You might well have heard by now that Rolls-Royce shares surged 221% in 2023. But which stocks do our free-site writers think might be able to fare even better in 2024?
DS Smith
What it does: DS Smith is a leading manufacturer of packaging materials, including paper and card products. It sells internationally.
By Alan Oscroft. Rolls-Royce has been a high-profile success, with aviation big in the news since the pandemic.
So I’m going to go for something completely different, something dull and boring. Is paper and packaging boring enough? It is for me.
I think 2024 could be the year when value stocks shine. And with a forward P/E of 10, I reckon DS Smith (LSE:SMDS) could be one of them. Forecasts have it dropping to 8.5 by 2026.
There’s a dividend too, with a 6.5% yield. And the analysts see that improving in the next few years.
Demand could be a bit of an issue, though. Inflation might be slowing, but there’s little sign of economic growth yet. And a depressed retail sector in 2024 could lead to weak sales for DS Smith.
Still, with earnings and cash flow forecast to grow strongly, this looks to me like a top value FTSE 100 stock that’s slipped beneath the radar.
Alan Oscroft has no position in DS Smith.
GigaCloud Technology
What it does: GigaCloud operates a B2B marketplace that connects re-sellers directly with manufacturers.
By Dr James Fox. I actually think Rolls-Royce will be one of the strongest performing stocks of 2024. However, I’m backing mid-cap tech stock GigaCloud Technology (NASDAQ:GCT) to outperform the British engineering giant.
GigaCloud currently trades at 11.4 times forward earnings, representing a 25.4% discount to the sector. Despite surging 261% over the past 12 months, it remains deeply misunderstood and underappreciated by many investors, with earnings forecasted to grow at 40% YoY.
The company’s competitive advantage lies in its ability to directly connect furniture manufacturers – often in China – with re-sellers in Europe and North America, allowing for direct-to-customer shipping while bypassing traditional methods.
It’s a really interesting business, offering reduced logistics costs versus traditional routes to market, primarily due to its scale and relationship with manufacturers.
Platforms aren’t especially hard to develop. So there’s always a risk that GigaCloud will see more competition. However, for now, it remains a highly underappreciated stock.
James Fox owns shares in GigaCloud Technology.
J.D. Wetherspoon
What it does: J.D. Wetherspoon owns a chain of pubs across the UK. It outlets are best known for low prices..
By Stephen Wright. I’m actually pretty bullish on Rolls-Royce shares in 2024. But I think J.D. Wetherspoon (LSE:JDW) has the capacity to even better.
The reason is relatively straightforward – I think interest rates are going to come down in 2024. This should help companies with heavily leveraged balance sheets.
Both Rolls-Royce and J.D. Wetherspoon fit the bill here. Both have residual debt as a result of pandemic lockdowns and travel restrictions.
The reason I’d prefer the pub chain over the engine manufacturer, though, is that I think it can withstand a recession better. And I’m expecting this to be another theme of 2024.
If inflation starts to rise off its receding levels, this could be an issue for Wetherspoon’s. But I think the stock can do better than Rolls-Royce in a 2023 that I expect to be helpful for companies with large debt expenses.
Stephen Wright does not own shares in Rolls-Royce or J.D. Wetherspoon.
Rightmove
What it does: Rightmove advertises around 90% of all homes for sale via estate agents across the UK.
By Paul Summers. As amazing as the recovery of Rolls-Royce shares has been, I suspect a repeat of 2023’s exceptional performance is unlikely because, well, it was exceptional. I’d much rather buy a stake in what I perceive to be a far higher-quality business: property portal Rightmove (LSE: RMV).
Despite ongoing concerns about competition, its site remains the primary destination for home buyers and sellers. Interestingly, a new record number put their property up for sale on Boxing Day just gone – a 26% increase on the previous record.
To be clear, I’m not expecting Rightmove to replicate Rolls-Royce’s multi-bagging ways. I reckon it will simply fare better in 2024. This is assuming we see interest rates being cut, providing a welcome boost to the housing market. And there’s a risk we won’t.
But based on earnings projections, the stock’s not been this cheap for years. And that screams ‘opportunity’ to me.
Paul Summers has no position in Rightmove
Taiwan Semiconductor Manufacturing Company
What it does: TSMC is the world’s largest semiconductor manufacturer and preferred supplier to Apple and Nvidia.
By Charlie Carman. Rolls-Royce almost stole the show last year, but it shared the stage with booming AI stocks like Nvidia.
TSMC (NYSE:TSM) is one company that I believe is yet to fully participate in the AI-fuelled growth frenzy and 2024 could be its year.
With a forward P/E ratio under 16.5, the shares look cheap compared to the sector as a whole. Moreover, anticipated revenue growth of 25% is well over double TSMC’s forecast for the wider semiconductor market.
The business has a wide economic moat. An extensive patent portfolio protecting its advanced chip-packaging technology helps to preserve its competitive advantages over rivals like Intel and Samsung.
Plus, new fabrication plants in Germany, Japan, and the US add geographic diversification to TSMC’s operations. That said, possible military conflict between China and Taiwan remains a major political risk.
Barring a Chinese invasion, conditions look ripe for strong growth in the TSMC share price this year.
Charlie Carman owns shares in Rolls-Royce and Nvidia.
