2 growth stocks that could crush the market in 2024

Stephen Wright has his eye on two quality growth stocks he thinks can outperform in the year to come. No AI or hype, just profits and strong prospects.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Businesswoman analyses profitability of working company with digital virtual screen

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Growth stocks did better than a lot of people expected in 2023. Rolls-Royce pulled the FTSE 100 higher and Nvidia helped the S&P 500 to a spectacular result.

The value of companies that can increase their earnings shouldn’t be underestimated. So here are two stocks that I think can generate market-beating returns in 2024.

Diploma

Diploma (LSE:DPLM) shares trade at a price-to-earnings (P/E) ratio of 39. Any stock priced at that level comes with big expectations – and that’s a risk for investors looking to buy it.

Should you invest £1,000 in Diploma Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Diploma Plc made the list?

See the 6 stocks

The trouble is, the stock has traded at a high P/E ratio for years. And while it has been coming up with the growth to justify this for some time, things have really taken off recently.

After a change of CEO in 2019, revenue has gone from £545m to £1.2bn in 2023. That’s despite a dip in 2020 due to the pandemic. 

Diploma’s business model involves acquiring distributors of industrial components and then helping them run their operations more efficiently. This means growth comes in two forms.

The first is the acquisition of the businesses and the second is the improvements the company can make to their profitability. Both of these have been firing well for the company.

I don’t see Diploma’s growth opportunities running out any time soon. That’s why I view it as a top stock to buy for 2024.

Berkshire Hathaway

Berkshire Hathaway (NYSE:BRK.B) is similar to Diploma in a number of ways. It aims to grow through a combination of acquisitions and operational efficiency.

It might seem odd to characterise a company led by one of the world’s greatest ever value investors as a growth stock. But Warren Buffett maintains that the goal is higher earnings.

One reason I’m backing Berkshire to outperform this year is the company’s balance sheet. Right now, the market is more optimistic than I am about 2024 in terms of the economy.

I think the chances of interest rate cuts and avoiding a recession are lower than most. That means I’m looking at shares in businesses that can do well in a surprise downturn.

Berkshire is known for having a huge cash pile available. And this should mean two things.

First and foremost it ought to insulate the firm against any kind of financial shocks. Second, it allows the company to seize opportunities that present themselves.

Without Charlie Munger, the company depends heavily on Buffett. While that’s a risk for investors, relying on the ‘Oracle of Omaha’ is a policy that has worked well before.

Growth stocks in 2024

I think 2023 demonstrated that betting against growth stocks is rarely a good idea. And both Diploma and Berkshire look like highly impressive companies to me.

Neither stock benefitted from any kind of AI hype last year. Just solid, quality earnings growth that I expect to continue for some time to come.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has positions in Berkshire Hathaway. The Motley Fool UK has recommended Nvidia and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

Analysts have upgraded this FTSE 100 stock to Buy. What should investors do?

Associated British Foods shares have been uninspiring for some time. But is it finally time to consider buying the FTSE…

Read more »

Man changing battery on electric bicycle
Investing Articles

Prediction: in 12 months the sizzling National Grid share price could turn £10,000 into…

It's been another solid year for the National Grid share price and the dividend yield is decent too. So why…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 185% in 3 years, why does the market love this FTSE 250 stock

Over the past three years, this stock has vastly outperformed the FTSE 250. Dr James Fox takes a closer look…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider

Exchange-traded funds (ETFs) provide a way for investors to spread risk without sacrificing the possibility of huge long-term returns.

Read more »

Happy couple showing relief at news
Investing Articles

Is the Rolls-Royce share price fast becoming a joke?

The FTSE 100 engineering titan has done brilliantly in recent years. But our writer wonders whether the Rolls-Royce share price…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

Is there a ‘best age’ to start buying shares?

Christopher Ruane weighs some possible pros and cons of waiting to start buying shares for the first time, versus starting…

Read more »

piggy bank, searching with binoculars
Investing Articles

Is it time to look again at the FTSE 250’s worst performers?

Our writer considers the prospects for two of the worst-performing shares on the FTSE 250, with falls of at least…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing For Beginners

Down over 40% in the past year, I think investors should consider these value shares

Jon Smith points out two value shares that have fallen heavily over the past year but are starting to look…

Read more »