With a new year comes new expectations for investors. Going into 2024, we may very well see the first round of rate cuts. Even if central banks, like the Bank of Canada, need to keep rates a bit higher for a while longer, I wouldn’t look to get into any sort of panic. At the end of the day, inflation seems to be on the right track. That likely has shot down many fears that the markets and economy would be headed for a repeat of the inflationary days of the 1970s.
As we head into the new year, I believe investors should look to compelling companies that have growth runway and valuation multiples that you can get behind. Now, a stock need not be deeply undervalued to be a great buy. Instead, a firm with positive earnings growth momentum and a fair-ish multiple may be more desirable as the markets try to break out of a slump, perhaps thanks in part to productivity gains to be had from next-generation generative artificial intelligence (AI).
In this piece, we’ll have a look at two stocks that I believe can fare well in 2024. And I’m looking forward to revisiting the three names in around a year from now! Without further ado, let’s get into the trio and where they stand heading into the new year.
Canadian Pacific Kansas City
CP Rail (TSX: CP) or Canadian Pacific Kansas City had a rather muted 2023, as expectations were lowered amid macro headwinds.
Indeed, the Kansas City Southern merger was exciting but may not be able to move the needle much higher on the stock until further down the road (or should I say track?). After a relatively flat 2023 (2.5% gains thus far), I view CP stock as a stock that may be able to march higher again, especially if the economy manages to grow while inflation dies down further.
At the end of the day, you need a strong rail network to get the economy going at full speed. And once the economy is ready to flex its muscles, count on CP Rail to do its part.
With a strong rail network, which now seems to be discounted by Mr. Market, I view CP stock as one of my top picks for 2024. Shares trade at 23.47 times trailing price to earnings (P/E), a fair multiple, in my view, for a fantastic firm!
Lululemon
For investors seeking more momentum, Lululemon (NASDAQ: LULU) stands out as a winner poised to keep winning for investors.
Remarkably, LULU stock recently blasted off to a new all-time high. Now sitting at around $510 per share, I still think it’ll be tough to beat the yoga wear maker in the new year, as it continues to outperform most other top brands in the apparel scene.
The valuation may seem stretched at 64.9 times trailing P/E. However, I wouldn’t bet against the firm, as it expands internationally while continuing to improve upon its margins. Lululemon’s a unique growth story and one that will continue working once the economy is back up and running again!
