Wall Street had a dream run in 2023 reversing the nightmare of 2022. The impressive bull run is set to continue in 2024. Year to date, the Dow, the S&P 500 and the Nasdaq Composite have rallied 5.5%, 10.5% and 11.1%, respectively.
On Mar 20, after the FOMC meeting, the Fed kept the benchmark lending rate constant in the range of 5.25-5.5%. However, the Fed’s latest “dot-plot” (a closely watched matrix of anonymous projections from the 19 officials who comprise the FOMC) shows the benchmark lending rate to come down to 4.625% at mid-point by the end of 2024. The existing mid-point of the Fed fund rate is 5.375%. This indicates three rate cuts of 25 basis points each.
Moreover, the central bank has raised the U.S. GDP forecast for 2024 to 2.1% in March from 1.4% in December. U.S. GDP rose 2.5% in 2023 compared with 1.9% in 2022. At the beginning of 2023, the consensus estimate for full-year GDP was 2%. On Mar 19, the Atlanta Fed GDPNow tracker forecast a 2.1% growth rate for first-quarter 2024, indicating, no chance of a near-term recession.
Our Top Picks
At this stage, buying on the dip will be the best investment strategy to make the most of the ongoing Wall Street rally. We have narrowed our search to five large-cap (market capital > $10 billion) stocks with attractive valuations. The stocks have strong potential for 2024 and have seen positive earnings estimate revisions in the past 60 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks in the past month.
Zacks Investment Research
Image Source: Zacks Investment Research
Twilio Inc. TWLO is benefiting from accelerated digital transformation amid a growing hybrid working trend. TWLO’s selective acquisitions and strategic investments in businesses and technologies are enhancing its product portfolio and fortifying its global presence.
TWLO is gaining traction not only from the solid expansion of its existing clientele but also from first-time deals with new customers due to its firm focus on introducing products and its go-to-market sales strategy. TWLO’s ongoing cost-saving initiatives are driving profits and margins, which is praiseworthy.
Twilio has an expected revenue and earnings growth rate of 5% and 9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.5% over the past 30 days. The stock price of TWLO is currently trading at a 21.3% discount to its 52-week high.
Zscaler Inc. ZS is benefiting from the rising demand for cyber-security solutions due to the slew of data breaches. The increasing demand for privileged access security on digital transformation and cloud-migration strategies is a key growth driver. ZS’ portfolio strength boosts its competitive edge and adds users.
A strong presence across verticals, such as banking, insurance, healthcare, public sector, pharmaceuticals, telecommunications services and education, safeguards ZS from the negative impacts of ongoing macroeconomic headwinds. Portfolio expansion through acquisitions with the likes of Avalor, Canonic Security and ShiftRight are praiseworthy.
Zscaler has an expected revenue and earnings growth rate of 31% and 51.4%, respectively, for the current year (ending July 2024). The Zacks Consensus Estimate for current-year earnings has improved 9.7% over the past 30 days. The stock price of ZS is currently trading at a 23.7% discount to its 52-week high.
NextEra Energy Inc. NEE continues to expand its operations through organic projects and acquisitions. NextEra has nearly 20 GW of renewable projects in its backlog. NEE’s subsidiary FPL’s customer base is expanding as Florida’s economy improves.
NEE is managing its debts efficiently and has ample liquidity to meet its debt obligations. NEE has decided to sell its natural gas assets in Florida to focus on its core business.
NextEra Energy has an expected revenue and earnings growth rate of 1.2% and 8.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. The stock price of NEE is currently trading at a 23.1% discount to its 52-week high.
American Water Works Co. Inc. AWK is gaining from contributions from acquired assets and military contracts. Investments in infrastructure will assist AWK to efficiently serve its expanding customer base. Water and wastewater rate hikes are also boosting AWK’s performance.
AWK continues to expand operations through organic and inorganic initiatives. AWK has ample liquidity to meet its obligations. Cost management is boosting margins. We expect an increase in revenues during 2024-2026.
American Water Works has an expected revenue and earnings growth rate of 0.6% and 6.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.6% over the past 60 days. The stock price of AWK is currently trading at a 23% discount to its 52-week high.
Insulet Corp. PODD has been progressing well with its four-pillar strategy that targets focused market expansion and innovation. PODD has been making progress with respect to its development roadmap of the Omnipod 5 system. The international rollout of the device continues successfully.
In 2023, PODD commercially launched Omnipod 5 in the United Kingdom and Germany. Further, Insulet registered continued strong adoption of Omnipod DASH in its international markets. In terms of innovation, in February 2024, PODD received the CE mark for the added compatibility of Omnipod 5 with the Abbott FreeStyle Libre 2 Plus sensor.
Insulet has an expected revenue and earnings growth rate of 15.7% and 12%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 21.3% over the past 30 days. The stock price of PODD is currently trading at a 50.4% discount to its 52-week high.
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