Are you worried about the possibility of an impending recession in 2024? Or maybe just the Fed loosening its grip on the economy by lowering interest rates? Our top stock picks for 2024 consider these likely scenarios.
Wondering how to safeguard and grow your investments in these uncertain economic times? Well, you’re not alone. With experts divided on what lies ahead for the financial markets, it’s only natural to seek a solid strategy to protect and grow your wealth.
In this article, we’ve got you covered as we’ll explore five top stock picks specifically tailored for those who believe a recession or lower interest rates might be on the horizon.
Whether you’re a seasoned investor or just starting, these stock selections are designed to weather economic storms and potentially thrive in challenging times.
The Approach Behind Our Stock Picks
Not every stock is a suitable choice when you’re planning to hold onto it for the long term, especially when economic conditions may be uncertain.
The top stock picks for 2024 are those that possess robust financial strength and stability, enabling them to withstand the potential challenges posed by bad economies and uncertain conditions.
Following the sage advice of Warren Buffett, who famously advised investors to ‘never lose money,’ the focus here is on stocks that enjoy favorable opinions from analysts and exhibit certain key attributes.
- Financial Strength: We prioritize stocks with robust financial health, as they are better equipped to navigate through economic downturns. This strength acts as a buffer against potential losses.
- Market Dominance: Stocks that command a significant share of their respective markets tend to have a competitive edge. Their established presence and customer base can help shield them from the worst effects of a recession.
- Growth Potential: We seek companies with positive growth outlooks, as they can continue to expand even when economic conditions are challenging. High-margin businesses that efficiently convert sales growth into rising profits are particularly attractive in growing economies.
- Customer Loyalty: Companies with loyal customer bases are more resilient during market downturns. Such loyalty can help insulate them against severe sales declines.
- High Margins: High-margin companies not only thrive in growing economies but also prove to be robust during economic downturns. These healthy margins protect profitability even when times are tough.
- Size and Reputation: Larger companies often have advantages in accessing capital at competitive rates. Their size and established reputation in the market contribute to their ability to secure the necessary funding, even when credit conditions tighten.
Through careful evaluation of these criteria, our objective is to pinpoint stocks with the capacity to endure a potential recession in Canada in 2024. These selections are specifically tailored to provide stability and the potential for growth despite the looming economic challenges.
5 Top Stock Picks 2024
As we step into the year 2024, these are our top stock picks, carefully chosen to face the challenges of a potential recession or economic downturn and lead you toward brighter investment prospects.
1. Goeasy stock
Among our top stock picks for 2024, especially if you’re anticipating a recession on the horizon, Goeasy (TSX: GSY) takes the lead.
In simple terms, Goeasy specializes in offering nonprime leasing and lending services to consumers, with a particular focus on those who face obstacles in accessing traditional banking services.
This means that a significant portion of its clientele comprises individuals with less-than-ideal credit scores or those seeking smaller loans that major banks may overlook.
Headquartered in Mississauga, this company boasts a substantial market capitalization of $2.6 billion, and its stock currently trades at an impressive $157.58 per share, reflecting an impressive 48% surge in value throughout 2023.
Notably, GSY stock has significantly outperformed the broader market index, making it an attractive prospect for investors.
What sets Goeasy apart is its remarkable track record of returns. Over the past decade, excluding dividends, Goeasy stock has delivered an astounding 894% in positive returns. Furthermore, the company currently offers an appealing annualized dividend yield of 2.4%, providing an additional incentive for investors seeking income from their investments.
The company’s robust financial performance is another evidence of its potential. In 2022, Goeasy saw its earnings increase by a notable 10.7% year over year.
Impressively, this positive earnings trend continued in 2023, with the company reporting a substantial 19.9% year-over-year increase in adjusted earnings, reaching $10.19 per share for the first three quarters of the year. This growth was fueled by a substantial 22.2% rise in total revenue.
Looking ahead to 2024, the economic landscape appears to be improving, with central banks gearing up to cut interest rates.
This could potentially lead to increased demand for Goeasy’s financial services, further boosting the company’s stock prices.
In a nutshell, Goeasy’s combination of financial stability, growth potential, and commitment to serving underserved consumers positions it as a compelling choice for investors in the coming year.
2. Bombardier Stock
Now, let’s move onto our next pick: Bombardier (TSX: BBD.B). Wondering is Bombardier (TSX: BBD.B) the diamond in the rough for investors in 2024, especially after witnessing a nearly 22% drop in value this year? Let’s take a closer look.
Bombardier, a business jet maker headquartered in Dorval, has seen its stock trading at $40.88 per share, boasting a market cap of $4.1 billion. While the company hasn’t unveiled its third-quarter financial results yet, the first two quarters of 2023 showcased promising signs.
Their total revenue experienced a solid 12% year-over-year increase, reaching US$3.1 billion. This growth can be attributed to their commitment to higher aircraft deliveries.
What’s even more striking is the company’s financial turnaround. In the first half of the year, Bombardier reported adjusted earnings of US$1.78 per share, a significant improvement from the adjusted net loss of US$1.23 per share in the same period of 2022.
This indicates a positive shift in its financial health, even amidst economic uncertainties.
Remarkably, Bombardier has consistently surpassed the expectations of Wall Street analysts for ten consecutive quarters, showcasing an impressive track record of financial growth.
As the company gears up to increase its aircraft deliveries and production in the upcoming years, there’s potential for further improvement in its financial performance.
Considering these fundamental factors, Bombardier emerges as a Canadian stock that may be highly undervalued following its recent declines. While the road ahead may have challenges, the company’s resilience and commitment to growth make it an intriguing choice for investors seeking opportunities in 2024.
3. Dollarama Stock
Let’s introduce you to Dollarama (TSX: DOL), our third top stock pick for 2024, and discuss why it might just be the resilient anchor you need.
Dollarama, headquartered in Mont Royal, operates a chain of discount stores across Canada and boasts a substantial market capitalization of $26.3 billion. Its stock currently stands at $93.34 per share, having demonstrated impressive growth with an 18% increase in 2023.
Over the past decade, DOL stock has soared by an astonishing 540%, a testament to its strengthening financial foundation.
As we dive into its recent performance, Dollarama’s fiscal year 2024 has shown remarkable resilience. In the first three quarters, ending in October, the company reported a staggering 30.3% year-over-year surge in adjusted earnings, driven by an impressive 18% increase in revenue.
Furthermore, for fiscal year 2024, Dollarama has announced a dividend of approximately $0.28 per share, marking a substantial 28% year-over-year increase.
What makes Dollarama particularly attractive, especially in uncertain economic times, is the consistent demand for its low cost products.
Even when faced with challenging economic conditions, consumers continue to flock to Dollarama’s stores, a testament to the stability and reliability of its offerings.
Moreover, Dollarama is actively expanding its store network, a strategic move that is poised to accelerate its financial growth in the years to come.
Hence, Dollarama stands tall as a safe bet for the long term. Its increasing popularity, coupled with a commitment to growth, positions it as a compelling choice for investors seeking stability and potential during uncertain economic times.
4. Lightspeed Stock
In a world where economic troubles loom, let’s talk about Lightspeed Commerce (TSX: LSPD), #4 in our top stock picks 2024, this Canadian growth stock has faced some tough times, with its stock price dropping by more than 60% in the last three years, currently sitting at $17.85 per share with a market value of $2.7 billion.
But here’s the interesting part: just like Bombardier, Lightspeed has recently shown some impressive improvements in its financial performance, even with the economy not doing so well.
In the last six months (up to June), the company’s revenue went up by about 23% compared to the previous year, reaching $393.3 million. At the same time, its losses also went down a lot from the year before.
This tells us that Lightspeed is doing pretty well financially, even when interest rates are going up.
Lightspeed also made a smart move by switching to Lightspeed Payments services, which helps them save money and run their business more smoothly.
Despite the economic challenges, the company’s management is hopeful about stronger revenue growth in the second half of the year.
So, LSPD could be a great buy. You might want to consider getting in on the action now and holding onto this stock for the long term, especially given its growth potential.
5. Suncor Energy Inc. (NYSE:SU)
Another compelling candidate that deserves your attention is Suncor Energy Inc. (NYSE: SU). While its year-to-date stock performance has seen a modest 8% gain through October 26, it’s the company’s strategic move that truly captures our interest.
Suncor has made a calculated decision to acquire TotalEnergies’ Canadian operations for approximately C$1.47 billion, a move that signifies confidence in its future prospects.
What makes Suncor even more intriguing is its recent spotlight on climate change goals. CEO Rich Kruger addressed this during the company’s Q2 earnings call, emphasizing the importance of aligning today’s business drivers with longer-term energy transition goals. This indicates a commitment to adapt and thrive in a changing energy landscape.
While making investment decisions, timing and strategy are crucial. The Artisan International Value Fund also recognized Suncor’s potential, with its share price increasing by one-third, driven by higher oil prices.
However, it’s essential to acknowledge that the energy sector can be cyclical and influenced by commodity prices. As a result, the fund adjusted its portfolio to ensure a balanced strategy.
Final Thoughts
Now that you’ve learned about our top stock picks for 2024, it’s key to choose strong companies that you’re willing to stick with for the long haul. Look for those with a track record of success, efficient operations, and a trusted brand. Bigger companies often weather storms better.
But here’s another thing to consider: Don’t put all your eggs in one basket. Diversify your investments and keep a close eye on your portfolio. The economic winds can change direction in the blink of an eye, even when you’re thinking long-term.
So, as you set sail into 2024, remember to stay vigilant and adapt when needed. Be sure to check out our other post on Where to Invest 20K in 2024.
