3 Stocks That Can Surge on Potential Rate Cuts in 2024

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The tightening of monetary policies has helped curb inflation to some extent. At the same time, global GDP growth has decelerated, and that’s a key concern for policymakers. Goldman Sachs (NYSE:GS) is already projecting two interest rate cuts next year. I would not be surprised if the policymakers are more aggressive in pursuing expansionary policies towards the end of 2024.

In general, interest rate cuts result in a weaker dollar as the amount of liquidity in the financial and economic system increases. That translates into a rally for riskier asset classes, with part of the excess liquidity diverted toward speculative activity.

This article focuses on stocks from three asset classes likely to benefit from potential rate cuts next year. These asset classes include gold, oil & gas and cryptocurrencies. If I had a portfolio of these three stocks (with equal allocation), I would bet on 40% to 50% total returns.

Let’s discuss the reasons to be bullish on these stocks to buy.

Newmont Corporation (NEM)

Newmont logo on a mobile phone screen

Source: Piotr Swat/Shutterstock

The World Gold Council believes gold is poised for new all-time highs next year. A key reason is potential rate cuts, and I believe that gold mining stocks will rally. Newmont Corporation (NYSE:NEM) stock looks attractively valued after trending lower this year. I would not be surprised with a 30% to 40% rally from current levels if gold makes new highs.

I like the fact that Newmont has an investment-grade balance sheet with a robust liquidity buffer of $6.2 billion. If gold trends higher, free cash flows will swell and translate into robust dividend growth.

At the same time, Newmont is positioned for aggressive organic and acquisition-driven growth. With the successful completion of the acquisition of Newcrest Mining, the company has added gold and significant copper reserves. Newmont is, therefore, positioned for a strong 2024 and is among the top stocks to buy to benefit from interest rate cuts.

Occidental Petroleum (OXY)

Person holding cellphone with logo of American company Occidental Petroleum Corp. (OXY) on screen in front of website. Focus on phone display. Unmodified photo.

Source: T. Schneider / Shutterstock.com

Economic slowdown concerns have translated into a correction in crude prices. As a result, some of the best oil & gas stocks have trended lower. I see this as a good opportunity to accumulate fundamentally strong names like Occidental Petroleum (NYSE:OXY).

With the possibility of rate cuts, there are two reasons to be bullish on oil. First, lower interest rates imply a weaker dollar. That triggers a rally in asset classes like commodities and energy. Further, rate cuts will boost investment and consumption spending. As growth gains traction, oil is likely to trend higher. I, therefore, believe OXY stock could rally from oversold levels in the coming year.

In recent news, Occidental acquired privately owned CrownRock for $12 billion. The acquisition will result in immediate free cash flow accretion with $1 billion FCF expected in the first year. With a potential upside in crude, the FCF is likely to be higher.

I must add here that for Q3 2023, Occidental reported free cash flow of $1.7 billion. Clearly, the annualized FCF potential will be robust in 2024, implying higher dividends and a ramp-up in share repurchases.

Riot Platforms (RIOT)

In this photo illustration, the Riot Platforms (RIOT) logo is displayed on a smartphone screen.

Source: rafapress / Shutterstock.com

There are already multiple reasons to be bullish on Bitcoin (BTC-USD) for 2024. The major ones include halving and the potential introduction of Bitcoin spot ETF. I believe the possibility of multiple rate cuts is another reason to be bullish on Bitcoin. With lower interest rates and a potentially weaker dollar, risky asset classes find favor. That is good news for cryptocurrency stocks. Riot Platforms (NASDAQ:RIOT) is one name that seems poised for a meaningful rally.

I believe Riot is the best pick among Bitcoin miners for two reasons. First, the company has a strong balance sheet with zero debt and a cash buffer (including digital assets) of $599 million.

Further, Riot is pursuing aggressive Bitcoin mining capacity expansion. By the end of the year, it expects mining capacity at 12.4 EH/s. Capacity is expected to increase to 38.1 EH/s by the end of 2025. By more than tripling capacity, the company will be positioned for stellar growth. In a scenario where Bitcoin touches new all-time highs, I would expect RIOT stock to deliver 2x or 3x returns.

On the date of publication, Faisal Humayun 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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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