$BABA, $GOOG, $GOLD - Barrons 2024 Top 10 Picks. Buy?
US stock market is ending the year with a flourish—and so are Barron’s favorite picks for 2023.
For the past 14 years, every December, Barron’s selects 10 stocks that are good bets to outperform the market over the next 12 months.
Just for the record, below are Barron’s recommendations’ performances.
Past 3 years track record summary
Year 2023: toppled market with a +31% average, versus S&P 500’’s +24%.
Year 2022 beat the index by +10% points.
Year 2021 were slightly behind market.
From the look of things, seems like Barron’s has an average 66% success rate, agree?
2023 Recap
To beat the market this year, any investor would need to have some exposure to the Magnificent Seven —Apple, Microsoft, Amazon, Alphabet, Tesla, Nvidia, and Meta Platforms.
Barron’s did.
In the 2023 recommendations, Barron’s list included Amazon and Alphabet, that were trading cheaply a year ago.
Barron’s strategic picks is as “typical” and had a value bias.
Its biggest winner was home builder $Toll Brothers(TOL)$, that more than doubled, helping to offset another big loser, aluminum miner Alcoa, that returned a negative -29%.
Barron’s 2024 reveal.
Barron’s list for 2024 includes a diversified mix of familiar stocks and some surprises, once again leaning toward, but not exclusively to, the value camp:
Due to limited real estate, this post will cover the first 3 recommended stocks:
Why Barron’s likes - Part 1.
Alibaba is one of the cheapest tech-oriented companies in the world—by a long shot.
After dropping -18% in 2023, it is trading for just x8 times projected earnings in its current fiscal year ending in March 2023.
With that decline, the stock, at a recent $72, is back where it stood following its 2014 initial public offering (IPO), despite a tenfold rise in revenue and a fivefold increase in earnings.
Its market cap is less than 15% of its closest American peer, Amazon.
Alibaba sits on a small mountain of cash, equal to 33% of its current market value of $189 Billion.
According to China Merchants Securities (Hong Kong) analysts, adding in its (1) core Chinese e-commerce unit, (2) its cloud computing and (3) logistics businesses, and (4) a stake in Ant Financial, the sum of the company’s parts comes to about $130 a share, nearly double the current stock price.
Is this salient enough a reason?
Word of caution:
Alibaba is not risk-free.
It delayed plans for an IPO of the cloud software business due to US chip export restrictions, and faces growing competitive pressures in China.
As highlighted by Kindred Capital Advisors, MD Steve Galbraith, the (a) headwinds from the Chinese government’s crackdown on big tech and (b) a sluggish domestic economy has been reflected in the stock.
Alphabet could be the best bet among the Magnificent Seven stocks that led the market higher in 2023.
It’s expected to grow as fast as $Microsoft(MSFT)$ , with earnings forecast to be up +15% in 2024, x3 times as quickly as Apple’s +5% growth.
Yet its stock trades for just x20 times earnings, a discount to both Microsoft and Apple’s 30 times, despite gaining 50% this year.
Investors have been worried about:
Slowing growth in Alphabet’s cloud computing division.
Threat that artificial intelligence poses to its search business.
Antitrust scrutiny.
Above issues look “manageable”.
The “disappointing” cloud business still grew Q3 2023 revenue at a 22% clip.
Although Google was caught off guard by Microsoft’s AI search initiative, it quickly regrouped.
For antitrust issues, they may not go anywhere. Whatsmore, Alphabet might worth more broken up, anyway.
Google’s +
Alphabet has > $100 Billion of net cash as of 30 Sep 2023.
Alphabet exhibits some discipline on costs; leaving plenty of money to (a) buy back stock, and perhaps (b) even start paying a dividend.
Alphabet could easily support a 1.5% payout, in line with the market.
Evercore ISI analyst Mark Mahaney writes, “Alphabet continues to be regarded as one of the true leading tech franchises, at a fundamental inflection point”.
Gold-mining stocks have not been able to keep up with gold prices—but 2024 may be the year that changes for Barrick Gold.
Gold miners are thought of as leveraged plays on the metal, yet Barrick shares are down marginally -1.79% this year. (see above)
Gold on the other hand is up >10% to $2,036 an ounce. Blame higher costs and lower-than-expected gold production. (see above)
Barrick’s advantages.
The company has some of the best mines in the world at spots like (1) Nevada and (2) the Dominican Republic.
It is the Top gold producer in Africa.
It aims to boost its mine output, mostly gold and some copper by +30% by the end of the decade.
It has the industry’s most effective leader in CEO Mark Bristow, a hands-on manager who visits each major mine at least three times a year. He also has a knack for handling delicate relations with host countries in the developing world.
According to independent analyst, Keith Trauner:
Barrick probably has the best management in the mining business.
It has an excellent balance sheet with virtually no net debt.
It pays a well-covered 2.3% dividend yield.
The stock trades for about x16 times 2024 (next year’s) projected earnings.
I like that there is diversity in Barron’s top 10 US stocks pick.
I like to come across new stocks that are not mainstream eg. Toll Brothers, Aloca etc…
Its evaluation is short on technical analysis (TA), but rich in facts not easily found in news articles.
I especially like its overview of Alibaba Inc, given my poor opinion of it. I am definitely going to do a double-take soon.
I cannot wait to share remaining two parts of Barron’s recommendations to you soon.
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