It’s painful to look back at missed opportunities in the stock market. Of course, it’s impossible to buy all stocks that are attractive. The portfolio would be outsized. However, there are some compelling opportunities in the growth stocks space that are worth considering before we enter 2024. Besides having exposure to blue-chip dividend stocks, the column discusses the top stocks to own for big returns next year.
If I had to provide an outlook for the coming year, I would say that it’s going to be another year of stock selection. A broad-based euphoric rally in the markets is unlikely. However, specific ideas will perform well, and there will be multi-bagger opportunities.
Also, rather than looking at specific sectors, I would use the bottom-up approach and screen good companies. Fortunately, there are several stories to talk about, and this column focuses on growth stock ideas that can deliver at least 100% returns.
Let’s discuss the reasons to be bullish on these best stocks to own in 2024.
Li Auto (LI)
Li Auto (NASDAQ:LI) is possibly among the best stocks to own on the back of scintillating growth. After surging to highs of $47 in August, LI stock has corrected to current levels of $39 on the back of profit booking. This seems like a golden opportunity for fresh exposure and I expect the stock to double from current levels next year.
From a growth perspective, Li Auto reported revenue of $4.61 billion for Q3 2023. On a year-on-year basis, revenue surged by 271.6%. Further, free cash flow for the quarter was $1.8 billion. Considering the growth trajectory, I will not be surprised if Li Auto reports FCF of more than $10 billion next year. The business is already a cash flow machine, and I expect robust delivery growth to sustain.
The company recently unveiled Li MEGA that is due for commercial launch in February 2024. This will support deliveries growth coupled with aggressive retail expansion within China. With Li Auto having a cash buffer of $12.13 billion, there is high flexibility to invest in innovation and product development.
Kinross Gold (KGC)
As I write, gold is trading near $2,050 an ounce. The breakout seems to be strong and potential rate cuts in 2024 will set stage for gold trading above $2,200 an ounce. I am therefore bullish on gold mining stocks and Kinross Gold (NYSE:KGC) is one name that’s likely to double in 2024.
KGC stock trades higher by 36% for the year-to-date. Even after a decent rally, the stock trades at an attractive forward price-earnings ratio of 14.6. Additionally, the stock offers a dividend yield of 2.05%. In a scenario where gold trends higher, investors can expect healthy dividend growth next year.
From a fundamental perspective, Kinross has an investment-grade balance sheet with a liquidity buffer of $2 billion. Further, for Q3 2023, the Company reported operating cash flow of $407 million. Given the positive outlook for gold, OCF is likely to be around $2 billion for 2024.
I must add that with high financial flexibility, there is a strong case for Kinross’ pursuit of acquisition-driven growth. The Company sold Russian assets in 2022 due to geopolitical tensions. A possible acquisition would compensate for the decline in gold production visibility.
Riot Platforms (RIOT)
There are speculations that the Securities and Exchange Commission would given an approval on Bitcoin (BTC-USD) ETF in early 2024. Further, Bitcoin halving is due next year. Both these factors are strong enough to take the cryptocurrency to new highs. I must add that rate cuts would also support a rally in Bitcoin.
With a bullish outlook, it’s a good time to consider exposure to some of the best Bitcoin miners. Riot Platforms (NASDAQ:RIOT) is a quality pick and can surge by over 100% next year. There are two main reasons to like Riot Platforms.
First, the Company has strong fundamentals while navigating the crypto winter. As of Q3 2023, Riot reported cash and digital assets of $488 million. With a zero-debt balance sheet, the Company has high financial flexibility for aggressive mining capacity expansion.
Further, Riot has already undertaken a massive expansion. As of Q3 2023, the Company reported hash rate capacity of 10.9EH/s. It’s expected that capacity will almost double to 20.2EH/s by Q3 2024. Further, the guidance is to boost capacity to 36.3EH/s by 2025. If this expansion is associated with Bitcoin trending higher, Riot is positioned for stellar revenue and cash flow growth.
Albemarle Corporation (ALB)
It’s been a bad year for Albemarle (NYSE:ALB) stock with a correction of 42% for year-to-date. It does not come as a surprise after a sharp correction in lithium prices. However, I strongly believe that the correction is overdone. ALB stock looks attractive at a forward price-earnings ratio of 5.7 and offers a dividend yield of 1.29%.
The first point to note is that even with a correction in lithium, Albemarle continues to guide for 30% to 35% sales growth for 2023. On the flip-side, EBITDA margin is expected to decline by 1200 basis points to 35%. However, this factor is discounted.
If we look beyond the near-term headwinds, Albemarle is a potential value creator. As of 2022, the Company reported lithium conversion capacity of 200ktpa. It’s expected that capacity will triple to 600ktpa by 2027. This will translate into healthy revenue and cash flow growth.
According to the Company, lithium demand will increase to 3.7MMt by 2030 from levels of 1.2MMt in the current year. As demand increases, lithium prices will firm-up. The correction therefore presents a good buying opportunity in the sector.
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) stock has surged for year-to-date. However, it’s important to note that the rally is from deeply oversold levels. As business fundamentals continue to improve, I am bullish on DKNG stock for the next year.
For Q3 2023, DraftKings reported robust revenue growth of 57% on a year-on-year basis to $790 million. Top-line growth was never a challenge for the Company considering the big addressable online sports betting and iGaming market. It’s the cash burn that had translated into a deep correction for the stock in 2022.
However, DraftKings seems to have addressed that challenge. For Q4 2023, the Company has guided for $200 million in positive adjusted EBITDA. At the same time, the Company has provided an initial guidance for next year. On a year-on-year basis, revenue is likely to increase by 25%. Additionally, EBITDA is likely in the range of $350 to $450 million in 2024.
With EBITDA margin expansion being supported by an increase in average revenue per user, the outlook is positive even beyond next year. I therefore expect the rally for DKNG stock to sustain.
Amdocs (DOX)
Amdocs (NASDAQ:DOX) stock has been largely sideways in the last 12 months amidst volatility. At a forward price-earnings ratio of 12.7, DOX stock looks deeply undervalued. Further, the stock also offers a robust dividend yield of 2.1%. I am bullish on a strong reversal rally, considering the business outlook and the addressable market for the Company.
As an overview, Amdocs is a provider of software solutions and services to the telecommunication and media industry globally. By 2025, the serviceable addressable market for the Company is estimated at $57 billion. Therefore, there is ample headroom for growth and Amdocs has a presence in 90 countries.
From a financial perspective, there are two points to note. First, Amdocs has a 12-month backlog of $4.15 billion. This provides clear revenue visibility. Further, the Company has guided for free cash flow of $750 million for 2024. This provides flexibility for dividends and investment in potential acquisition-driven growth. Given the fundamentals and the potential market size, DOX stock is undervalued.
Borr Drilling (BORR)
Borr Drilling (NYSE:BORR) stock had touched highs of $9 in August. However, there has been a steep correction and consolidation with BORR stock currently trading at $6.2. I believe that the offshore drilling contractor is poised for a strong reversal rally considering the order backlog and potential growth visibility.
The first positive is that as of November, Borr reported an order backlog of $1.87 billion. The backlog provides clear cash flow visibility for 2024. Further, I expect the offshore drilling market sentiments to remain positive next year and the order intake will be robust.
It’s worth noting that there is a strong case for multiple rate cuts next year. This will be bullish for oil and offshore drilling activity. As the backlog swells, Borr Drilling will be positioned to increase dividends and potentially deleverage. At the same time, the Company has a modern fleet of 24 rigs. Fleet expansion is likely if the industry outlook remains bullish. This will provide revenue and cash flow upside visibility.
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.
