There’s plenty of reason to look for stocks to buy before we enter 2024. The S&P 500 index has trended higher by almost 25% this year. It’s difficult to talk about targets for the next year, but I believe the markets will remain in an uptrend as multiple rate cuts are possible. Expansionary policies will not only stimulate economic growth but also inject liquidity into the financial system.
As a basic screening, I have looked at stocks to buy that are trading at a valuation gap. This includes growth stocks and blue-chip stocks. In my view, a portfolio of these stocks can potentially deliver 30% to 50% returns over the next 12 months. Further, these stocks are worth holding beyond this initial time horizon.
Newmont Corporation (NEM)
Newmont Corporation (NYSE:NEM) is one of the more interesting stocks to buy as it has trended higher by 15% in the last month.
However, if we look at the 12-month chart, NEM stock is has delivered negative returns of 8%. With gold trading near $2,050 an ounce, it’s a good time to buy NEM stock for a bigger rally in the coming quarters. A dividend yield of 3.89% adds to the attractiveness.
With an investment grade balance sheet, Newmont has solidified its position as one of the largest gold miners. Further, the company has quality assets that are likely to ensure stable production into the 2040s. With prospects of multiple rate cuts in 2024, the rally for gold might have just started. It would not surprise me with a 30% to 40% rally for this blue-chip stock next year.
For Q3 2023, Newmont reported operating cash flow of $1 billion. If gold continues to trend higher, Newmont is positioned to report annual OCF of more than $5 billion in 2024. Cash flow upside will also be supported by the acquisition of Newcrest Mining. Strong cash flows would also imply healthy dividend growth.
Li Auto (LI)
Earlier this year, Li Auto (NASDAQ:LI) traded at highs of $47.3. However, with a profit booking driven correction, the stock is trading at $35. I believe this is one of the more intriguing stocks to buy, and I expect LI stock to double from current levels next year.
It’s worth mentioning that Li Auto commands a market valuation of $34.3 billion. However, the company holds cash of $12.13 billion as of Q3 2023. Further, in the last quarter, Li Auto reported free cash flow of $1.8 billion. Ultimately, valuations are based on cash flows and from that perspective, Li Auto seems significantly undervalued.
Further, with the company having a strong cash buffer, aggressive investment in retail expansion will support growth. The regular launch of new models is another catalyst. Early next year, Li MEGA will be launched and will support deliveries growth. The company is also planning overseas expansion with the first market likely to be the Middle-East.
Riot Platforms (RIOT)
There is a sense of missing out on the rally with Riot Platforms (NASDAQ:RIOT) stock having surged by almost 400% for year-to-date.
I want to point out the fact that RIOT stock was trading above $70 when Bitcoin (BTC-USD) made highs in 2021. It’s very likely that the cryptocurrency will make new highs next year and RIOT is one of the best crypto stocks to buy and a potential multi-bagger from current levels.
Of course, Bitcoin trending higher is not the only reason to like Riot Platforms. The company has strong fundamentals and is pursuing aggressive growth plans. In the next 12 to 24 months, Riot is positioned for stellar revenue and cash flow growth.
To put things into perspective, Riot has cash and digital assets worth $600 million. The company intends to use this cash buffer for aggressive mining capacity expansion. By the end of the year, Riot expects to achieve capacity of 12.3EH/s. Further, by the end of 2025, capacity should surge to 38.1EH/s. This will translate into robust cash flow growth assuming Bitcoin remains in an uptrend.
Miniso Group (MNSO)
Miniso Group (NASDAQ:MNSO) stock had a rather sharp sell-off from recent highs of $29.9 to current levels of $19.9. This undervalued stock has a forward P/E ratio of 18.1, making it promising to buy.
In addition, the dividend yield of MNSO stock stands at an appealing 2%. Previous peaks for MNSO stock imply a potential 50% upside. There is a high probability of this occurring within the next 12 months.
For Q1 2024, Miniso reported healthy revenue growth of 36.7% on a year-on-year basis to $519.6 million. For the same period, the company’s adjusted EBITDA increased by 52.8% to $139 million. EBITDA margin expansion has been a big positive in the last few quarters.
It’s worth noting that Miniso continues to open new stores globally. As of September 2023, the company reported 6,115 stores, which was higher by 819 on a year-on-year basis. This is another factor that’s likely to support revenue growth besides an increase in average ticket size. With the initiation of dividends this year and share repurchase, there seems to be ample scope for value creation.
Albemarle Corporation (ALB)
I had maintained my view in the recent past that Albemarle Corporation (NYSE:ALB) stock is deeply oversold. The stock has witnessed a sharp rally of 16% in the last one month.
I expect the bullish momentum to sustain next year. ALB stock continues to trade at an attractive forward price-earnings ratio of 6.8, even after recent gains. ALB stock also offers a dividend yield of 1%.
During the year, the downside in ALB stock was driven by lower lithium prices. While the company still expects 30% to 35% sales growth, significant EBITDA margin contraction is on the cards. However, this factor is discounted in the stock.
Going forward, I expect lithium prices to stabilize and trend higher. Albemarle has ambitious lithium conversion capacity expansion plans. This will translate into healthy revenue growth and cash flow upside. Considering the company’s strong balance sheet, I expect potential acquisitions to support growth.
Panasonic Holdings (PCRFY)
Panasonic Holdings (OTCMKTS:PCRFY) is among the nest stocks to buy now considering the valuations. PCRFY stock has remained almost sideways in the last 12 months and trades at a forward price-earnings ratio of 7.8.
Further, the stock offers an attractive dividend yield of 2.36%. It would not surprise me if it produced 30% to 50% total returns in the next 12 months.
The electric vehicle battery maker has ambitious growth plans through 2031. During this period, the company plans to quadruple EV battery capacity to 200GWh. This is one reason to be bullish on the stock. Revenue growth is likely to be healthy in the coming years.
By 2029, Panasonic is also targeting to produce solid-state batteries for drones. Of course, these are long term targets, but will have an impact on valuations. Further, being an innovator, I expect Panasonic to remain ahead of the curve even amidst competition.
Chevron Corporation (CVX)
Chevron Corporation (NYSE:CVX) is my top oil and gas pick with the stock having declined by 10% in the last 12 months.
An investment grade balance sheet with robust cash flows is a major reason to like Chevron. To put things into perspective, Chevron reported operating cash flow of $9.7 billion for Q3 2023. With the recent acquisition of Hess Corporation (NYSE:HES), cash flows will swell further.
It’s not surprising that Chevron is targeting annual capital expenditure of $19 to $22 billion after they complete the acquisition. This will ensure that reserve replacement remains robust and the company continues to invest in the renewable energy segment.
On the date of publication, Faisal Humayun did not hold (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.
Energy, Renewable Energy, Battery, Consumer Discretionary, Automotive, Electric Vehicles, Financial, Fintech, Lithium, Oil, Industrial, Precious Metals, Retail
