
American Tower's business is about as stable as they come. For long-term investors, it's a stock worth buying and holding.
