This year, 33% of Americans are considering purchasing stocks as part of their investments. These key findings come from a GOBankingRates November 2023 survey with a sample size of 1,039 Americans. Of those 33% surveyed, buying stocks appealed to 42% of respondents between the ages of 25 to 34.
Which stocks should Americans watch and buy for their investment portfolios in 2024? Let’s find out which types of stocks are worth the investment.
Small-cap stocks are the stocks of companies which have a worth between $300 million and $2 billion. Though they are considered to be riskier compared to mid-cap stocks, there’s potential for high returns when investing in this asset class.
Ayako Yoshioka, CFA and senior portfolio consultant at Wealth Enhancement Group, said having exposure to small-caps can benefit an investor’s portfolio, especially as interest rates are heading back down and the U.S. economy avoids a recession.
“Over the last several years, small-cap companies have been able to improve profit margins, yet valuations remain below the historical average,” said Yoshioka, who also recommends leaning into quality.
Some examples of active small-cap stocks may be found on Yahoo! Finance’s curated stock watch list. These include the likes of companies such as JetBlue, ZIM Integrated Shipping Services and FIGS.
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How do you know you’ve found quality stocks worth investing in? According to Yoshioka, these stocks belong to companies with solid balance sheets. They generate growing excess free cash flow, usually with sustainable revenue growth.
“Typically, these companies have strong business models; some have recurring revenues, and others have leadership positions within their industries,” said Yoshioka. “Many quality companies exhibit many of these characteristics and can perform relatively well, whether in a strong bull market or in a market correction.”
A few examples of companies with quality stocks include, but are not limited to, blue chips like Amazon, Apple and Microsoft.
Stocks in Other Regions
Is it worth it to consider buying stocks in non-US companies? Yes. Priyanka Agnihotri, portfolio manager at Brown Advisory, recommends looking at other regions, like Europe, where companies are better dispersed throughout the index.
One UK company Agnihotri likes is a pest control company called Rentokil.
According to Agnihotri, Rentokil has been able to hold margins and free cash flows during the COVID-19 pandemic and through rate hikes. They also acquired Terminix, which expanded their market in the US.
“We feel they are a resilient business that will hold up in many different economic environments, with a huge opportunity to improve margins,” said Agnihotri.
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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.