Friday, February 23, 2024
Dividend Stocks

The Top 25 Stocks to Buy Immediately According to AI: February 2024 Edition

In December 2023, I published the list of the top 500 stocks to buy for 2024, ranked by AI. My AI system, MarketMasterAI, had honed in on higher-growth blue chips like Mastercard (NYSE:MA) and payments processor Automatic Data Processing (NASDAQ:ADP) to ride for the next six months. Meanwhile, lower-quality firms like struggling EV maker Rivian (NASDAQ:RIVN) and crypto exchange Coinbase (NASDAQ:COIN) ended up at the bottom.

So far, the results have been excellent.

Since January, the average 1.8% rise in A+ stocks has almost quadrupled the average 0.46% return. Returns among the top 10 picks exceeded 5%.

The system has also been exceptional at picking stocks to avoid. Since MarketMasterAI made its predictions, the 10 worst F-rated stocks have dropped an average of 13%.

Of course, the system occasionally misses moonshot stocks. Shares of F-rated Super Micro Computer (NASDAQ:SMCI), a firm favored by Louis Navellier (subscription required), have more than doubled so far this year. But MarketMasterAI seeks to do better on average, downgrading firms like SMCI in favor of more consistent picks. In fact, nine out of 10 top MarketMasterAI picks have gone up this year, compared to just 52% of the top 500 stocks!

The best part is that MarketMasterAI keeps adjusting as new data becomes available. More than half of S&P 500 companies have now reported fourth-quarter earnings, and the unusual number of earnings beats is pushing the system into riskier growth stocks.

Pivoting into Growth

On average, the latest group of top stocks are faster-growing than before. Analysts expect these top picks to grow revenues by 8.3% this year (compared to the market average of 5.7%) and earnings by 14.6% (vs. the market average of 6.9%). That’s a significant acceleration from December’s picks, which saw revenue and EPS growth of 6.9% and 9.6%, respectively.

However, three major changes stand out.

Firstly, energy stocks are now replaced by insurance firms. Oilfield service companies Halliburton (NYSE:HAL) and Hess (NYSE:HES) drop out of the top 25 on downward revisions to global oil output estimates. High-quality Schlumberger (NYSE:SLB) barely hangs on at number 23.

Second, many healthcare stocks also leave the top 25 this month after enormous January run-ups. Formerly top-ranked Eli Lilly (NYSE:LLY) has returned 12% since January on optimism over its weight-loss and diabetes drugs. Its expected upside consequently drops to 6.5%, earning the firm an average C grade. Firms like Regeneron Pharmaceuticals (NASDAQ:REGN) and Amgen (NASDAQ:AMGN) have seen similar moves, and thus drop out of the top rankings.

Finally, several large industrial and consumer-facing firms move up the ranks to replace healthcare picks. These companies tend to rise steadily during mid-stage economic recoveries as demand improves.

Together, that means the average beta of the top-25 portfolio actually drops from 0.81 to 0.77, a remarkable reduction in volatility given a pivot into growth stocks.

The Top 25 Stocks to Buy Immediately, According to AI

These findings are summarized in the table below. Of particular note is No. 1 ranked Marsh & McLennan Companies (NYSE:MMC) and No. 2 Arthur J. Gallagher (NYSE:AJG). Both of these firms rose 33% or more in 2021, a period of strong economic recovery, and analysts expect 2024 to bring similar conditions.

The inclusions of single-family REITs Equity LifeStyle Properties (NYSE:ELS) and American Homes 4 Rent (NYSE:AMH) are also notable. These firms typically only perform well during economic expansions, and so their presence is a highly bullish sign of the economy.

Finally, no Magnificent Seven stock makes this month’s list again. Shares of these high-growth tech stocks have moved so high so quickly that MarketMaster AI believes further growth is unlikely.

Rank Ticker Company Name Expected 6-Month Return Grade Business
1 MMC Marsh & McLennan Companies Inc 11.8% A+ Insurance Brokers
2 AJG Arthur J. Gallagher & Co. 11.7% A+ Insurance Brokers
3 RBA RB Global Inc 11.6% A+ Diversified Support Services
4 MNST Monster Beverage Corp 11.5% A+ Soft Drinks & Non-alcoholic Beverages
5 FDS Factset Research Systems Inc 11.4% A+ Financial Exchanges & Data
6 EA Electronic Arts Inc 11.4% A+ Interactive Home Entertainment
7 ELS Equity LifeStyle Properties Inc 11.4% A+ Single-Family Residential REITs
8 RYAN Ryan Specialty Holdings Inc 11.3% A+ Insurance Brokers
9 ODFL Old Dominion Freight Line Inc 11.3% A+ Cargo Ground Transportation
10 PG Procter & Gamble Co 11.2% A+ Household Products
11 CASY Caseys General Stores Inc 11.1% A+ Food Retail
12 MA Mastercard Inc 11.0% A+ Transaction & Payment Processing Services
13 HEI-A HEICO Corp 11.0% A+ Aerospace & Defense
14 CSGP CoStar Group Inc 10.8% A+ Research & Consulting Services
15 NOC Northrop Grumman Corp 10.8% A+ Aerospace & Defense
16 ROL Rollins Inc 10.8% A+ Environmental & Facilities Services
17 AMH American Homes 4 Rent 10.8% A+ Single-Family Residential REITs
18 BSY Bentley Systems Inc 10.8% A+ Application Software
19 KO Coca-Cola Co 10.7% A+ Soft Drinks & Non-alcoholic Beverages
20 VRSK Verisk Analytics Inc 10.6% A+ Research & Consulting Services
21 V Visa Inc 10.6% A+ Transaction & Payment Processing Services
22 BF-B Brown-Forman Corp 10.6% A+ Distillers & Vintners
23 SLB Schlumberger NV 10.5% A+ Oil & Gas Equipment & Services
24 MOH Molina Healthcare Inc 10.5% A+ Managed Health Care
25 APD Air Products and Chemicals Inc 10.5% A+ Industrial Gases

10 Stocks to Sell

MarketMasterAI also updates its lowest-ranked companies. This month, many surging stocks land on the bottom 10. AppLovin (NASDAQ:APP) has seen shares rise 220% over the past year, while Super Micro is up over 600% once you include January’s rise. History tells us that these firms tend to pull back after a major run-up, and so the AI system warns investors to take profits.

Meanwhile, healthcare firms Illumina (NASDAQ:ILMN) and Sarepta Therapeutics (NASDAQ:SRPT) have struggled to gain much traction, causing MarketMasterAI to grade them as sells. If history is right, these 10 stocks are ones investors should tactically avoid for the next six months.

Rank Ticker Company Name Expected 6-Month Return Grade Business
491 GitLab Inc 2.6% F Systems Software
493 Procore Technologies Inc 2.6% F Application Software
495 Illumina Inc 1.9% F Life Sciences Tools & Services
497 AppLovin Corp 0.8% F Application Software
499 Super Micro Computer Inc -0.6% F Technology Hardware, Storage & Peripherals

On the date of publication, Thomas Yeung held no positions in any stock mentioned in this piece. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Tom Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the highest-tier subscription at InvestorPlace. He is the former editor of Tom Yeung’s Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad.

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