My Top 5 Stocks to Kick Off 2024

Do these promising stocks belong in your portfolio? I own all five.

Yesterday we took some time to explore my top five startup investments to kick off 2024 at Bottom Line Investing.

Now it’s time to narrow our focus on the stock side of the BLI watchlist. Here are five top stocks I think are worthy of consideration heading into the new year:

My top 5 stocks to watch in 2024

  • SoFi Technologies (NASDAQ: SOFI): After watching the share price of my favorite fintech (and single largest personal position) more than double in 2023, I was beginning to fear I’d never again have the chance to talk about SoFi Technologies under $10 per share. But earlier this week we received a blessing in disguise in the form of a downgrade from Keefe, Bruyette, & Woods analyst Mike Perito.

    Mr. Perito lowered his rating on SoFi to “underperform” from “market perform” (essentially to “sell” from “hold”), and reduced his per-share price target by a buck to $6.50 (shares closed yesterday at $8.22). He argued in part that SoFi could be vulnerable to revenue and earnings headwinds over the next several quarters, especially as U.S. Federal Reserve officials are expected to lower the central bank’s federal funds rate at least three times in the coming year.

    Incidentally, I wrote an article at The Fool several months ago explaining how SoFi is poised to win regardless of whether rates are rising or falling. SoFi CEO Anthony Noto even pointed out during their first-quarter 2023 conference call that — thanks to its superior cost structure and national bank charter — as interest rates finally begin to decline the company should be able to “hold rates much longer and higher than [its] competitors and really gain even more market share.”

    In any case, I still think SoFi looks increasingly unstoppable as it fulfils Noto’s goal of becoming a top-10 U.S. financial institution. Management has also guided for SoFi to achieve its first-ever GAAP profit when it releases fourth-quarter results later this month. I'm happy to use this opportunity to add to my position.

  • Lemonade (NYSE: LMND): I’ve urged investors to begin building their positions in Lemonade for the better part of the past year, and was ecstatic in November when the mobile-centric insurance technology company roared higher after posting significant progress to that end with its own Q3 report.

    Lemonade is also similarly marching toward sustained profitability — only on a longer timeline than SoFi. With the caveat that its path to real profits won’t be a straight line, management recently told investors they now expect Lemonade to turn cash-flow positive by late 2025 — a full two years earlier than their previous goal — and “with hundreds of millions in unrestricted cash in the bank.”

    I’ll be watching closely, of course, for Lemonade’s gross loss ratio ex-CAT (excluding catastrophe events) to remain at or below the company’s target of 75%. It should have an easier time achieving that goal with the help of a recent 51% rate increase approval for its car insurance in California (where roughly half its total car book of business resides).

  • StoneCo (NASDAQ: STNE): This Buffett-backed Brazilian Fintech has taken investors on quite a ride since going public at $24 per share in 2018; shares rallied to above $92 in early 2021, plummeted to just above $4 in late 2022, then closed this week around $17.

    But many of the issues that plagued StoneCo over the past couple of years are now fading in the rear-view mirror. StoneCo is now on pace to achieve its first full-year profit after two straight years of losses, helped by a sustained influx of hundreds of thousands of Brazilian micro, small, and medium-sized (MSMB) business clients seeking to leverage its leading payments solutions and omnichannel commerce platform.

    It also appears StoneCo is primed to accelerate its momentum. Two weeks ago I pointed out that StoneCo had just announced a new $467.5 million revolving credit facility with the U.S. government, the proceeds from which it will use to help MSMB clients scale through installment sales comprise around 80% of all e-commerce transactions in the country. If I’m right, there’s little reason its stock can’t extend recent its upswing for the foreseeable future.

  • Boston Omaha (NYSE: BOC): Boston Omaha’s presence on this list should be equally unsurprising; last week I mused that the financial holding company and so-called mini-Berkshire is flying under the radar as it continues to quietly build its empire. Its recent moves include a regional fiber network acquisition in November under its Boston Omaha Broadband (BOB) fiber internet segment, acquiring the remaining stake it didn’t already own in a small asset-management firm (24th Street Asset Management) last May, and an impending valuation bump for its 22.9% stake in former SPAC merger target Sky Harbour Group (SKYH) (shares of which have nearly tripled in price since the end of September).

    Boston Omaha remains a difficult stock to accurately value today; per-share book value is essentially useless given accounting quirks surrounding its various dealings and depreciation schedules for its hard assets like billboards.

    But I stand by my previous assertion that its Co-Chairmen and Co-CEOs Alex Rozek and Adam Peterson are two of the most talented capital allocators I’ve ever had the pleasure of personally meeting. In time, I think the market will realize how badly it’s undervaluing Boston Omaha stock, and its share price will jump accordingly.

  • Gitlab (NASDAQ: GTLB): Finally, leading development, security, and operations (DevSecOps) platform Gitlab is near and dear to my heart as a former software engineer. It’s also the largest company in this list with a market cap standing just under $9 billion as of this writing — arguably a mid-cap stock given steadily rising enterprise values within tech in recent years.

    But GitLab remains in its earliest growth stages, chasing what management believes is an annual market worth $40 billion and growing. According to Gartner, by 2026 around 75% of enterprises will shift to unified DevSecOps platforms like Gitlab as opposed to multiple disparate tools, more than triple last year’s percentage.

    But wait, you ask: Isn’t Gitlab competing in a crowded space with other DevSecOp behemoths like Github, which Microsoft acquired for $7.5 billion in 2018?

    Well, yes and no. Github only competes with Gitlab on around 20% of its contracts. And Gitlab’s win rates are relatively consistent regardless of whether Github is present. Once Gitlab wins new business, its solutions are incredibly sticky as well, as evidenced by its dollar-based net retention rate (DNBRR) hovering consistently above 120% (it was 128% last quarter).

The Bottom Line

I’m looking forward to keeping track of these businesses’ progress as they release their next respective quarterly updates in the coming weeks and months.

While I’m obviously rooting for them to succeed, I’ll also be the first to admit it if my established thesis for any one of them goes off the rails.

Finally, keep your eyes on your inbox in the coming weeks for some exciting news involving the direction of this newsletter and new features coming to the Bottom Line Investing site. I can’t wait to share more on what we’ve been up to and what we’re planning to help you grow your bottom line.

Wishing you a prosperous 2024,