The best shares to buy now for 2024, in my opinion, are the companies primed to thrive from an improving economic outlook.
Countless businesses are being adversely affected by the current economic climate. And not all of them will survive to tell the tale. But those with robust balance sheets and a moat of competitive advantages could be some of the first to surge when investor sentiment begins to recover. And that includes companies in sectors that are out of favour today.
Finding opportunities in property
With mortgages surging, it’s no secret that property values across the UK are tumbling. And subsequently, many real estate investment trusts (REITs) have been taken down a notch.
These stocks typically trade close to the net asset value of their property portfolios. So, it’s not surprising that many have suffered double-digit blows lately. However, as a long-term investor, non-cash changes in a firm’s real estate portfolio are far less concerning than the cash flow generated by its properties.
After all, these companies usually make money by renting spaces, not selling them. And there are plenty of UK REITs that have actually seen rental income increase despite the slide in valuation. That means more money to pay down debts and boost shareholder dividends.
That’s why I’ve just added Safestore (LSE:SAFE) to my income portfolio. The self-storage market isn’t immune to disruption, as seen by a slight decrease in occupancy lately. But with price hikes offsetting this impact, rental income continues to grow. And that bodes well for the group’s existing 13-year double-digit dividend growth streak.
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Technology’s second wind?
The tech sector was arguably the hardest hit during the 2022 stock market correction. These firms enjoyed a burst of explosive growth following the pandemic that drove valuations sky-high. But with economic conditions taking a turn for the worse, the market cap of even the most promising technology companies collapsed, with some falling as much as 90%!
With most of these firms being unprofitable, such volatility is hardly surprising. But with investors swapping from the extreme of growth-at-any-cost to earnings-at-any-cost mentality, the bigger picture seems to have been missed. Earnings aren’t what matter (well, up to a point) – cash flow is key. After all, companies don’t go bankrupt because they’re unprofitable – it happens because they run out of money.
And that’s why MongoDB (NASDAQ:MDB) has caught my attention. The alternative cloud database platform powers some of the biggest companies in the world. It serves some of Britain’s leading enterprises like AstraZeneca, Vodafone, and even HMRC.
With the platform becoming so heavily engrossed in the operations of businesses and government organisations, it’s not something that can be easily taken out. And pairing that with a recurring revenue subscription model has turned it into a cash-generating machine that I think investors should consider.
Risk vs reward
Regardless of the buying opportunities investors may stumble across today, even the best shares have their risks. And while they may be capable of withstanding existing threats, new challenges can arise overnight that may compromise an investment thesis.
That’s why diversification remains crucial. Portfolio risk can never be eliminated entirely. But by spreading capital across multiple promising businesses, the impact of one failing can be offset by the success of others.
