3 Must-Buy Stocks for Immediate Investment Success
With markets hitting new highs, it’s getting harder to find must-buy stocks. Already, the market has been in a bull run since October 2022. As stocks keep on rallying, clear value opportunities are becoming rare.
However, the market occasionally presents great opportunities. It often throws out the baby with the bath water through indiscriminate selling, presenting bargains. Overreactions or short-termism, like knee-jerk selloffs on earnings, create fertile hunting grounds for must-buy stocks.
In today’s markets, three compounders have seen a negative reaction by the market. Based on their latest price action, one would argue that their prospects have declined. However, the fundamental outlook couldn’t be better. Let’s delve deeper into their underlying numbers.
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According to Finviz, these compounders are cashflow machines with operating margins exceeding 20%. Moreover, they will grow EPS by over 15% annually over the next five years. Yet, as of this writing, they trade at a forward price-to-earnings (P/E) below 20.
Although the market views these stocks unfavorably, taking a contrarian bet here will pay off. After all, these companies are market leaders in their domains. A year from now, the short-term setbacks will be in the rearview, and these stocks will be higher.
PDD Holdings (PDD)
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If you know the shopping app Temu, then PDD Holdings (NASDAQ:PDD) should be on your radar. The Chinese e-commerce giant is Temu’s parent company. After the recent selloff from over $150 to below $130, the stock looks attractive.
So, what triggered the recent selloff? The stock fell following a report from The Information suggesting that U.S. lawmakers were pushing for an import ban on Temu. The report alleges that the shopping app could be banned in the U.S. due to the use of forced labor in its supply chain.
Taking things into perspective, fears of a ban are overblown. While a ban in the U.S. is a potential risk, the likelihood is low. An outright ban on Temu seems farfetched, considering its impact on U.S.-China relations. At a time when both countries are trying to mend ties, such a move would hurt any progress.
Indeed, the company’s actions paint a picture of little worry. It is continuing its investments in the U.S. and spent heavily on Super Bowl ads. Its advertisements aired six times during the broadcast. According to the Financial Times, Temu has over 70 million users in the U.S., but only 1% of the e-commerce share compared to Amazon’s (NASDAQ:AMZN) 40%. Therefore, there is a massive growth opportunity for Temu to exploit.
Given the impressive growth outlook, analysts are bullish. TipRanks analysts see over 40% upside and have a price target of $178. Thus, PDD is one of the must-buy stocks for 2024.
Booking Holdings (BKNG)
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Another long-term compounder whose stock has suffered a temporary setback is Booking Holdings (NASDAQ:BKNG). The stock fell more than 9% after reporting earnings on February 22.
Overall, that was another impressive year for Booking Holdings. For the full year 2023, total gross travel bookings increased by 24% to $150.6 billion. Total revenues were $21.4 billion, representing a 25% increase from 2022. This drove a 39% increase in non-GAAP net income to $5.6 billion, with non-GAAP net income per diluted common share growing 52% to $152.22.
These solid results highlight the strength of Booking’s brands, making it one of the top must-buy stocks. It’s important to note that the company dominates the travel booking arena. Booking.com is a global leader in travel bookings, while Priceline dominates the online discount travel market. Its third platform, Agoda, is an online accommodations leader in the Asian region.
Kayak and OpenTable complete the list of Booking’s five key consumer brands. Altogether, Booking operates in over 220 countries and has over 28 million homes, apartments, and hotels listings. In 2023, over 1 billion room nights were booked on the platform.
Based on analyst estimates, 2024 EPS will grow 15% to $174.77. Thus, BKNG stock trades at 20 times forward earnings as of this writing. That’s a bargain for a long-term compounder with operating margins above 25%.
Alphabet (GOOG, GOOGL)
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Over the past week, Google’s parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has declined after a botched AI product launch. Gemini’s flaws left investors unimpressed, leading to a $70 billion market loss. Indeed, since the announcement, Gemini has revealed several inconsistencies and biases that CEO Sundar Pichai termed unacceptable.
Therefore, Google is still a leader in AI. The company has been researching AI even before it acquired DeepMind in 2014. However, as a technology giant constantly in regulatory crosshairs, it has had to adopt a conservative approach. Although younger startups like OpenAI and Perplexity AI might be leading the charge, Google is still a major player in AI.
Another market concern has been the threat to Search from AI. Still, Google has an insurmountable lead, garnering over 90% share in the market. On that note, it’s important to remember that Google’s competitive moat in search is buttressed by its distribution advantage. Through Android, the company has Google Chrome installed on billions of devices where Google Search is the default.
As of this writing, Alphabet is one of my must-buy stocks. Other marquee assets, particularly YouTube and Google Cloud, have been impressive. In Q4 2023, Google Cloud achieved 25.6% year over year (YOY) growth. Meanwhile, YouTube revenue growth reaccelerated to 15.5% YOY, driven by growing subscription revenues.
Alphabet’s AI missteps are a temporary setback that the company will resolve shortly. Furthermore, there could be more operational efficiencies as the firm addresses its bloated workforce. At 18 times forward earnings, this technology giant is a bargain.
On the date of publication, Charles Munyi 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.
Charles Munyi has extensive writing experience in various industries, including personal finance, insurance, technology, wealth management and stock investing. He has written for a wide variety of financial websites including Benzinga, The Balance and Investopedia.
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