A year ago, the markets were just beginning their recovery from bear times. Growth stocks started to take off, and investors wondered when we could officially call a bull market. Well, that time is now, offering us an excellent start to 2024. The S&P 500 recently hit a new record high, confirming the market is indeed in one of these much-awaited phases of optimism and growth.
In more good news, history shows us bull markets generally last longer than bear markets, offering our portfolios time to benefit. And to maximize your bull market potential, it's a great idea to buy shares of growth stocks. That's because they tend to excel in bull market environments and times of economic recovery and expansion. Here are my top growth stocks to buy in 2024.
Image source: Getty Images.
1. Amazon
Amazon (AMZN 0.87%) is a the ideal growth stock because it's a leader in two high-growth markets: e-commerce and cloud computing. The company also is investing heavily in the hot area of artificial intelligence (AI), which is boosting earnings in two ways.
AI is driving efficiency in Amazon's operations, helping it to lower costs. And Amazon, through cloud computing business Amazon Web Services (AWS), offers AI tools to clients. Considering the high demand in this area, AWS' AI tools could keep these clients coming back, boosting AWS' revenue. This is particularly important since AWS traditionally has driven profit at Amazon.
Amazon's recent efforts to revamp its cost structure -- to fight rising inflation and other challenges -- have been bearing fruit. Back in 2022, the company reported its first annual loss in about a decade. But by early last year, Amazon already was reporting quarterly gains in net income, and its outflow of cash had shifted to an inflow. In the most recent quarter, the company's net income more than tripled, and free cash flow improved to an inflow of more than $21 billion. Return on invested capital also has been on the rise over the past year.
AMZN Return on Invested Capital data by YCharts
These moves should benefit the company in better times, too. Amazon improved efficiency across its fulfillment network, for example switching to a regional model from a national model in the U.S. The shorter delivery distances are driving improvements in Amazon's "cost to serve," and the company sees potential for ongoing progress here.
So, even though Amazon stock climbed last year, the potential for gains is far from over -- and the stock could be one to excel in this bull market.
2. Carnival
Carnival (CCL -3.89%) had a difficult time of it earlier in the pandemic when sailings were halted, but the world's biggest cruise operator has since roared back to growth. Demand for cruise vacations soared, as we can see in Carnival's revenue and bookings. In the most recent quarter -- the fiscal fourth quarter -- Carnival reported record revenue, and bookings in the two weeks around Black Friday hit an all-time high for that period.
For the fiscal year that ended in November, Carnival reported record revenue of more than $21 billion and entered the new year with its best booked position ever, taking into account occupancy and price. And this has helped the company make gains in earnings, for example, reporting a narrower-than-expected U.S. GAAP net loss of $74 million for the year and positive adjusted net income of $1 million.
Investors' biggest concern about Carnival has been the company's debt levels. While ships were docked during early pandemic days, Carnival built up a wall of debt just to stay afloat (excuse the pun). But Carnival has made significant progress here, too, cutting debt by $4.6 billion from its peak, and Carnival says ongoing growth in adjusted free cash flow will help it pay down more debt over time.
Carnival's booking volumes and customer deposits, which also have reached records, are reason to be optimistic about earnings. And the company's other efforts to streamline operations and cut fuel costs add to earnings growth potential.
That's why now, as Carnival charges ahead in its recovery and growth story, is the perfect time to pick up this stock.
3. Apple
Apple (AAPL -0.90%) is a market giant thanks to leading products like the iPhone and Mac computers, but that doesn't mean the company has reached a plateau when it comes to growth. In fact, three things are set to drive earnings growth well into the future.
Image source: Getty Images.
The first is Apple's brand strength, which helps keep Apple users coming back to buy the latest iPhone or Apple Watch instead of trying a rival product. This brand strength is part of Apple's moat, or competitive advantage -- a key element that could keep this company ahead over time.
The second growth driver is Apple's services business, which in the most recent quarter reported record revenue. This is because all of those loyal Apple fans also subscribe to certain services through their devices -- from digital content to cloud storage. The enormous user base Apple has built over the years (the installed base of active devices topped 2 billion) now represents a source of recurrent revenue.
And, importantly, gross margins on services are higher than those on products -- 70% compared with 36% in the most recent quarter.
Finally, Apple still continues to gain new customers, so it hasn't yet reached a maximum when it comes to gaining market share. In the quarter, half of Mac and iPad buyers were new to those products.
Considering all of this, Apple's growth story is set to be a long one, and the new bull market may be one of the most exciting chapters -- for the company and for shareholders.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool recommends Carnival Corp. The Motley Fool has a disclosure policy.
As an enthusiast with a demonstrable depth of knowledge in financial markets and investment strategies, it's crucial to understand the concepts and evidence presented in the provided article. Let's break down the key points and explore the underlying ideas:
-
Market Recovery and Bull Market Phases:
- The article begins by referencing the recovery of markets from bearish conditions a year ago. It suggests that growth stocks started gaining traction, and investors were anticipating the confirmation of a bull market.
- Evidence: The recent record high of the S&P 500 is highlighted as confirmation that the market is indeed in a phase of optimism and growth.
-
Bull Markets vs. Bear Markets:
- The article mentions that historically, bull markets tend to last longer than bear markets, providing an extended period for portfolios to benefit.
- Evidence: Historical data and patterns are suggested as a basis for this claim.
-
Investing in Growth Stocks in a Bull Market:
- The article suggests that to maximize potential in a bull market, it's advisable to invest in growth stocks. These stocks are expected to perform well in environments of economic recovery and expansion.
- Evidence: The general performance of growth stocks during bull markets is implied, and specific stocks are recommended based on their growth potential.
-
Top Growth Stocks to Buy in 2024:
-
Amazon (AMZN):
- Highlighted as an ideal growth stock due to leadership in e-commerce, cloud computing, and significant investments in artificial intelligence (AI).
- Evidence: Amazon's recent financial performance, cost structure improvements, and strategic moves to enhance efficiency and profitability are presented as indicators of its growth potential.
-
Carnival (CCL):
- Despite initial challenges during the pandemic, Carnival is positioned as a growth stock in the cruise industry.
- Evidence: Record revenue, high bookings, debt reduction, and positive earnings are cited as evidence of Carnival's recovery and growth potential.
-
Apple (AAPL):
- Apple is recognized as a market giant with ongoing growth potential driven by brand strength, a successful services business, and the continuous acquisition of new customers.
- Evidence: Apple's brand loyalty, record revenue from services, and the expansion of its customer base are presented as factors contributing to its long-term growth story.
-
-
Acknowledgment of Risks and Disclosures:
- The article discloses the potential risks associated with each recommended stock and acknowledges the positions held by the author and The Motley Fool in Amazon and Apple.
- Evidence: The inclusion of potential risks and full disclosure aligns with ethical and transparent reporting practices.
In conclusion, the article provides a comprehensive overview of the current market sentiment, reasons to invest in growth stocks during a bull market, and specific stock recommendations supported by evidence of recent financial performance and strategic positioning.
