As 2023 showed, the stock market can be quite the wealth-building machine. Following the 2022 bear market, the Dow Jones Industrial Average climbed to a record high, while the S&P 500 and Nasdaq Composite soared by 24% and 43% in 2023, respectively.
Regardless of what's thrown investors' way in the new year -- whether that be a continued march to new highs for the major indexes or the most-anticipated recession in history -- amazing deals can still be found for opportunistic investors willing to seek them out.
What follows are 10 unsurpassed stocks that can make you richer in 2024.
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1. Alphabet
The first superior stock with all the tools and intangibles needed to deliver for shareholders in the new year is Alphabet (GOOGL 10.22%) (GOOG 9.96%), the parent company of world-leading internet search engine Google and streaming platform YouTube, among other ventures.
Though 2023 brought concerns of an ad spending slowdown, Alphabet's insurmountable moat has insulated it from much of the tumult. In December, Google accounted for 91.61% of global internet search share. Furthermore, it's sustained at least a 90% share of worldwide monthly internet search dating back to March 2015. As long as this moat exists, Alphabet is going to generate copious amounts of cash flow that it can redirect into high-growth initiatives.
Speaking of high-growth initiatives, cloud infrastructure service Google Cloud has made the shift to recurring profitability, while YouTube, the second-most-visited social site on the planet, has enjoyed a roughly 670% increase in daily views of Shorts (short-form videos often lasting less than 60 seconds) since 2021.
Alphabet stock remains historically inexpensive and is ripe for additional upside.
2. NextEra Energy
Another industry leader that can fatten investors' portfolios in 2024 is the largest electric utility by market cap, NextEra Energy (NEE -1.36%). Utilities struggled mightily last year as Treasury bond yields soared. But with the Federal Reserve expected to kick off a rate-easing cycle in the new year, utility yields are back in focus.
What separates NextEra Energy from dozens of other publicly traded electric utilities is its green-energy approach. Nearly half (34 gigawatts [GW]) of the company's 70 GW of operating capacity derives from renewables, including 23 GW from wind and 6 GW from solar, which are high-water marks for both energy sources from any utility in the world. Focusing on renewables has lowered its electricity generation costs and powered annualized adjusted earnings growth of almost 10% since 2012.
Furthermore, utilities supply a basic need. Regardless of whether you own or rent, you'll likely need electricity to power your appliances and possibly HVAC system. This leads to predictable operating cash flow year in and year out.
3. AT&T
Telecom company AT&T (T 1.02%) is another stock that can make opportunistic investors richer in 2024. Although legacy telecom stocks were rocked by an investigative report from The Wall Street Journal in July that alleged they could face hefty replacement and environmental/health-related costs tied to their use of lead-clad cables, these claims appear to be much ado about nothing.
What matters is that AT&T is successfully executing on an operating basis. Upgrading its network to support 5G download speeds is increasing wireless revenue, encouraging users to consume more data (data is what generates the juiciest margins for the company's wireless segment), and bolstering its aggregate number of broadband customers.
AT&T has also made remarkable progress with its balance sheet. Since March 2022, the company has spun off content arm WarnerMedia, which was merged with Discovery to create Warner Bros. Discovery. This new entity took control of certain debt lots previously held by AT&T. Including organic pay-down, AT&T has reduced its net debt by more than $40 billion to $128.7 billion.
4. Annaly Capital Management
One of my 10 stock market predictions for 2024 is that we'll witness what's currently the second-longest yield-curve inversion on record come to an end. A combination of dovish Federal Reserve monetary policy, coupled with a normalization of the yield curve, is an ideal environment for mortgage real estate investment trusts (REITs) like Annaly Capital Management (NLY 1.02%).
The mortgage REIT operating model involves borrowing money at short-term rates and using this capital to purchase higher-yielding long-term assets, such as mortgage-backed securities. If interest rates decline in the new year, and the yield curve normalizes, short-term borrowing costs will fall and companies like Annaly will enjoy a higher net interest margin.
Additionally, Annaly Capital Management almost exclusively purchases agency assets. Agency securities are backed by the federal government in the event of default. What this added protection does is give Annaly the liberty of utilizing leverage to support its whopping 13.4% dividend yield.
Image source: Getty Images.
5. UnitedHealth Group
A fifth unsurpassed stock that has a history of making its shareholders richer is healthcare company UnitedHealth Group (UNH 0.30%). Based on total returns, which includes dividends paid, UnitedHealth Group has made its shareholders money in 20 of the past 22 years.
Most people are familiar with UnitedHealth because of the company's health insurance segment. Even though the Affordable Care Act has sapped some of the premium pricing power for health insurers in the individual market, UnitedHealth is doing just fine with its employer-based plans and within the individual marketplace.
Subsidiary Optum is an even bigger growth driver for UnitedHealth. Optum provides prescription refilling services, care delivery, and software solutions for healthcare companies, among a bevy of other solutions. Not only is Optum growing faster than the health insurance segment, but it often generates a considerably juicier operating margin.
6. Alibaba
Winners can be found beyond the borders of the U.S. as well. Look for e-commerce juggernaut Alibaba (BABA 0.59%) to sweeten investors' portfolios in 2024.
The most obvious catalyst for Alibaba is the steady return to normalcy for China's economy. China's regulators abandoned the stringent and highly controversial "zero-COVID" mitigation strategy in December 2022. Though it's taking a while for China's once-dominant economy to ramp up, there remains a lengthy runway for e-commerce expansion. Alibaba's online shopping sites, Taobao and Tmall, account for about 51% of China's e-commerce market, per the International Trade Administration.
On top of being an e-commerce leader, Alibaba is also the clear No. 1 in cloud infrastructure services in China. Through March 2023, Alibaba Cloud accounted for 34% of the $7.7 billion spent on cloud infrastructure services in the first quarter. This burgeoning segment is still in its early stages of growth.
When backing out Alibaba's mammoth cash position, it's trading at an all-time low of 5 times forward-year earnings.
7. PayPal Holdings
Leading fintech company PayPal Holdings (PYPL 2.90%) is the seventh unrivaled stock that can make you richer in the new year. Though increased competition in digital payments and above-average inflation have weighed on shares, an incredibly cheap valuation could be the catalyst that sends the stock notably higher.
Among the many performance indicators for PayPal, none are more important than its user engagement statistics. Three years ago, the average active account was completing 40.9 transactions on a trailing-12-month (TTM) basis. As of the end of the third quarter (Sept. 30, 2023), active accounts were nearing 57 transactions completed over the TTM. Since PayPal is predominantly a fee-driven platform, increasing the aggregate number of transactions is the easiest way to grow its gross profit.
We're also witnessing purposeful belt-tightening and shareholder-friendly moves being made by new CEO Alex Chriss and the company's board. PayPal was targeting $1.3 billion in annual operating cost reductions in 2023, and it looks to be on track to purchase around $5 billion worth of its own stock. A forward price-to-earnings ratio of 11 doesn't do justice to a company capable of sustained double-digit sales growth.
8. Altria Group
Though growth stocks were seemingly the flavor of the month every month in 2023, don't overlook the power of time-tested value names in 2024. High-octane dividend stocks like Altria Group (MO -0.37%), which sports a yield of nearly 10%, can make you richer this year.
The biggest issue for tobacco stocks is that as consumers have become aware of the long-term dangers of tobacco use, fewer adults have taken up the habit. Thankfully for Altria, the company behind leading premium cigarette brand Marlboro, it holds exceptional pricing power with existing smokers. Even if cigarette shipments decline, Altria's ability to raise prices can move both its sales and earnings per share higher.
Altria Group is expanding into smokeless products as well. In June 2023, it closed a $2.75 billion deal to acquire electronic-vapor company NJOY Holdings. What makes NJOY such a catch is that it's received a half-dozen marketing granted orders (MGOs) from the U.S. Food and Drug Administration for its products. Whereas NJOY's e-vapor products have a green light to stay on retail shelves, the vast majority of e-vapor products don't.
9. PubMatic
Not all top stocks have to be household names. One company with the necessary catalysts to make you richer in 2024 is little-known adtech stock PubMatic (PUBM 1.75%).
As I pointed out earlier, the advertising market endured a downturn following the 2022 bear market. The good news is this slump should melt away with 2024 being an election year. Advertising agency GroupM believes U.S. political cycle ad spending will reach $16 billion this year, which would be a 31% increase over spending during the 2020 election cycle. With ad dollars shifting to digital channels, it's companies like PubMatic, which help publishers sell their digital display space, that will benefit.
What's often overlooked with PubMatic is that the company chose to design and develop its cloud-based infrastructure instead of relying on a third-party platform. Though this was a costlier up-front decision, it'll allow the company to rapidly grow its operating margin as its revenue scales.
Sporting $171.4 million in cash, cash equivalents, and marketable securities, with no debt, PubMatic is sitting pretty.
10. Visa
The final unsurpassed stock that can make you richer in 2024 is payment-processing specialist Visa (V -0.23%). Despite certain money-based metrics sounding a warning for the U.S. economy and stock market, Visa has competitive edges that should help it reach new all-time highs this year.
Visa is a dominant force in payment facilitation domestically, and it has a multidecade opportunity awaiting it in emerging markets. In 2021, it accounted for 52.6% of credit card network purchase volume in the U.S. (the largest market for consumption). Furthermore, it can organically or acquisitively move its payment infrastructure into the Middle East, Southeastern Asia, and Africa in the coming years and decades to sustain a double-digit growth rate.
Visa's success is also a function of its focus on payment processing. Visa has passed on becoming a lender, which means it doesn't have to deal with loan losses during recessions. Not having to set aside capital for credit delinquencies and loan losses during economic downturns is an undeniable competitive edge that helps its profit margin remain above 50%.
