3 Top Stocks to Buy Now for 2024

By TradeSmith Research Team

After a strong, but at times harrowing, 2023, stocks headed into 2024 with the skies brightening and the pesky clouds breaking up.

And after a solid start, stocks are set up for a strong year overall. There will be some ups and downs, but smart investors have a great opportunity to make back their losses, build on their gains, and grow their wealth.

That’s not a guess. I don’t mess around with guesses or gut feelings. I learned early in my career that’s a path to failure.

I rely on cold, hard data, with no axe to grind and no agenda to promote. Just the facts, ma’am.

I designed an entire quantitative analysis system to find the best stocks in the market with the highest probability of big profits and to gauge money flows. My system analyzes more than a million data points every day.

When I combine that with other data sources, I see a real moneymaking opportunity in 2024.

Let me give you five quick data points that show you exactly what I’m talking about.

The Big Money Index

The index I am most confident in is one I designed myself. I call it my Big Money Index (BMI), and it tells me what institutional traders are doing with the massive amounts of money they control.

Institutions account for between 70% and 90% of trading volume each day, so if you’re not considering where that money is going, there’s a good chance you’re swimming upstream.

Not surprisingly, my Big Money Index fell into “oversold” territory during the sharp selling last fall. It fell under 19, which indicated extreme selling that isn’t sustainable.

Going back to 1990, I counted 129 instances when the BMI was below 19. And guess what? Stocks were higher one year later all 129 times – with the S&P 500 averaging 24.7% gains.

Inflation is WAY down

We all felt the pain of higher prices the last couple of years. And while it took a long time, inflation now appears under control. It peaked above 9% in the summer of 2022 and was down near 3% by the end of 2023.

You’ll hear how the Fed’s target rate is 2%, but that’s actually a unicorn; it only exists as a bit of mythology. I ran a personal study on the Consumer Price Index going all the way back to its 1960 creation. The average reading over the last 63 years is 3.77% – higher than where inflation is now.

That level of inflation certainly wasn’t harmful to stocks: The S&P 500 gained more than 46,000% during that 63-year span.

Interest rates are also about to fall

Higher rates have been the Fed’s primary weapon in the war on inflation, and they did their job without overdoing it.

Higher rates cooled the economy, which was a necessary side effect. But the economy has proved amazingly resilient and surprised an awful lot of folks with its strength.

All of this means the Fed can stop raising rates. Investors have grown increasingly confident of this.

And talk of rate cuts has already started. As that chatter heats up in 2024, money will pour back into stocks.

Companies continue making money

Even with inflation and rate hikes, consumers spent and companies thrived. During the last earnings reporting season of 2023, 82% of S&P 500 companies earned more than analysts expected.

What’s more, earnings for S&P 500 companies grew 4.3% – the first quarter of growth in a year.

Analysts expected an earnings beatdown for years, but it never came. Now the data shows the trend has reversed higher.

Record levels of “fuel” for stocks to launch

There is nearly $6 trillion in money market accounts, according to the Fed’s latest data. That’s far and away the most ever.

I’ve called it a cash “bubble,” and bubbles burst.

Money managers aren’t paid to park funds in cash. They’re paid to grow funds, so there’s an inherent pressure to have that money working.

As the market strengthens, inflation and interest rates come down, and companies start to make more money, a big chunk of that cash will flood back into stocks. The FOMO (“fear of missing out”) will kick in, and we should see a tidal wave of cash coming back into stocks.

You don’t want to miss out on that, so let me share three top stocks you can buy now for 2024. These stocks all rate very well in my Quantum Edge system, which has outperformed the S&P 500 7-to-1 over the last 30 years.

Let’s get to them.

Lululemon Athletica (LULU): The Athleisure Category Killer

Lululemon (LULU) isn’t the biggest “athleisure” company around. That distinction belongs to Nike (NKE).

But most people credit LULU with originating this popular and growing fashion movement that is fast approaching $350 billion in annual sales.

Lululemon also doesn’t produce the cheapest clothing around. But with its average yoga pant running more than $100 a pop – and as high as $158 – it has made athleisure into a big and profitable business.

LULU started out making those famous yoga pants, but now offers menswear, kidswear, and footwear. Lululemon has become an extremely popular brand that thrived in recent years when many other retailers did not. Its men’s line is one of the main growth drivers, and the company has expanded operations with an extensive array of retail channels around the globe – now more than 670 stores around the world.

LULU has also built a robust direct-to-consumer (DTC) sales channel. In-store sales are still important, and the company is known for its in-store experience, but retailers also need a strong online presence to truly thrive.

DTC sales constitute 40% of overall revenue. Those sales carry higher operating margins than in-store sales, and as that part of the business grows, it bodes well for future profitability.

Management has laid out an ambitious growth plan that it calls “Power of Three x2.” It builds on the original Power of Three plan and calls for a doubling of net sales from $6.25 billion in 2021 to $12.5 billion by 2026.

How does it plan to get there? Product innovation, guest experience, and market expansion.

Running LULU through my quantitative analysis system, we see an excellent overall Quantum Score of 87.9. That tells us right off the bat that the stock has a high probability of moving higher.

Sales and earnings growth are both strong as the company executes on its growth goals. The profit margin is solid at 10.5%, meaning Lululemon keeps 10 cents of every dollar it brings in. And debt is manageable, which is good because the company isn’t digging itself into a hole trying to finance growth.

LULU shares hit a series of new 52-week highs toward the end of 2023, and shares have been a big winner over the last five years. They’ve been whipsawed from time to time in market volatility and during Covid, but the trend is unmistakable.

Lululemon is a phenomenal brand with quality products that people are willing to pay up for. It also continues to innovate. Given its strong fundamentals and technicals and Big Money’s history of buying this stock, it has all the makings of a continued winner in 2024.

Microsoft: One of My Top AI Picks

“Artificial intelligence” (AI) is one of the hottest topics around.

Companies are adding it to their products. Investors are buying their stocks. And shares are soaring.

I get it. AI is an amazing technology. I’m excited about it, too. I’ve been studying it along with machine learning, database architecture, and algorithm construction for some time now, and I’m incorporating more of it into my stock-picking system to bolster our already-high success rate.

I also believe AI has opened a hefty wealth window. But here’s where we need to be shrewd. We want to buy reality and beware of hype.

This current round of AI mania was ignited in late 2022 with the release of ChatGPT, which stands for Chat Generative Pre-trained Transformer. (I wonder if the bot named itself.)

ChatGPT’s main purpose is to think, write, and talk like a real person. But it does more than that – a lot more. It can write computer programs, compose music, write essays, play games, and more. Students are using it for schoolwork, and even some scientific papers already list ChatGPT as one of the authors.

ChatGPT hit one million users in just five days and now has more than 100 million users.

Every company and every investor seem to “want in” on the action. Including Microsoft (MSFT).

I know. I know. It’s not exactly a surprise stock, but sometimes the best-known and biggest companies really are among the best opportunities. That’s the case here in this early stage of AI’s emergence.

Instead of focusing on small companies with heavy debt (which is even more problematic with higher interest rates) and no earnings, you can focus on companies that can buy up these firms – not for the profits (there often aren’t any) but for the developer corps.

Microsoft is a nearly $3 trillion company that can easily drop $5 billion to acquire one of these innovative startups. And then, Microsoft is capable of turning around and monetizing that $5 billion investment into $100 billion.

Let me add that I am not saying MSFT is a great stock just because of AI. It is a great company overall – a well-run technology leader that continues to grow and innovate.

It is, at heart, a software company (and AI is software). Many of us use its Office 365 products like Word and Excel. Many businesses use Microsoft Teams. Then there’s everything else from owning LinkedIn to Xbox to cloud products and services like Azure.

MSFT’s Quantum Score of 81 is about as good as it gets. Sales have grown 14% over the last three years, with earnings up 20% in that same time. Software businesses tend to produce high profit margins because once the product is designed, you can sell subscriptions to it over and over again. That’s true with Microsoft, which keeps 34 cents of every dollar it brings in.

The technicals are also strong with shares marching higher in 2023 and up 260% over the last five years.

I can also tell you that Big Money flooded into this stock in November when the market turned sharply higher. My system picked up 10 Big Money buy signals in the first 14 trading days of the month.

I expect money to continue flowing into MSFT in 2024 as the company continues to grow and innovate with the tech revolution marching forward.

Adobe: Taking Digital Media Into the Next Generation

Adobe (ADBE) needs little introduction. It’s one of the biggest and best-known digital media software companies in the world, and any of us who use computers or mobile devices probably use their products.

The company created the ubiquitous PDF (“portable document file”) format, and is also known for its Photoshop, Illustrator, InDesign, Lightroom, and Acrobat Reader programs. Adobe was founded more than 40 years ago and continues to be a leader in design, content creation, editing, and publishing. It has grown to nearly 30,000 employees with revenue last year topping $17.5 billion.

More growth is on the horizon, and yes, artificial intelligence is a part of that as Adobe has introduced new technology for generating images. Type in a few words of text and Adobe Firefly will create the image. Users generated more than three billion images in the first seven months.

Adobe’s ratings are also exceptional. Its Quantum Score is 84.5, which is right in the optimum buy zone. Sales have increased 16.2% over the last three years, while earnings expanded 24.2% in that same time. Both are estimated to grow in the 12%-13% range next year.

The company’s profit margin is strong at 27%. As we’ve said, software companies usually have high margins, so it’s something I definitely look for.

Shares shot from less than $275 in 2022 to above $600 in 2023, a nearly 120% surge that has the stock heading back toward its all-time highs set in 2021.

ADBE has been on my system’s elite Top 20 list of the best stocks in the market 94 times in the past 18 years. Shares are up 8,705% in that time.

Here again, we have a strong company that continues to grow and innovate, and whose shares are in strong demand. Those are great signals for future upside, and I expect ADBE to break out to new all-time highs on its way to nice profits in 2024.