All indicators show that the US economy remains resilient and in a much better shape than expected, defying all recession worries. The latest report on economic growth released by the Commerce Department shows the US economy grew 3.1% on a year-over year basis in the fourth quarter of 2023 as consumer spending on healthcare, dining out and cars remained strong. Holiday season sales also came in better than expected. Holiday sales during November and December touched a whopping $964.4 billion, not adjusting for inflation, according to data from the National Retail Federation.
The US economy's strengths and the possibility of rate cuts later this year are causing market bulls to make more ambitious predictions and set new targets for the S&P 500. For example, Katie Stockon, Fairlead Strategies founder and managing partner, said during a program on CNBC earlier this month that the S&P 500 could reach 6,100 in the long term if we see new highs. The analyst said the market is showing signs of strengths despite some stocks being overbought and all of this points to the start of a bull market.
In this optimistic environment, we decided to take a look at some of the most popular investing-related discussion threads on Reddit to see which stocks Redditors believe will outperform the S&P 500 in 2024. We scoured Redditors' discussions and picked 15 stocks that came up more frequently as the ones Redditors are backing for this year. We also gauged hedge fund sentiment for these stocks to see what hedge funds think of these companies. Why? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
Rocket Lab USA Inc (NASDAQ:RKLB) ranks 15th in our list of the stocks that will outperform the S&P 500 according to Reddit. Rocket Lab USA Inc (NASDAQ:RKLB) is among the favorite stocks of Redditors but they believe the success of Rocket Lab USA Inc (NASDAQ:RKLB) depends upon the Neutron project. Neutron is a medium-lift two-stage launch vehicle under development by Rocket Lab USA Inc (NASDAQ:RKLB). The vehicle is expected to become operational in 2024.
KeyBanc Capital Markets recently started covering Rocket Lab USA Inc (NASDAQ:RKLB) with an Overweight rating.
Cathie Wood's ARK recently bought 91,940 shares of Rocket Lab USA Inc (NASDAQ:RKLB).
Number of Hedge Fund Investors: 13
Biotech company Twist Bioscience Corp (NASDAQ:TWST) shares have already gained about 27% over the past one year but retail investors on Reddit believe the stock has more room to run and can outperform the S&P 500 in 2024.
As of the end of the third quarter of 2023, 13 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Twist Bioscience Corp (NASDAQ:TWST).
On January 17, Goldman Sachs upgraded the stock to Buy, citing new Express Genes gene synthesizing service.
Number of Hedge Fund Investors: 19
Redditors believe the fundamentals of Tecnoglass are strong and the stock can go up if the management improves its execution.
Liberty Park Capital made the following comment about Tecnoglass Inc. (NYSE:TGLS) in its Q3 2023 investor letter:
“Tecnoglass Inc. (NYSE:TGLS) is a vertically integrated manufacturer, supplier, and installer of architectural glass, framing systems, windows, and doors. The company’s automated manufacturing base in Colombia allows it to manufacture products at a much lower cost than domestic companies. Shipping expenses are a low-single digit percentage of revenues because Tecnoglass transports products to the United States in containers that would otherwise return empty (there is a significant trade imbalance between the US and Colombia).
Number of Hedge Fund Investors: 33
Recently, a Redditor commented about Paramount during a discussion on stocks that have the potential to beat the market in 2024. This comment got a lot of upvotes and is worth a mention:
"Sum of the parts is attractive, at todays prices you are only paying for the TV media business. Paramount +, Film Studio, and publishing business are free options."
Ariel Appreciation Fund made the following comment about Paramount Global (NASDAQ:PARA) in its Q2 2023 investor letter:
“We also added former holding Paramount Global (NASDAQ:PARA)) in the period. Shares tumbled following a lackluster earnings report and subsequent dividend cut, presenting an attractive entry point in this leading entertainment company. PARA’s Filmed Entertainment business has an exciting upcoming 2023 and 2024 movie slate with many high-profile franchises. Its TV Media segment is undergoing a restructuring to save on costs and PARA’s fresh array of global content is driving subscriber momentum worldwide across its direct-to-consumer platform. Meanwhile, management is magnifying its focus on profitability for the streaming service and moderating investments in content, which should drive free cash flow in 2024 and beyond. In our view, the company’s long-term opportunity in streaming and the value of its proprietary content remain meaningfully underappreciated at current trading levels.”
Number of Hedge Fund Investors: 24
While many Redditors from Europe argue SoFi Technologies Inc (NASDAQ:SOFI) is "nothing more than a bank," the stock appears to be quite popular among retail investors on the social media platform. Many Redditors believe SoFi Technologies Inc (NASDAQ:SOFI) stock can outperform the S&P 500 in 2024.
Number of Hedge Fund Investors: 44
Ulta Beauty Inc (NASDAQ:ULTA) is one of the stocks that will outperform in 2024 according to Reddit. Here's what a Redditor recently said on a discussion thread on stocks and possible investing trends in 2024:
"I am taking a hard look at ULTA right now. The beauty space has been exploding and they've been growing well and their last 10K said they had no long-term debt."
As of the end of the third quarter of 2023, 44 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Ulta Beauty Inc (NASDAQ:ULTA). The biggest stakeholder of Ulta Beauty Inc (NASDAQ:ULTA) is Anand Parekh's Alyeska Investment Group which owns a $191 million stake in Ulta Beauty Inc (NASDAQ:ULTA).
Here is what Carillon Eagle Mid Cap Growth Fund has to say about Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2023 investor letter:
“Ulta Beauty operates a chain of beauty stores. The stock underperformed after the company lowered its margin outlook as it continued to fight higher inventory shrink and other costs. Meanwhile, demand and transaction growth remain strong.”
Number of Hedge Fund Investors: 73
An overwhelming majority of Redditors believe Pfizer Inc (NYSE:PFE) shares are undervalued and are poised to come back. Retail investors on Reddit discussion threads believe Pfizer Inc (NYSE:PFE) shares have been crushed pretty badly after the pandemic highs but the stock can grow based on long-term catalysts. Redditors like Pfizer Inc's (NYSE:PFE) $43 billion acquisition of Seagen.
"..They are shifting their game to the cancer arena as covid ha(s) died down, also a few obesity drugs in the pipeline, PFE is a undervalued buy for sure," said a Reddit comment.
Smead Value Fund made the following comment about Pfizer Inc. (NYSE:PFE) in its Q3 2023 investor letter:
“Through the first nine months of the year, we had a gain of 2.10%. The S&P 500 had a gain of 13.07% and the Russell 1000 Value had a gain of 1.79%. The stock market realized markedly higher riskless US Treasury interest rates had their effect on the stock market as it began to reassert what Warren Buffett calls the “gravitational pull” on price-to-earnings ratios (P/E).
Number of Hedge Fund Investors: 81
Redditors are deeply divided when it comes to Tesla Inc (NASDAQ:TSLA). While a huge number of posts and comments on Reddit say Tesla Inc (NASDAQ:TSLA) will outperform the S&P 500 in 2024, many also believe the stock will have a tough time amid competition.
A Redditor who is bullish on Tesla Inc (NASDAQ:TSLA) for 2024 said the following about the stock:
"I believe it’s a trillion dollar company at the minimum with just the EV’s, so roughly 330$ share price. I also believe 2024 is the year we see energy revenue explode. Who knows what that will do to a “car companies” share price."
Arguments against Tesla Inc (NASDAQ:TSLA) say the company will suffer due to competition and weakness in energy business.
Tsai Capital Corporation stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its fourth quarter 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) ($248.48 – up 101.7% for the year. Recent high $299.29): Tesla has significant and underappreciated competitive advantages across multiple verticals including electric vehicles, software and energy storage. Misunderstood by much of Wall Street – and consequently a favorite of short sellers – Tesla continues to grow rapidly and increase its lead over the competition while delighting consumers in the process. Despite his unconventional (and sometimes off-putting) personality, Elon Musk is a visionary who has created enormous shareholder value. Musk is also a long-term thinker who has embraced the scale-economies-shared business model favored by Henry Ford and Jeff Bezos, intentionally reducing prices, increasing the customer value proposition and expanding the total addressable market. Tesla’s massive scale and cost advantages are now challenging the viability of legacy auto, which has hundreds of billions of dollars of outdated property, plant and equipment in a world that is rapidly transitioning to electric vehicles (EVs). While we expect competition for EVs to intensify and for Tesla to lose market share over time, we also believe the company will increase production and deliveries from approximately 1.8 million vehicles today to approximately 15 million vehicles in 2030 and further its lead in autonomous driving capability. In fact, we expect Tesla will eventually license its autonomous driving software, creating high-margin (70-80%), recurring licensing revenue. Tesla is also one of only two companies that dominate the energy storage market, which has the potential to grow to several hundred billion in revenue as power plants around the world increase their focus on renewable energy. Our investment in Tesla is aligned with our preference for companies that have strong balance sheets and the managerial skill to reinvest capital at high rates of return into large addressable markets.”
Number of Hedge Fund Investors: 89
Walt Disney Co (NYSE:DIS) has been facing tough times over the past few months amid growth concerns and strong competition. But a lot of investors on Reddit believe the stock could rebound in 2024.
Here's what a Walt Disney Co (NYSE:DIS) bull on a Reddit discussion thread said about Walt Disney Co (NYSE:DIS):
"Governors come and go (reference: DeSantis vs Disney spat). Disney owns half of Hollywood and still has the absolute best amusement parks in the world, even if Universal is catching up. With only Deadpool being released next year, it sounds like maybe they've finally learned their lesson to slow down. They should have stretched phase 4 and 5 out way more. But now they will hopefully stretch phase 6 out (or wherever we are). I predict an overhaul and a massive spike in a few years."
Madison Sustainable Equity Fund made the following comment about The Walt Disney Company (NYSE:DIS) in its Q3 2023 investor letter:
“During the quarter, we sold our positions in Bristol-Myers Squibb and The Walt Disney Company (NYSE:DIS). The Walt Disney Company is facing a difficult and uncertain transition in its core media business assets including the ESPN business and other linear media assets. These media assets are cash generative but face secular decline as consumers are cutting their expensive cable subscriptions and moving to alternative streaming options. This has resulted in a decline in operating profits for the media division. The media business has long-term fixed costs related to its sports broadcasting agreement with multiple sports leagues which will further pressure profits during this transition.”
Number of Hedge Fund Investors: 107
Retail investors on Reddit believe Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) will outperform the S&P 500 in 2024. Many Redditors said in latest discussion threads that the market is not appreciating the AI potential of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) due to geopolitical risks. Redditors believe China would not risk a conflict when its economy is going through a crisis. Redditors also like Taiwan Semiconductor Mfg. Co. Ltd.'s (NYSE:TSM) expansion in Arizona, Germany, and Japan.
As of the end of the third quarter of 2023, 107 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM). The biggest stakeholder of Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) was Ken Fisher's Fisher Asset Management which owns a $2.6 billion stake in Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM).
Wedgewood Partners stated the following regarding Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its fourth quarter 2023 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was also a top contributor to performance. The Company began shipping chips that were fabricated using its industry-leading “N3″ node. Nearly all of the Company’s N3 capacity has been filled by high-end chip designers such as Apple, NVIDIA and even Intel. As high-performance computing, particularly related to AI in both data centers and edge devices, continues to build momentum, the Company will be a key supplier for many years to come. Despite the boom-and-bust cycle in demand seen for many semiconductors during Covid-19 and post-Covid-19, the Company should be able to post solid double-digit growth next year as inventories and end-market demand across most of its technology nodes get back to normal levels. The Company also maintains dominant market share in leading-edge nodes, which is in short supply, given the difficulties its competitors have had in scaling up EUV-based manufacturing. The Company has been able to secure higher prices because of this and can still generate excellent returns on elevated capital expenditures necessary for this scarce capacity. The Company is arguably one of a handful of the world’s most important and largest companies, but because the Company’s shares trade as an ADR (American Depositary Receipt) the shares are not part of the major stock market indices in the U.S. As a result, the shares are woefully under owned by U.S. investors (institutional and individual), particularly for a company that regularly generates cash flow return on invested capital in excess of +40%. Therefore, our growing position in these shares represent a significantly relatively overweight portfolio position versus our peers and benchmarks. We could not be more pleased by this anachronistic institutional imperative.”
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Disclosure. None. 15 Stocks That Will Outperform the S&P 500 in 2024 was initially published on Insider Monkey.
