Looking ahead to 2024, conditions appear to favor a continued rally in the stock market. Inflation keeps falling, the economy remains strong, bond yields are in decline, and the U.S. Federal Reserve could begin lowering interest rates as soon as March. There are also growing expectations that we’ll achieve the hoped-for “soft landing,” where the Fed manages to bring inflation under control without tipping the economy into a recession.
All of this makes it increasingly likely the stock market rally that occurred in 2023 will continue into the new year and may even accelerate. While some economists and market commentators continue to warn of a recession, there’s no evidence of one yet. In fact, the latest data showed the U.S. gross domestic product (GDP) grew at a very strong 5.2% annualized rate in this year’s third quarter. The year ahead could be a strong one for the market, and investors should prepare their portfolios now as we approach the year’s end. Here are three stocks to buy for a 2024 rally.
Oracle (ORCL)
There’s a big pullback of Oracle (NYSE:ORCL) stock right now that investors should take advantage of before we get into a 2024 rally. After running up nearly 40% in 2023, ORCL stock dropped 13% after the software company reported quarterly revenue that missed Wall Street targets. Oracle announced earnings per share (EPS) of $1.34 compared to $1.32 expected. However, revenue in what was Oracle’s fiscal second quarter came in at $12.94 billion versus $13.05 billion anticipated.
For fiscal Q2, Oracle reported revenue came up short in three of its operating segments. The forward guidance provided by the company was also softer than what Wall Street expected. The disappointing print has ORCL stock pulling back hard, and investors should take advantage. The company stressed that revenue in its cloud infrastructure unit reached $1.60 billion during the latest quarter, up 52% from a year ago. Oracle also said it continues to pick up cloud business from rival Microsoft (NASDAQ:MSFT).
Over the past five years, ORCL stock has increased 116%.
HP (HPQ)
The stock of personal computer (PC) maker HP (NYSE:HPQ) has been slumping lately on news that legendary investor Warren Buffett continues to sell his stake in the company. Since September, Buffett has reduced his stake in HPQ stock to 5.2% from about 10%. Buffett initially took a position in HP back in April 2022. However, the investment hasn’t been profitable as the stock is trading today below the level where Buffett first bought it.
However, Buffett still owns 51.5 million shares of HPQ stock worth about $1.6 billion, and he remains the third-largest institutional shareholder of HP behind BlackRock (NYSE:BLK) and Vanguard. Also, analysts at Morgan Stanley (NYSE:MS) just upgraded HPQ stock to a Buy equivalent rating from Hold and raised their price target on the shares to $35 from $31. Morgan Stanley said in a note to clients that it thinks HP’s stock is underappreciated, and they expect a rebound in 2024.
HPQ stock is up 13% in 2023 and has gained 37% over the past five years.
BlackBerry (BB)
Two pieces of news from BlackBerry (NYSE:BB) provide hope for the year ahead. First, the company named a new CEO John Giamatteo, a long-time company insider. Second, BlackBerry canceled the initial public offering (IPO) for its Internet of Things (IoT) business unit planned for summer 2024. Giamatteo’s appointment comes after the abrupt departure of former CEO John Chen in November.
Earlier this year, BlackBerry announced plans to divide its cybersecurity unit from its IoT business and take the IoT unit public through an initial public offering. However, the company now says while it still plans to separate the IoT and cybersecurity businesses, it no longer plans to pursue an IPO in the coming year. BlackBerry has struggled for more than a decade to transition from its original business of making smartphones to becoming a cybersecurity and IoT company.
That struggle led BB stock to pull back hard in recent years. The company’s share price is down 8% over the last year and down 47% through five years. At $4 a share, it’s now a penny stock. But there’s hope for a recovery in 2024. There are also rumors the company could be sold.
On the date of publication, Joel Baglole held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
