Top 5 Sectors to Watch in a Bullish Market

Do you want growth in a bull market? These aren’t just the sectors to watch but the stocks that should go right along with them.

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Investors are starting to see some positivity once again in this market, which could influence a bull market in the very near future. With that in mind, here are five sectors that should do well in a bull market and stocks to go right along with them.

1. Technology

The technology sector continues to be a major driver of growth, primarily due to advancements in artificial intelligence, cybersecurity, and software development. Companies like Shopify and Constellation Software (TSX:CSU) are well-positioned to capitalize on these trends. The sector’s robust growth potential is supported by ongoing digital transformation across various industries.

Yet, of these two stocks, I would go with CSU stock. CSU stock has shown consistent revenue growth, with revenue reaching US$8.84 billion as of March 2024. This reflects a 24.35% year-over-year growth. Analysts have a positive outlook with price targets ranging from $3,400 to $4,300, suggesting potential upside.

The company continues its strategy of acquiring smaller software firms. This enhances its diversified product portfolio and reduces dependency on a single market. This acquisition-driven growth strategy has been a key factor in its financial performance and investor confidence

2. Healthcare

The healthcare sector should experience significant earnings growth in 2024. After a challenging year in 2023 due to COVID-related impacts and patent cliffs, the sector is poised for a rebound. Key players like Eli Lilly and AbbVie are anticipated to show strong earnings performance. This is driven by innovation and increased healthcare demand.

However, if you’re looking for a Canadian stock, consider Bausch Health Companies (TSX:BHC). BHC stock should benefit from a recovering healthcare sector post-pandemic, with an emphasis on expanding its product portfolio and improving operational efficiencies. The healthcare sector is experiencing a resurgence, and Bausch Health’s efforts in product diversification and innovation position it well to capitalize on this trend.

3. Financials

The financial sector is viewed as a contrarian play with significant upside potential. Despite concerns about interest rates and economic uncertainty, financial institutions such as banks and insurance companies are expected to benefit from economic normalization. This sector includes major banks like Royal Bank of Canada and Toronto-Dominion Bank, which have historically shown resilience and growth during market recoveries.

But for dividends and growth, I would go with Canadian Imperial Bank of Commerce (TSX:CM) instead. CIBC stock is known for its strong dividend yield, with a forward dividend yield of 6.32%. The bank has maintained a conservative approach, ensuring stable payout ratios and consistent dividend growth. Analysts expect CIBC to benefit from economic normalization and higher interest rates. Furthermore, CIBC’s strategic focus on digital transformation and operational efficiency will help it maintain a competitive edge in the financial sector

4. Energy

The energy sector, particularly Canadian oil and gas companies, should perform well due to new infrastructure projects like the Trans Mountain Pipeline expansion and the Coastal GasLink project. These projects are set to increase capacity and support stable revenue streams. Companies like Suncor and Canadian Natural Resources are expected to benefit from these developments despite the challenging macroeconomic environment for energy.

Yet I would instead go with Enbridge (TSX:ENB). Enbridge’s strong dividend yield of approximately 7.69% and ongoing projects like the Trans Mountain Pipeline expansion should enhance its capacity and revenue streams. The energy sector, particularly oil and gas, is poised for growth due to increasing demand and strategic infrastructure investments. 

5. Communications Services

The communications services sector is poised for continued growth, driven by major players like Meta and Alphabet. The sector’s growth is supported by increasing digital ad spending and advancements in communication technologies. Additionally, companies like Disney (NYSE:DIS), AT&T, and T-Mobile US are expected to contribute to the sector’s strong performance through improved earnings and expanded service offerings.

Now, for an American player, I would go with Disney stock. Disney has been focusing on expanding its streaming services and content offerings. Despite challenges, the company’s investments in Disney+ and other digital platforms are expected to drive significant revenue growth. Analysts remain optimistic about Disney’s ability to capitalize on its strong brand and diversified entertainment portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce, Royal Bank Of Canada, Shopify, and Toronto-Dominion Bank. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Alphabet, Canadian Natural Resources, Constellation Software, Enbridge, Meta Platforms, and Walt Disney. The Motley Fool has a disclosure policy.

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