Top 3 Growth Stocks I may buy in 2024 – for big capital gains? (as a Singapore Investor)

After Monday’s article on Shopee (Sea Ltd) stock.

I received this great comment on the Telegram Chat:

@Financial_Horse any articles on which boom stock to buy? like ARM or cyber security? nobody is interested in sh*t stock like shopee

Ouch.

But like with all good comments.

They get you thinking.

We cover a lot of fundamental driven, value style stocks on Financial Horse.

Given how things are playing out, there is a chance we see another dot com style “bubble” in 2024, driven by Fed rate cuts and a weak global economy (driving international capital into US markets).

For investors with high risk appetite, who want to try and ride this wave (and hopefully get out in time).

What are the top growth stocks to buy in 2024?

Big Caveat – these are momentum plays, which can hurt on the downside once it reverses

Before we dive in, a word of caution.

The stocks on this list are not your normal REITs or dividend stocks paying a 7% sustainable dividend yield, where you buy and hold for 10 years.

The stocks on this list are highly momentum driven, and very volatile.

You do have to realise that if a stock can climb 50% in 2 months.

It can do the opposite on the way down as well.

Careful risk management is required for these growth stocks

If there is a lesson the 2021 bubble in COVID tech stocks taught us.

It’s that the skill set required to make money in a bubble.

And the skill set required to hold onto that money.

Are completely different.

If you want to dabble in momentum driven growth stocks, it pays to think about when to sell.

And the way I see it, is that unless you think you are owning the next Google, you want to sell when:

1. Sell into euphoria – when the market thinks a stock can only go up and investor are throwing a 10x multiple on revenues 5 years in the future, you want to take money off the table
2. Sell when you’ve made life-changing money – If you’ve made enough to buy a condo and a car and settle down happily with your family (or whatever life goal you have), that may be the time to take money off the table and derisk

But who am I kidding.

Timing the exact top when the market gets over-exuberant?

Nobody gets that right – not even the investing greats.

So don’t say I didn’t warn you.

Top 3 Growth Stocks I may buy in 2024? (as a Singapore Investor)

As I was coming up with the outline for this article.

It occurred to me that the current market rally can be broadly split into 3 different categories.

And for each, there is that one poster boy stock.

NVIDIA – poster boy for the AI rally

The first of course – is NVIDIA, poster boy for the AI rally.

Here’s the chart for NVIDIA, which is up a whopping 47% this year alone (only 1.5 months in).

With a chart like that, literally every institutional manager is forced to chase the stock, or risk underperforming the index.

Is AI a bubble?

The thing with all bubbles, is that they always start out with a good fundamental story, with real world impact on earnings.

Think about the dot com bubble in 2000, or the railway bubble in the 1900s.

Yes, the internet companies in 1999 did boast soaring revenues, and internet did indeed go on to change the world.

But once valuations started getting disconnected from reality, and investors were pricing internet stocks on the basis of everyone in the world owning 2 computers and applying a 10x multiple on that.

That’s when things started getting out of hand.

So the difference between a fundamental driven stock rally, and a bubble, is one of valuations.

I’ve extracted the valuations for NVIDIA below.

At 36.5x P/E, things aren’t really crazy by bubble standards yet.

Which implies that with the right market conditions (say easier monetary policy in 2024, a weak global economy driving global capital into US).

The AI rally can continue to run.

But be very careful with the reversal – when will AI top?

But the question with NVIDIA, and the AI stocks, is how do you know when this will top?

I was watching with great interest to see what Stanley Druckenmiller’s Duquesne Fund would do (he was one of the first fund managers to go big into NVIDIA, and his judgment is usually spot on).

What he did in Q4, was to sell 30% of his NVIDIA shares (but still holding 9% of his portfolio in NVIDIA).

And buy NVIDIA call options instead – to retain upside exposure if the rally continues.

Ie. Derisk the stock investment, and gain upside exposure via call options instead (capping downside if the move reverses).

Alternatives to NVIDIA? To get exposure to the AI bubble?

What if you didn’t want to buy NVIDIA?

What if you wanted to buy the smaller AI names, in the hopes that as the AI rally broadens these other names will benefit?

I suppose AMD (and maybe Intel) is the poor man’s version of NVIDIA.

If demand for AI chips is as big as it’s made out to be – it’s unlikely that NVIDIA is going to be the only supplier for chips.

As things stand, about 9% of my portfolio today is AMD, so I have the same problem above on when to take profit.

You could also make an argument that if this AI story is real.

Memory names like Micron or SK Hynix will benefit as well – given the large amount of High Bandwidth Memory (HBM) required for AI computation.

Or you could also get exposure to the software names like Microsoft, Adobe, maybe Palantir?

Or… Just buy NVIDIA the AI growth stock poster-boy?

But sometimes it pays not too be too smart about these things.

NVIDIA is the poster boy for the AI rally.

If the AI rally continues, NVIDIA will continue to go up.

If the AI rally ends, it doesn’t really matter what “AI” stock you buy – they’re all going down.

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FAANG / the rest of the Magnificant Seven

In the 1970s, gold was the hedge to inflation.

In the 2020s, it turns out FAANG is the hedge to inflation:

Remember how I said all good rallies are fundamental driven (at least at the start).

The reason why investors are crowding into FAANG is that they have indeed been delivering pretty solid financial results, despite the higher interest rates, higher costs, and slower global economy.

Hence investors crowding into FAANG as an inflation / recession hedge.

But… insiders have been dumping FAANG of late

That said – insiders have been dumping FAANG of late.

Here’s Jeff Bezos, having sold $4 billion in Amazon stock the past week.

The last time Jeff Bezos sold so much Amazon stock?

In 2021 – and we all know what happened after that.

Interestingly – Stanley Druckenmiller himself sold his entire Google and Amazon position in Q4.

So it does look like the “smart money” is turning much more cautious on the FAANG at these prices.

Bitcoin / Ethereum

The final one of course – Bitcoin, poster boy for the crypto rally.

What exactly is the use case / purpose of Bitcoin?

I used to think that crypto may have a legitimate real world use case.

But it’s been more than a decade now, and nobody seems to have discovered what this use case may be.

So the simplest conclusion prevails.

That the use case for crypto (for now) is as a store of value / vehicle for speculation (depending on how nicely you want to put it).

Bitcoin is a hyper leveraged version of the NASDAQ?

Back in 2021/2022 there was a lot of talk about Bitcoin being an inflation hedge.

Well, that has been clearly debunked now.

It turns out, what Bitcoin actually is, is a way to bet on global liquidity / speculation.

It is the NASDAQ on steroids.

Here’s the performance of Bitcoin against a 3x leveraged NASDAQ play.

You can see how Bitcoin is even more volatile than a 3x leveraged NASDAQ – both on the upside and downside.

It is the ultimate vehicle of speculation.

What this means, is that if the cycle is going down you don’t want to hold Bitcoin.

But when the cycle is going up, Bitcoin is one of the best ways to bet on that rally.

Alternatives to Bitcoin?

Just like with AI.

Ethereum is the “poor man’s” version of Bitcoin.

Now that Bitcoin spot ETFs have been approved, I suppose it is inevitable that we will eventually get an Ethereum spot ETF.

Which could be a big catalyst for Ethereum’s price, similar to the Bitcoin ETF play.

If you wanted even more leveraged exposure.

You can go into the smaller alt coins.

The logic is similar to AI – if you think the rally will broaden, then the smaller cap names will eventually benefit as well, potentially offering greater upside.

For obvious reasons, if you go into the smaller coins with lower liquidity – while you stand to make a lot more if you are right, you also stand to lose a lot more if you are wrong.

So I leave investors to decide what is appropriate for their risk appetite.

Closing Thoughts: These are not your grandfather’s dividend stocks

Full disclosure that I hold positions in AMD, Micron, Intel, FAANG, and Bitcoin/Ethereum (full portfolio shared on FH Premium).

I cannot stress enough that the stocks on this list are not your usual dividend stocks / REITs.

These are volatile, high risk momentum plays.

The higher they go up in the short term, the more they are going to come down on the other side.

And as the saying goes – if you want to play with fire, you must be prepared to get burned.

With these stocks I don’t think identifying them is the hard part.

The hard part is knowing when to sell.

You don’t want to sell too early and sit out on big gains.

But sell too late and you may give back all of your big gains too.

How long can the growth stock rally continue?

For the record I don’t know for certain if the current rally will continue.

What we have today is somewhat reminiscent of the 2000 dynamic where you have a weak global economy driving global capital to the US, and a Fed that may be forced to cut interest rates in 2024.

This could fuel the rally short term.

But some parts are different too.

Unlike the past 20 years, China’s economy is very weak this cycle, and will stay that way for a while.

That’s a big engine of growth for the world removed.

And for the first time in 40 years – inflation is a problem, which places constraints on the ability of policy makers to ease monetary policy.

While AI is driving a productivity boom and new gold rush.

Same same, but different.

Whatever the case, this article is written on 16 Feb 2024 and will not be updated going forward.

I will share my updated views on these growth stocks, and when I sell (or buy more), on FH Premium.

This article was written on 16 Feb 2024 and will not be updated going forward.

For my latest up to date views on markets, my personal REIT and Stock Watchlist, and my personal portfolio positioning, do subscribe for FH Premium.

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