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In Jan. 2023, I wrote about my 10 top stocks to buy for the new year. I ended up pretty proud of my list because if you’d invested $1,000 in each of the 10 stocks the day the article was published, you’d have ended 2023 with $13,301, including dividends. If you’d instead put your $10,000 into an S&P 500(SNPINDEX: ^GSPC) index fund, you would’ve had just $11,900 at the end of the year. In other words, the total return of my stock picks beat the broad market by 74%.
And last December, I updated my list of top 10 stocks for 2024, which have again outperformed the market. With $10,000 invested equally across those 10 stocks at the beginning of the year, you’d have $14,281 as of the Dec. 5 market close. An equal investment in an S&P 500 index fund would be worth $12,890. That’s a total return difference of 48%.
That’s an encouraging result given how strong stocks have been this year. When the market is down, it’s much easier to beat. For example, when the S&P 500 lost 18% in 2022, 51% of U.S. equity managers underperformed the market. But through the first half of a bullish 2024, 57% of large-cap U.S. equity managers were underperforming the index, and 60% underperformed it last year when the index was up 24%.
Let’s take a closer look at how my picks are faring with about a month to go in 2024 and consider whether you should buy them for the coming year.
The top 10 stocks I chose for 2024 were Airbnb(NASDAQ: ABNB), Amazon(NASDAQ: AMZN), Costco Wholesale(NASDAQ: COST), Global-e Online(NASDAQ: GLBE), Lemonade(NYSE: LMND), Lululemon Athletica(NASDAQ: LULU), MercadoLibre(NASDAQ: MELI), Nu Holdings(NYSE: NU), SoFi Technologies(NASDAQ: SOFI), and Visa(NYSE: V).
Here’s how they are performing compared to the S&P 500 as of Dec. 5:
Data by YCharts.
Nine of my top 10 picks are up year to date. The lone exception, Lululemon, is experiencing some major challenges right now. Let’s do a quick rundown on each of these stocks and their prospects for 2025.
After gaining 59% in 2023, Airbnb has been flat this year. Growth has slowed, but profitability has soared. It’s looking more like a value stock right now, and it’s building on its popular platform. Shares trade at only 22 times trailing-12-month free cash flow, and value investors should take a look.
Amazon has launched powerful artificial intelligence (AI) capabilities that are driving tremendous growth in its cloud computing segment, Amazon Web Services (AWS). AWS is the leading global cloud services provider, and AI is bringing in new clients. It’s also the largest e-commerce company in the U.S. with a wide lead. Amazon remains a top choice for almost any investor.
Costco is one of my favorite all-weather stocks, and it continues to climb despite reaching fresh all-time highs this year. It’s reliable for strong performance under almost any macroeconomic conditions, and the market can’t seem to get enough of it. If you have a long-term mindset, you can add some shares even now, but you might want to adopt a dollar-cost averaging strategy.
Global-e is a small but growing e-commerce powerhouse that provides cross-border solutions for online retailers. It services A-list clients like Disney, LVMH, and Nordstrom, and it adds more customers every quarter. It boasts high growth, and it’s getting closer to profitability too. That positions the company to extend its momentum into 2025.
Lemonade is the standout stock on this list, and you can see how one big winner can carry a portfolio. The insurance company entered 2024 down more than 90% from its all-time high as investors were frustrated with its progress toward profitability. It made great strides this year, and its AI algorithms are doing their job. Lemonade still has a tremendous opportunity.
Lululemon is a consumer favorite, but it made a few missteps this year in its product launches. That wasn’t helped by a soft market in general for premium apparel, and Lululemon isn’t the only activewear company struggling right now. However, at the current price, it trades at only 26 times trailing-12-month earnings, a discount to the S&P 500 average. There may be some more volatility in the near future, but long-term investors should view this as an opportunity to buy a leading consumer apparel brand on the dip.
MercadoLibre has been a top performer for a long time, but the stock fell earlier this year due to economic instability and new competition in some of its key markets. However, MercadoLibre continues to run an outstanding business that’s highly profitable and still reporting high growth, and its opportunity across Latin America is enormous.
Nu is an all-digital bank headquartered in Brazil, and it’s growing by leaps and bounds. It has a cross-selling strategy that’s resulting in high engagement and rising average revenue per active customer. The company has 110 million global customers, and it’s entering new markets that should fuel its gains through 2025 and beyond.
SoFi is an all-digital bank in the U.S., and it’s also demonstrating momentum as it captures market share and becomes sustainably profitable. It has reported positive net income in the past four quarters, and management expects that trend to continue. The business is successfully expanding into a full financial services app, adding to its core lending segment, and it has years of growth ahead of it.
Visa is an all-weather stock that grows when the economy does. It’s slightly underperforming the market this year since the market’s gains have been fueled by big tech stocks. But Visa has been a winning choice for years, and it’s an excellent value pick.
Ten stocks aren’t enough for a diversified portfolio, and this list skews toward growth stocks. But if your research leads you to invest in a few of these companies and you round out your portfolio with additional stocks or even an exchange-traded fund for greater diversification, you can be well prepared for various market conditions.
And it’s important to remember that every year will look different — some picks may be duds, while others surge. But these year-to-year swings become less important when you focus on buying quality stocks and holding them long term. This remains a winning strategy for building wealth in the stock market.
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*Stock Advisor returns as of December 2, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in Airbnb, Global-E Online, Lemonade, MercadoLibre, Nu Holdings, SoFi Technologies, and Walt Disney. The Motley Fool has positions in and recommends Airbnb, Amazon, Costco Wholesale, Global-E Online, Lemonade, Lululemon Athletica, MercadoLibre, Visa, and Walt Disney. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
My Top 10 Stocks to Buy in 2024 Are Beating the Market by 48%. Should You Buy Them for 2025? was originally published by The Motley Fool
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