2024 is off to a great start for many investors, with the S&P 500 climbing 10.2% in the first quarter, roughly the performance the index averages for an entire year. Since the end of 2022, the S&P 500 is up a staggering 36.9%, which has some investors worried that the market is overextended, while others think there's plenty of room to run.
No one knows what will happen in the short term, but the best way to compound your money in the stock market is to invest in quality companies and hold them through periods of volatility.
Investors looking for a blend of growth, income, and value have come to the right place. Here's why these Motley Fool contributors think Toast (TOST 0.16%), Viking Therapeutics (VKTX 0.55%), Brookfield Renewable (BEP) (BEPC 0.73%), United Parcel Service (UPS 0.54%) and Procter & Gamble (PG 0.01%) are five stocks worth buying in April.
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A rough-cut diamond with robust growth plans
Anders Bylund (Toast): Toast, a provider of restaurant-management software and payment solutions, has stumbled recently. A poorly received service fee, layoffs, and a CEO change have damaged investor confidence and kept the stock price low.
The tech company isn't perfect, and another management misstep could lead to new potholes, but this innovative store-management platform essentially sells itself (and a lot of literal ham sandwiches). However, don't let the missteps fool you.
Toast continues to impress with accelerating sales growth and improving profitability. Its user-friendly restaurant management platform is disrupting an aging collection of separate single-function tools that don't always work well together. Moving up from its former focus on smaller local businesses, the company is now attracting big-name customers like Caribou Coffee -- a member of the Panera Bread group.
Toast's future looks bright, but the stock is still undervalued. Share prices are up by 33% year to date but still more than $40 below the all-time high set in November 2021.
Trading at just 3.4 times sales while sales jumped 35% year over year in the latest earnings report, Toast looks like a bargain right now. In the long run, Toast should overcome whatever self-induced difficulties the business might face, delivering strong returns to patient shareholders.
A top-takeover target
Keith Speights (Viking Therapeutics): I'll be shocked if Viking Therapeutics isn't gobbled up by a big drugmaker by the end of 2025. Granted, the possibility of being acquired isn't the main reason to buy this biotech stock in April. However, I think the underlying factors that make Viking a top-takeover target also make it a great pick for aggressive investors.
Some Wall Street analysts project the obesity drug market could top $100 billion by 2030. That's too lucrative of an opportunity for large biopharma companies to ignore. And it makes Viking a promising stock to consider now.
In February, Viking reported outstanding results from a phase 2 study of the injectable formulation of VK2735. Patients receiving the experimental drug experienced placebo-adjusted mean weight loss of up to 13.1% after 13 weeks of treatment. The current market leaders -- Novo Nordisk's Wegovy and Eli Lilly's Zepbound -- didn't achieve results that impressive during their clinical trials.
If this isn't enough to tempt a potential suitor, Viking followed up a few days ago with encouraging phase 1 results for an oral version of VK2735. The oral drug achieved up to 3.3% placebo-adjusted mean weight loss after 28 days with a solid safety profile. Viking thinks a higher dosage given for a longer period could lead to even greater weight loss.
This might sound like an infomercial, but wait -- there's more! Nonalcoholic steatohepatitis (NASH), also known as metabolic dysfunction-associated hepatitis (MASH), is another potentially huge market that big drugmakers are salivating over. Viking is evaluating VK2809 in a phase 2 study targeting NASH/MASH. It has already reported statistically significant liver-fat reduction and a favorable safety profile. Viking expects to announce 52-week biopsy data by mid-2024.
With these great pipeline candidates, I think Viking could one day be worth much more than its current market cap of around $9 billion. I suspect some large biopharma companies agree.
A high-yield stock from a high-potential industry
Neha Chamaria (Brookfield Renewable): India was recently in the news when one of its largest conglomerates operationalized a capacity of 1 gigawatt (GW) at a renewable energy plant. The thing is, it isn't just another clean energy plant: It is the world's largest renewable energy project with a targeted operational capacity of 45 GW by 2030. India, after all, wants to meet 50% of all its electric power needs from renewable energy sources by 2030.
That's a big goal, and India isn't the only nation switching to cleaner energy sources. That also means massive opportunities ahead for renewable energy companies, one of which is Brookfield Renewable, with operations across 20 countries. With units of Brookfield Renewable Partners and shares of the corporate entity, Brookfield Renewable Corp. down about 12% and 15%, respectively, in the past three months, it's an opportunity to buy the renewable energy stock.
There's a lot to like about Brookfield Renewable. It has a diversified portfolio with large-scale operations across hydropower, wind, solar, and energy storage. It expects to invest at least $7 billion in growth projects over the next five years. Brookfield Renewable already generates most of its cash flows under long-term power contracts. So, while that offers cash-flow stability, growth investments should drive higher cash flows. Between 2023 and 2028, the company is confident of growing its funds from operations (FFO) per share by at least 10% annually, which should provide enough buffer for it to grow dividends by 5% to 9% every year.
So what you have here is a company operating in a high-potential industry, maintaining a strong balance sheet, growing its cash flows steadily, and rewarding shareholders with bigger dividends year after year. Earlier this year, Brookfield Renewable reported record numbers for 2023 and raised its dividend by 5%, setting itself up for another strong year ahead. With both share classes of Brookfield Renewable losing some ground in recent months primarily because of high interest rates and their dividends now yielding at least 5.8% each, I don't think you'll regret buying some shares this April for the long haul.
This high-yield dividend stock is too good to pass up
Daniel Foelber (UPS): United Postal Service stock was staging a bit of a comeback, but it all went downhill after the company hosted its 2024 Investor and Analyst Day on March 26. UPS ripped off the proverbial bandage, calling for weak 2024 results and high costs. Margin growth is expected to pick up in 2025, with 2026 ultimately being a record year with $108 billion to $114 billion in revenue and a 13% adjusted operating margin. But the path to get there -- and how long it will take -- led many investors to run for the exits.
UPS is a somewhat boring stock that got caught up in the pandemic-fueled growth narrative. When folks were stuck at home, spending on services and experiences plummeted, and goods spending soared. Demand outpaced package-delivery supply, which helped fuel top- and bottom-line growth.
UPS Revenue (TTM) data by YCharts.
As you can see in the chart, the revenue growth did not prove sticky. UPS managed to put up pretty good overall results in 2022 but was too optimistic for 2023. It initially guided for $97 billion to $99.4 billion in revenue and a consolidated operating margin of 12.8% to 13.6%. The results proved to be a huge miss, with revenue of just $91 billion and a 10.1% operating margin.
It's understandable why investors are selling off UPS stock. The company went from outperforming to underperforming, and its guidance isn't that good. Given its recent track record, some may question whether UPS can hit its 2026 guidance. But UPS management took great care to walk through the reasons why its guidance is achievable, and the logic checks out.
UPS has sold off enough and has a clear path to return to growth. The long-term tailwinds of e-commerce and the package-delivery industry, both domestically and internationally, are strong. With a 4.5% dividend yield, investors get a sizable incentive to hold the stock through this challenging period.
Looking for a higher dividend
Demitri Kalogeropoulos (Procter & Gamble): Consumer staples companies have fallen out of favor on Wall Street lately, and that's a great reason to take a look at Procter & Gamble in April. This month is a big one for shareholders, with two huge announcements on the way. P&G's fiscal third-quarter update will arrive on April 19, and the company will reveal its 2024 dividend payout around the same time. Last April, the dividend increase of 3% was announced a few days before P&G's quarterly report.
There's a good chance that investors will see a bigger dividend increase for 2024. Sure, P&G's sales trends are slowing, as they have been for most industry rivals. Shoppers haven't been spending as freely on consumer staples, and price hikes are slowing along with inflation.
But P&G's profitability is rising, cash flow is stellar, and its earnings are spiking. The owner of hit brands like Tide detergent and Pampers diapers posted a 16% profit boost in the most recent quarter.
Keep an eye on volume trends in April's earnings report. P&G needs this figure to stay in positive territory, especially now that price increases have slowed. I'd expect the company to continue winning market share against peers like Kimberly-Clark, as it has over the past several quarters. I'm also looking for its operating margin to stay in its industry-leading territory.
In any case, P&G is highly likely to announce its 68th consecutive annual dividend hike in April. That type of streak is rare in the stock market, and it's a direct result of impressive competitive assets like P&G's big global sales footprint and highly efficient operations. Investors who don't mind a period of sluggish sales growth ahead should consider putting this Dividend King on their watchlists for April and beyond.