The economy is chugging along, but investors may want to still consider positioning their portfolios in early 2024 to prepare in the event of volatility resulting from lingering macroeconomic uncertainties, said FBB Capital Partners’ Mike Bailey. “I definitely want to be diversified because I have no idea if there’s a recession coming or not,” the director of research at the firm told CNBC. “That’s why I want to make sure I’ve got some defensive [stocks] and some growth.” Bailey sees a positive setup for a host of likely 2024 winners, in particular recommending high-quality companies that are gaining market share over competitors and offering growth, beating earnings expectations and raising forward guidance. Heading Bailey’s list of picks are some of 2023’s leading technology stocks, some of them beneficiaries of Wall Street’s love affair with all things tied in to artificial intelligence. AMZN 1Y mountain Amazon shares over the last year Amazon remains Bailey’s top pick, offering a compelling valuation relative to some of its Magnificent 7 peers and a favorable growth outlook thanks to advertising, artificial intelligence and e-commerce. “You’ve got massive profits that are just about to start flowing in,” Bailey said. “To us, it looks pretty compelling, [a] pretty consistent business, and it’s trading at a discount.” Amazon won the approval of Wall Street in recent weeks , with many sell-side investment banks calling it a top pick for 2024. The company soared 81% in 2023, but analysts see an average 18% upside for the shares based on Friday’s close price and consensus price targets. Microsoft runs a close second Bailey, who cites similar AI advantages. The company should offer new growth prospects this year, even if the long-term upside from AI is difficult to quantify. The rise of weight-loss drugs known as GLP-1s shook the fast-food and beverage industries last year. Wall Street’s already begun questioning what the impact could mean for an industry reliant on more demand, although many companies have downplayed the impact or said they intend to adapt. Such concerns aren’t holding back Bailey’s bet on McDonald’s as the fast-food giant continues to top investor expectations. The stock also trades at a discount given the organic and volume growth it’s achieved. MCD 1Y mountain McDonald’s shares over the last year “To me, it feels a little overblown. For example, McDonald’s is trading way below its average in terms of valuations,” he said. “You’re already baking in some pressure if there is lower demand [as a result of] GLP-1s.” Bailey’s also found favorites in the insurance industry, notably UnitedHealth Group and Progressive . UnitedHealth shares lagged growth-oriented technology companies in 2023, finishing the year down less than 1%. But the stock trades at a cheap valuation and should offer mid- to high teens earnings growth this year that may even surpass the S & P 500. Bailey views Progressive as a “contrarian” play in financials, seeing it gaining share from competitors such as Geico and State Farm. “They’ve done a better job than peers, figuring out where the insurance cycles going and pricing on that,” he said. “That’s a pretty compelling idea for us.”
