There are many reasons why I might not be able to invest as much as I hope to next year. There might be plenty of shares in the FTSE to buy, but I might not have much money. Or I might have too much exposure to the stock market and need to save cash instead. Whatever the reason, if I could only pick one stock to buy, I think I know what it would be.
Good momentum
The company is Greggs (LSE:GRG). The company is in the FTSE 250 and went public back in 1984. Over the past year, the share price is up by a modest 6%.
One of the reasons why I’d pick this stock is due to the strong financial performance over this year. Take the Q3 trading update as an example.
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Like-for-like sales for the quarter through to the end of September were up 20.8% versus 2022. This is a large jump, especially when we factor in the growth trajectory over the past few years. To be able to post such a healthy beat in figures despite 2022 also being a strong year is very impressive.
2023 should finish off with between 135 and 145 net store openings. This highlights that while some businesses are pulling back from physical locations, Greggs is pushing forward.
Well positioned for next year
Another factor to consider is the outlook for 2024. Let’s say that things get worse in the UK and we all have to tighten our belts a little. I think that Greggs will do well out of this, with people switching from more expensive bakers and coffee shops to go to Greggs instead.
On the other hand, let’s say next year marks a financial recovery for the economy. In that case, I’d still expect Greggs to perform strongly. It’s well placed with new stores to capture new customers who suddenly feel more comfortable in spending more on food-to-go.
Of course, a risk is that customers flip during good times and choose to go to more expensive options. But even with this, I feel Greggs is in a strong position whatever happens here in the UK next year.
Growth based on the long term
With a price-to-earnings ratio of 20.73, Greggs stock is more expensive than the FTSE 250 average. It might well be the case that I could find a cheaper alternative to consider buying.
However, like other growth stocks, I’d be buying Greggs shares for performance in 2024 and beyond. I expect profits to continue to grow (as they have done in previous years). On that basis, I’m not too worried about the share price in relation to current earnings. Rather, when I consider the potential increase in profits down the line, I think the stock is a sensible purchase now anyway.
I hope to be able to buy multiple stocks next year, to further diversify my portfolio. Yet if I had to just pick one right now, I’d buy Greggs stock. I’m going to purchase the stock for my own portfolio before year-end.
