Top 2 Stocks For 2024 To Buy Before The Market Realizes It – Seeking Alpha

As the first trading week of 2024 begins, the technology sector (XLK) results have been announced. The outperformance of the December 2023 market, which seemed almost perfect, hit late buyers hard. His retail FOMO fever reached its peak in late December. Investors who couldn't add exposure when Wall Street was so pessimistic likely felt compelled to participate.

As a result, extremely high levels of optimism were recorded at the end of December among “small speculators”, or non-reportable traders, across the market. Sentiment-driven charts show the net positions of these small speculators “in billions of dollars, adjusted for position size and index value.” It is clear that December's bullish surge of optimism has culminated in the frothy levels we last saw in 2021. In other words, investors who followed the tech market in December That's what Larry asked for: Hammering.

Based on the latest XLK price movement, most of December's gains were lost this week (as of the January 4th trading session). However, the chart above is a long-term chart for XLK, so resolution will only be available until the end of January. So the XLK Bulls will probably remind us that it's still too early to suggest continued weakness, and they're right. However, it also highlights why paying attention to price trends and sentiment-based indicators is fundamental in assessing risk/reward. why? Is the technology sector generally overvalued? Yes. The tech sector is overvalued by about 5%, based on Morningstar's sector rating estimates.

In other words, it's not as buoyant as the levels that were grossly overvalued during the 2020/21 pandemic bubble. But interest rates are also much higher than they were back then, suggesting a complex interaction as the market assesses the appropriate discount rate for tech and growth stocks. The challenge is further complicated by uncertainty about when the Fed will start cutting rates in 2024. So fundamentals-only investors are likely facing a complex scenario that would have been simpler if they had reliable charts to mull over fundamentally strong stocks. Consider.

I've been rotating out of high-flying tech stocks towards the end of December as the meltup presented some opportunities. Out of respect for our members, I will not discuss the details here as these are presented in my service. One thing is for sure, though: I haven't been adding to these high-flying tech stocks lately. In contrast, the tech stocks I added included stocks that were beaten to peak pessimism, such as solar stocks.

With that in mind, here are the top two stocks for 2024 that we think readers should consider adding to their portfolios.

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First Solar Co., Ltd. (FSLR) This is my preferred strategy for participating in a potential recovery in solar stocks in 2024. Careful investors likely recognize that high interest rates, bloated downstream inventory issues, and weak industry-wide demand will hit solar stocks hard in his 2023. I published a detailed paper on FSLR in early December highlighting why I believe FSLR is poised to lead the recovery among its leading peers.

Additionally, FSLR has been assigned a best-in-class growth grade of 'A' and valuation grade of 'B-', suggesting a clear divergence of growth stocks. Since my update in mid-December, FSLR has significantly outperformed SPX, and the market's pessimism is creating an excellent opportunity for investors looking to take advantage of this watershed. Opportunity remains relatively early, as solar stocks could come back strong in 2024 as the market reassesses the solar industry after a tough 2023. That's what I think.

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Investors in major pharmaceutical companies Pfizer Japan Inc(PFE) In December, PFE also reached its peak of pessimism, making a 10-year round trip. I discussed this in my mid-December update as well, suggesting why the market was ultimately forced into long-term capitulation. As a result, PFE lost all of its COVID-19 gains and more as the market significantly downgraded PFE's rating. Therefore, the market appears to have completely lost faith in the COVID-19 franchise as investors hastily exited to prevent the possibility of further losses materializing.

However, as expected, PFE bottomed out in December. This week's price action suggests that selling pressure remains under control despite the broader market decline. As a result, I think the market should finally recognize that Pfizer remains a highly profitable wide-moat pharmaceutical company (assigned a best-in-class profitability grade of 'A+'). thinking about. Wall Street analysts expect Pfizer's sluggish adjusted EPS growth to bottom out this year and return to solid growth in 2024 (up 48% year over year) and 2025 (up 24% year over year). ing. These are his adjusted EPS growth metrics for the next two years, so we're not talking about long-term portfolio return growth. The adjusted EPS multiple for FY2015 was 10.4x (well below the 10-year average of 12.9x), and the market is likely to be growing significantly more pessimistic about Pfizer's ability to recover its earnings.

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As retail investors have recently focused on high-flying tech stocks, I think continued rotation could pose a harsh reality for these investors. Investors are keen to potentially outperform, so they need to be aware of opportunities presented to the market through potential sector or industry rotations before the rest of the market does.

Above are two stocks in which my members and I have already acquired stock due to timely opportunities. I think investors looking to switch exposure from a portfolio of overvalued tech and growth stocks should consider these two stocks as my top picks for 2024.