Did you know that at any given time there are literally thousands of stocks to choose from to create your perfect custom portfolio? To some people, that sounds like an exhausting proposition. However, for most of the more active investors in the market, picking stocks can be a lot of fun. It’s an opportunity to go on a treasure hunt.
But it’s just a thought experiment: What if you could only make three stock purchases in a year? Would it change anything for you? It certainly did for me. I had to limit myself to names that I would be comfortable with in the long run, just in case things didn’t work out in the short term.
Here are the three choices I made for 2024. Keep in mind that the same exercise may lead to different choices in a different year.
Coca-Cola
Yes, The Coca-Cola Company (NYSE:KO) is such a predictable stock suggestion that it’s almost cliché. I do not mind. With only a limited number of purchases within a calendar year, I opt for predictability (and income) over risky growth.
You know the company as the name behind the popular namesake cola. Sprite, Schweppes ginger ale and Barq’s root beer are also part of the soft drink family.
However, there are a few important things you may not know about The Coca-Cola Company. First of all, it’s not just carbonated drinks. Coca-Cola also owns Dasani water, Gold Peak tea, Minute Maid juices, Powerade sports drinks and Fresca, to name a few. This broad product range enables the company to meet the ever-changing needs of consumers. Being also the biggest name in the beverage sector, it has a great influence on the sales and marketing of its goods.
The second notable detail is that Coca-Cola isn’t really in the industry you would think it is in. Contrary to popular belief, Coca-Cola does very little in its own bottling these days. Most of this work is outsourced to independently operating bottling partners, allowing the company to focus on what it does best: marketing and branding. The revenue comes from the sale of flavored syrups that the bottling partners use in the production of these well-known drinks.
At first glance the difference does not seem that great. But much of the costs, headaches and risks associated with the beverage sector lie at the bottling level. In contrast, the royalty revenue the company collects is not only high-margin but also reliable.
This business model is the main reason the beverage giant was recently able to increase its dividend payout for the 62nd year in a row. It currently yields 3.3%.
JPMorgan Chase
You may already know Megabank JPMorgan Chase (NYSE:JPM) has not raised revenue expectations for the remainder of 2024, contrary to expectations. While the company beat first-quarter revenue and profit expectations, its full-year net interest income outlook is unchanged from its previous guidance of about $90 billion. The stock is now down about 10% from last month’s peak, thanks in large part to this disappointment.
What gets lost in the noise, however, is how well the company is still doing, and likely will continue to do, on other important fronts. Take investment banking as an example. Although overall dealmaking revenue declined slightly year over year, this is a somewhat volatile profit center. Meanwhile, investment banking costs rose 18% year-on-year and 20% higher than in the fourth quarter, in line with a slight global recovery following last year’s lull in M&A and IPO activity.
EY reports that while total IPOs fell 7% year over year in the first quarter, the 7% growth in total funds raised suggests this business is on the mend. In fact, as PwC Capital Markets Advisory Leader Doug Chu said in his firm’s analysis of first-quarter activity: “The first quarter of 2024 is off to a strong start – could 2024 finally see the return of a more normalized IPO market? Good.”
However, it is not just a revival of capital markets activity that makes JPMorgan shares so interesting this year. As time goes on and the world moves back from the brink of recession to a so-called soft landing, demand for banking services in general, such as lending, increases. For example, despite persistently high interest rates, the Federal Reserve reports that most banks anticipate growing demand for new loans this year compared to 2023 – once interest rates finally start to fall.
Simply put, investors are currently misreading the market, sending JPMorgan Chase stock lower. But that short-term swoon is actually a long-term opportunity.
Walt Disney
Last but not least, I would add The Walt Disney Company (NYSE: DIS) to a short list of stocks I would buy in 2024. This hasn’t been the case for a while.
Ohcould seemingly do no wrong to the entertainment and media giant before the COVID-19 pandemic, thanks to the success of several blockbusters at the box office and before the massive launch of its Disney+ streaming service in 2019. Investors were also pretty sure that Bob Iger would leave a rock-solid company in good hands when Bob Chapek took over as CEO in early 2020.
However, in early 2021, it became clear that Disney was not the company most investors thought it was. Streaming turned out to be more expensive and competitive than initially expected. The cable TV industry crumbled even more than feared.
Walt Disney’s film industry has also struggled, seemingly never being able to reproduce the success of its Avengers and Star Wars franchises, which had done so well before COVID. These and other problems became so acute that the company barely survived its recent proxy battle with activist investor Nelson Peltz, but it was a long and ugly battle nonetheless.
End result? Shares are down more than 40% from their early 2021 peak, falling back to full-year 2015 levels.
But nothing lasts forever, and most of the issues that have plagued Disney lately are finally being addressed now that Iger is back in charge as CEO. For example, he has admitted in several recent interviews that the quality of the storytelling in many of the newer films has been subpar – something that is finally being addressed. Walt Disney is also still in the process of cutting overall costs, and in particular the cost of streaming content, in search of a sustainable balance between marketability and affordability.
It’s still a work in progress, and it remains to be seen when the great ship will be able to turn itself around. However, Disney stock’s lackluster performance suggests investors think it could be a while yet.
But as Warren Buffett’s sage advice reminds us, “Be fearful when others are greedy, and be greedy when others are fearful.” There is enough hope on the horizon to believe that Walt Disney’s turnaround will take shape sooner or later.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends JPMorgan Chase and Walt Disney. The Motley Fool has a disclosure policy.
If I Could Only Buy Three Stocks in 2024, I’d Choose This One Originally published by The Motley Fool
