Every new year presents a timely opportunity for investors to take stock of their portfolios and chart a course for the future. For those looking to infuse fresh capital into their investment accounts, identifying reliable companies with strong potential for the year ahead is essential.
Sometimes, the most promising opportunities are right in front of us, while in other cases, undervalued stocks can present irresistible buying opportunities. This month, considerations for investing in Netflix (NASDAQ: NFLX), International Business Machines (NYSE: IBM), Brookfield Infrastructure (NYSE: BIPC) (NYSE: BIP), Vertex Pharmaceuticals (NASDAQ: VRTX), and Starbucks (NASDAQ: SBUX) stand out as five compelling investment opportunities.
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Netflix: A Must-Watch Stock
Demitri Kalogeropoulos (Netflix): Investors in Netflix had a solid 2023, but the year ahead could prove even more rewarding. The streaming video giant is poised to deliver double-digit sales growth in the fourth quarter, potentially marking its third consecutive quarter of accelerating revenue expansion.
Netflix is set to announce its Q4 results on Jan. 23, with most Wall Street analysts anticipating positive news. In mid-October, management projected an 11% sales uptick to $8.6 billion. This figure is expected to be bolstered by a growing global subscriber base and steadily increasing average spending.
Market enthusiasm is high for Netflix’s entry into the advertising business, which is poised to emerge as a significant revenue driver over time. This offering has rapidly enhanced Netflix’s pricing competitiveness against its peers and is occurring alongside membership fee hikes among rivals like Walt Disney. With streaming companies eyeing profitability in 2024, Netflix enjoys a strong advantage as the industry leader.
Monitoring metrics such as cash flow and operating profit margin will be crucial late in January. Both indicators are on an upward trajectory, and executives raised their near-term projections following a robust third-quarter earnings report. As operating profit margin moves towards 20% of sales and the company generates significant cash flow entering 2024, shareholders stand to benefit from improving returns.
IBM: Embracing the AI Revolution
Anders Bylund (IBM): Artificial intelligence (AI) has been a hot topic among investors for over a year now. Many AI players have witnessed substantial stock price gains, with IBM however lagging behind.
Despite AI darlings like Nvidia and C3.ai experiencing triple and double-digit returns respectively over the past year, IBM’s stock has seen a modest 14% increase. This trails not only AI champions but also broader market indexes such as the tech-heavy Nasdaq Composite and the more generic S&P 500.
IBM’s stock is attractively valued at 21 times earnings, 12 times free cash flows, and 2.4 times sales. In comparison, Nvidia and C3.ai have soared to significant premium valuations. IBM has been concretely focused on “strategic imperatives” for over a decade, shedding unprofitable operations to concentrate on key markets, with AI being a prime area of interest.
IBM has been at the forefront of researching and commercializing AI technologies for decades, making significant strides such as the historic victory of its Deep Blue system over Garry Kasparov in 1997. While the AI sector is rife with potential winners, few stocks offer bargain prices and attractive dividend policies like IBM does. As IBM’s Watson.AI platform for business-oriented AI services gains traction, an investment at its current price level promises long-term rewards.
Brookfield Infrastructure: A Solid Dividend Pick
Neha Chamaria (Brookfield Infrastructure): Brookfield Infrastructure boasts a diversified portfolio of essential infrastructure assets spanning utilities, transportation, midstream energy, and data infrastructure.
Despite operating in diverse sectors, the company’s assets play a vital role in a functioning economy. With a proven track record of delivering stable returns, Brookfield Infrastructure stands out as a dependable dividend stock for income investors.
High-Powered Investment Options for 2024
Brookfield Infrastructure: A Steady Rock in Unpredictable Waters
If businesses are vessels navigating choppy economic waters, Brookfield Infrastructure is a solid, unsinkable battleship. With 90% of its assets generating consistent income under long-term contracts, the company remains resilient in turbulent times. Although 2023 saw fears of rising interest rates weigh down its performance, the tides are turning for Brookfield Infrastructure in 2024.
Markets witnessed Brookfield Infrastructure growing its funds from operations (FFO) per unit by 8.5% year over year, signaling robust performance in the face of adversity. The company’s acquisition of Triton International for $1.2 billion is a testament to its strong cash-flow profile heading into 2024. Investors can count on Brookfield Infrastructure to meet its annual dividend growth goal by raising dividends by at least 5%. The allure of a high dividend yield of 4.5% or more makes it a lucrative opportunity for both partnership affiliates and corporate share buyers alike. With the Federal Reserve poised to cut interest rates, Brookfield Infrastructure emerges as a top stock to buy in 2024.
Vertex Pharma: Riding the Wave of Medical Breakthroughs
Vertex Pharmaceuticals is like a daring surfer, skillfully riding the crests of success. After an exceptional 2023, the company gears up for 2024, poised for further triumphs. Anticipation runs high as Vertex prepares to disclose results from six late-stage clinical studies early in the year, with a focus on treating cystic fibrosis and acute pain. As Vertex dominates the market for CF therapies, the vanzacaftor triple-drug combo is anticipated to propel the company to new heights, requiring only once-daily dosing and promising lower royalty payments. December 2023 witnessed Vertex’s encouraging phase 2 study results for VX-548, hinting at a promising future for non-opioid pain treatment.
Looking ahead, Vertex anticipates positive news later in the first quarter, with an FDA approval decision date set for Casgevy in treating transfusion-dependent beta thalassemia. With a track record of medical breakthroughs, Vertex is primed to spearhead market-beating gains in 2024 and beyond.
Starbucks: Brewing Up a Fresh Era of Growth
Starbucks, the iconic coffee giant, is undergoing a refreshing metamorphosis, ready to usher in an era of transformative growth. Despite weathering setbacks from the COVID-19 pandemic, the company boasts an exceptional fiscal year 2023, marked by record revenue and earnings.
Guiding for 10%-12% revenue growth and 15%-20% earnings growth in fiscal 2024, Starbucks exudes confidence in its strategic expansion. The focus on digital engagement through the Starbucks app, mobile order and pay, and the Starbucks Rewards program is driving same-store growth and increasing customer spending. With a staggering number of active rewards members in the U.S. and China, Starbucks is investing heavily in China, seeking to amplify its store count in 2024. This intensified emphasis on digital offerings and customer loyalty appears to bear fruit, especially in the Chinese market which exhibits rapid growth in rewards membership.
Adopting a pickup-centric strategy, Starbucks is tailoring its store format to prioritize convenience over ambiance, aligning with shifting consumer preferences. This innovative approach not only sets Starbucks apart from smaller coffee houses but also propels its growth trajectory. With its transformative initiatives and promising growth prospects, Starbucks emerges as a compelling buy, poised for a resurgence in 2024.
The Awakening of Starbucks Stock
Underperforming Stock with Untapped Potential
Starbucks has remained a quiet player in the market, treading water while other stocks rise and fall dramatically. However, what the market has yet to realize is Starbucks’ potential for a major breakthrough.
Master Plan Unveiling
Once the market opens its eyes to Starbucks’ hidden master plan, the stock has the potential to soar to unprecedented heights. The revelation of this plan could be the much-needed catalyst to propel the stock’s performance.
Steady Dividend Payout
Despite the stock’s lackluster performance, investors still have the opportunity to earn a 2.5% dividend yield by simply holding Starbucks stock. This reliable payout serves as a silver lining during the stock’s stagnant phase.
Considerations for Investors
Before considering investments in Starbucks or any other stock, it is essential to weigh the pros and cons of the decision. Examining the long-term prospects and underlying fundamentals of a stock is crucial for making informed investment choices.
Expert Insights on Stock Picks
The Motley Fool’s Stock Advisor service has identified what it believes to be the top 10 stocks for investors to buy now, but notably, Starbucks did not make the cut. This underscores the importance of conducting thorough research and due diligence before making investment decisions.
The Stock Advisor service offers investors a comprehensive framework for success, including portfolio-building guidance, regular updates from analysts, and new stock picks every month. Its impressive track record further solidifies its credibility as a valuable resource for investors.
Positions and Recommendations
Several individuals, including prominent analysts and investors, have disclosed their positions in various stocks but have maintained a positive outlook on Starbucks’ potential. This demonstrates a shared sentiment of optimism about the future prospects of the stock.