The S&P 500 has put together an outstanding year in 2023, up more than 22%, with 11 trading days left until 2024. As a result, there are approximately seven stocks up 100% or more in 2023.
Now, if you broaden the search to include all U.S.-listed stocks with a market capitalization of $2 billion or more, the number of stocks up 100% increases to 75.
Many of these top-performing stocks in 2023 will continue their performance into 2024. However, the probability of more than a handful of these doing so is low. You would think, reading many of the hyperbolic headlines from the investment media, that doubling one’s share price in a year is an easy task. Far from it.
In January 2022, I selected seven stocks that doubled in 2021 and might do it again in 2022. If I remember correctly, a couple came close, but no cigar.
I’m not looking for a repeat for this article, but rather three stocks to buy that doubled this year and should perform well in 2024. There are no promises for a double under the Christmas tree this year.
Abercrombie & Fitch (ANF)
Abercrombie & Fitch (NYSE:ANF) stock is up 254% in 2023, much better than the 100% minimum required for consideration here.
The omnichannel apparel retailer has five brands: Abercrombie, Abercrombie Kids, Hollister, Gilly Hicks, and Social Tourist. For reporting purposes, the company combines Gilly Hicks and Social Tourist under the Hollister brand and Abercrombie Kids under the Abercrombie brand.
In Q3 2023, Abercrombie accounted for 52% of its $1.06 billion in sales, while Hollister and company contributed the remaining 48%. The entire company’s operating profit in the quarter was $138.02 million, 13.1% of revenue, up from 2.0% in Q3 2022. Its gross profit margin in the third quarter was 64.9%, 570 basis points higher than a year earlier. There aren’t too many retailers with 65% gross margins, including successful ones.
At its June 2022 Investor Day, the company launched the Always Forward Plan, a 3-year strategic outlook for its business. The goals included a 2025 revenue target of $4.1 billion to $4.3 billion, 8%+ operating margins, and a cumulative three-year free cash flow of $600 million.
How’s it doing on those goals? Based on its guidance for 2023, it should hit the revenue and operating margin targets two years early, with the free cash flow target reached in 2024.
It won’t be up 254% in 2024, but a market-beating return isn’t an unreasonable expectation.
Royal Caribbean Group (RCL)
Royal Caribbean Group (NYSE:RCL) is my favorite of the three large cruise operators. Its stock is up 147% in 2023. RCL stock beats Norwegian Cruise Line Holdings (NASDAQ:NCLH) and Carnival (NYSE:CCL). Not surprisingly, it’s the only one of the three up over the past five years siince Covid-19 crushed the trio’s business models.
Why do I like RCL so much?
Well, selfishly, my wife and I married on the Majesty of the Seas, the company’s former 74,000 gross ton cruise ship that was put into service in April 1992 and sold in December 2020 to Greek-based Seajets. It doesn’t appear to still be in service.
However, I always preferred RCL because its former CEO, Richard Fain, served in that capacity for 33 years. The third-longest-serving CEO in the S&P 500, he completely transformed its business. He stepped down in January 2022. CFO Jason Liberty took his spot, with Fain becoming Chairman of the Board. He still serves in that capacity.
Fain took Royal Caribbean public in April 1993 at $18 a share. If you account for the 2-for-1 stock split in 1998, its shares have achieved a compound annual growth rate of 9% over the past 30 years.
Considering the volatility of cruising stocks, that’s an unbelievable return.
TopBuild (BLD)
The final name on my list is TopBuild (NYSE:BLD). Its shares are up 105% YTD, the lowest return of the three. However, long-time shareholders get the last laugh. BLD stock is up 628% over the past five years, considerably higher than the other two.
I recommended the insulation distributor and installer in October 2020:
“New homes need insulation. So, even though a shortage is never good, it’s better than the alternative — a surplus. With low rates and an America inclined to be homebodies for the next year or more, like Pool, TopBuild will continue to reap the rewards of a changing housing market.”
Its shares are up 74% in the 38 months since, 3x the performance of the Russell 2000.
Nothing much has changed about the housing market. Sure, interest rates are much higher now, but the shortage of homes hasn’t gone away, hitting 6.5 million homes at the end of 2022.
The company reported Q3 2023 results at the end of October. While there was definite evidence that its business is slowing — sales rose 1.9% to $1.33 billion — it continues to see growth in all three end markets (residential, commercial, and industrial) despite the challenging macro environment.
On the bottom line, its net income was $167.6 million in Q3 2023, 9.0% higher than a year earlier. Further, it continues to increase gross margin and operating margin. In the third quarter, its gross margin was 31.7%, 130 basis points higher, while its operating margin was 17.9%, 80 basis points over Q3 2022.
Free cash flow is good, helping to keep its balance sheet conservatively leveraged. It’s an excellent long-term buy.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
