Three Best Growth Stocks For 2024

Forbes

As we move into 2024, it is clear that the market and the world in general is changing quickly. The ability to adapt and to change with the times is a necessity. How does that happen in the investing world? Doing very careful research into stocks, exchange-traded funds and other investment vehicles for growing income in 2024 and beyond.  Rob Isbitts, a senior contributor for Forbes and founder of ETFyourself.com, joins ‘Forbes Talks’ to discuss the three best growth stocks for 2024.

Transcript

00:00 Hi, everyone. I'm Rosemary Miller here with Rob Itspitz, the founder of ETFyourself.com,

00:10 here to tell us about the three best growth stocks for 2024. Thank you so much for joining

00:15 me today, Rob. Sure, sure. Great to be here. And it is funny, people heard that introduction.

00:22 They say, OK, ETFyourself.com must be one of those ETF geeks and guilty. But remember,

00:31 every ETF that somebody analyzes has a group of individual stocks in it if it's an equity

00:38 ETF. And obviously, a big part of my background as a mutual fund manager was in the equity

00:44 space. So, yeah, we went for three different ETFs here. And look, we're talking about growth.

00:53 And so, I mean, I've been a macro strategist as long as I can remember, probably going

01:00 back 30 years. And so, you know, with the caveat that my macro view for this year, next

01:09 year is, let's say, a little more sanguine, not through the roof bullish. But that doesn't

01:18 matter to somebody who's trying to find growth stocks for long term purposes. And so, you

01:26 know, none of this is personal advice, of course. But I picked out three that I thought,

01:31 OK, these are not just stocks. These are businesses. These are franchises. They're going to have

01:39 their ups and downs because as a famous investor, value investor, Benjamin Graham famously said,

01:49 the stock market in the short term is a voting machine. In the long term, it's a weighing

01:55 machine. And I think these all may weigh out longer term. So we'll start with BlackRock.

02:01 And for those who are familiar with the ETF business, you can probably fill in the words

02:09 for me. BlackRock are the kings of the ETF business. They had a tremendous business before

02:20 that. But they really, their iShares brand is almost like we say, Band-Aids instead of

02:29 what it really is, which is an adhesive bandage. Well, for ETFs, I'm sure there are a lot of

02:34 investors, maybe millions of them that say, oh, well, I just use iShares. And what they

02:39 really mean is they invest in ETFs. So when you get to that point and you've got a market

02:46 cap of $110Bn, so certainly they're not going anywhere. They've been very hesitant to cut

02:53 their stock price to split it, similar to Warren Buffett and Berkshire Hathaway. So

03:01 they're putting their stock in the 700s per share. It is not cheap and not outrageously

03:08 expensive at 21 times trailing earnings at the time we wrote the article. And this is

03:15 only a 35-year-old business. And I just feel like they have such a, again, kind of a Buffett

03:28 quote, wide moat. They have such a wide moat in the ETF business. There are a small number,

03:35 about five or six firms in the ETF world that dominate the assets. And among the dominators,

03:42 BlackRock is the dominator of the dominators. And they've got over $9T in AUM. And so I

03:52 think that that's the story there. We've got a couple more.

03:56 Yes, we do have a couple more, two more.

03:59 Great. Okay, great. So let's turn to Salesforce, which really one of those businesses that

04:08 in the last dot-com bubble, Salesforce was just getting started. The company started

04:19 to open up their doors in 1999. They are a software as a service business. A lot of it

04:29 is really based on their flagship CRM, Customer Relationship Management software. So a confirmed

04:38 leader. They're not technically part of the Magnificent Seven, as we call them, but maybe

04:44 just outside. And they are one of the 30 stocks in my favorite market indicator, the Dow Jones

04:52 Industrial Average. 30 stocks in the Dow. And Salesforce is the only one that's never

04:58 paid a dividend. And the fact that even the Dow committee would allow them in there tells

05:04 you something about the quality of this business, because the Dow historically has been dividend

05:10 paying stocks. So there's no dividend. If you look at trailing P.E., it's going to be

05:16 somewhere in the 90s. So that's not really the way to look at this one. These are growth

05:21 companies. And while the stock did move up quite a bit last year with the tech sector,

05:32 if you were thinking on a longer term time horizon, I would say at least five years.

05:39 Salesforce, again, is one of those not going to go anywhere kind of companies, should continue

05:43 to grow, has the ability to grow by acquisition and in a high interest rate environment. The

05:50 longer we stick around with that, and I think it could be a little bit. Companies that can

05:55 self-fund because they have that kind of cash flow. I mean, that's kind of common to all

06:00 three of these. They don't have to worry that they are maturing old debt and now they have

06:07 to issue more debt just to stay alive at a much higher rate, which is going to destroy

06:13 a lot of smaller companies. Not these three. And speaking of three, the third one is Nike.

06:20 I still remember when I was a much younger person being in a store. I think I was shopping

06:27 for Adidas or Puma. And I remember the salesperson said to me, oh, have you seen these Nikes?

06:33 They're going to knock the other guys off the block. Well, never were truer words said.

06:39 Right. So, look, I mean, it's another Dow component. Again, another skinny yielder, because

06:48 that's kind of not what we're looking for in growth stocks. And, you know, I mean, they've

06:56 been Nike since 1971. There's a great movie about Phil Knight and the influence they had

07:02 with Michael Jordan and the Air Jordans. I'm trying to remember the name of the movie,

07:08 but it kind of tells the story. And, you know, today, Nike, I think it suffers from very

07:14 high expectations. The stock has really been crushed on earnings a couple of times the

07:20 last year. But, you know, again, the ability to do what big growth companies can do to

07:27 grow, whether it's acquisition, quashing competition. And let's face it, like all these

07:35 companies, pure innovators, pure innovators. And in the case of Nike, very much a trendsetter

07:43 in the retail world. And so it makes the top three.

07:48 So what key factors should investors keep in mind when researching and considering growth

07:52 stocks for their portfolios? Well, that is a direct result of what your

08:01 investment time horizon is. I'm not a investment advisor, registered investment advisor anymore.

08:07 I was for 27 years, though. Sold my practice a few years ago to focus on research. And

08:12 so I've sat in that chair. And the one thing that, as they say, you know, you can take

08:18 the boy out of fiduciary, you can't take the fiduciary out of the boy. And so I would say

08:25 to anybody who's looking for growth stocks, say first, ask yourself why. Is it for immediate

08:30 gain? Are you looking for the pop? Well, in that case, use trading strategies. If you're

08:35 looking for growth companies, focus on the growth. Yes, the valuation is important, but

08:41 sometimes you just don't have a place to go because they're all overvalued. And in large

08:46 cap growth companies, that's kind of where we are. So and then, look, I mean, find good

08:54 resources. Don't just listen to what I or anyone else has to say. Go and start to learn

09:02 about some some of the key factors and focus on sustainable growth, not grew very quickly

09:10 last year, period. And also in your selection process for those

09:15 stocks, how important was diversification in your selection process?

09:20 Well, we're talking about a portfolio of three. So really, as far as I went was to not find

09:29 any two companies that were really in the same space. So you've got one in tech, you've

09:35 got one in the financial space, but not in the banking business. BlackRock is not really

09:42 a bank, they're an investment manager. And in the case of Nike, you know, it's in the

09:48 consumer space. So I think that's sort of an introduction to an introduction of diversification

09:58 with those three. And I guess the last thing I would say is, look, whether it's growth

10:04 investing or not, I'm still a fan of the Dow. Not all the companies have the fastest growth

10:12 rates, but it's 30 stocks that are, you know, very established companies. And the more you

10:19 learn about those types of companies, the more you start to learn about what is important

10:24 in that word I used before, which is your earnings and profit and ultimately what investors

10:32 reward, which is the sustainability, the ability to just keep doing it year in, year out, regardless

10:39 of whether the stock price is flipping up and down at this moment.

10:43 Well, thank you so much for joining me today, Rob. This has been incredibly insightful.

10:50 Thank you very much. Thanks for having me.

10:52 Yeah.

10:53 Thanks, Rob.

10:54 Thanks, Rob.

10:55 Thanks, Rob.

10:56 Thanks, Rob.

10:57 Thanks, Rob.

10:58 Thanks, Rob.

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