Why US Blue-Chip Stocks Are A Must-Consider For Investors In 2024
Aries Yuangga, Wakil Penasihat Berjangka
Summary
The Fed's recent pause in rate hikes, most recently in mid-December 2023, and its indication of a series of rate cuts in 2024, offers the US stock market a window of opportunity to grow and accelerate faster. As we step into 2024, Indonesian investors may consider diversification strategies into the dynamic realm of US equities, particularly the "Magnificent 7" - Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, cumulatively representing approximately 20.2% of total US stock market capitalization.
These US titans have significantly outperformed the S&P 500 and offer compelling reasons for Indonesian investors to consider a diversification strategy. Wall Street Journal even made a bold claim that in the current financial market, “It’s the Magnificent Seven’s Market. The Other Stocks Are Just Living in It” when explaining how these stocks have jumped ~75% in 2023 (year-to-date)—and now have made up about ~30% of the S&P 500.
US Market: The Magnificent 7
The cumulative 75+% gain of the "Magnificent 7" stocks in the US have demonstrated remarkable growth as follows (YTD):
Alphabet: Up 53.33% (YTD)
Amazon: Up 79.20% (YTD)
Apple: Up 57.46% (YTD)
Meta Platforms: Up 180.87% (YTD)
Microsoft: Up 55.80% (YTD)
Nvidia: Up 246.52% (YTD)
Tesla: Up 137.95% (YTD)
These stocks have significantly outperformed the S&P 500, a key indicator of the U.S. stock market, which also has shown remarkable growth of 24.69% YTD.
Outlook: The Magnificent 7
Driven by the exceptional performance of the Magnificent 7 stocks throughout 2023, analysts predicted that these companies will continue their bullish trends further into 2024.
1. Alphabet (GOOGL)
2. Amazon (AMZN)
JPMorgan Outlook: JPMorgan predicts a 29% upside for Amazon, with a price target of $190.
The Motley Fool's Analysis: Amazon has an implied upside of 56%, with a potential target of $230 per share.
InvestorPlace's View: Amazon is expected to outperform in 2024 due to its expansion and innovation in various sectors.
3. Apple (AAPL)
Wedbush Outlook: Wedbush predicts Apple could reach a $4 trillion valuation by the end of 2024, with a price target of $250, implying a 30% upside.
4. Meta Platforms (META)
WeInvestSmart Outlook: The stock price for META in 2024 is predicted to average around $374, with a range between $345 and $403
5. Microsoft (MSFT)
Investor's Business Daily: Microsoft is seen as a top large-cap pick for 2024, with Oppenheimer setting a price target of $410.
7. Tesla (TSLA)
Finbold's Analysis: Wall Street analysts have varied predictions for Tesla, ranging from a high of $380 to a low of $85. The average 12-month price target is around $245.96.
The Motley Fool's View: There's speculation about Tesla potentially hitting $500 in 2024.
Why Diversify to US Stocks?
Macroeconomics: The Fed's recent pause in rate hikes, most recently in mid-December 2023, and its indication of a series of rate cuts in 2024, offers the US stock market a window of opportunity to grow and accelerate faster.
Diversification: Investing in US stocks provides geographical diversification, reducing country-specific risks.
Higher Growth Potential: The Magnificent 7 have shown higher growth rates, suggesting more significant potential for capital appreciation.
Innovation and Market Leadership: These companies are at the forefront of technological innovation and market leadership, driving future growth.
Stability and Resilience: US blue-chip stocks offer stability and have shown resilience in various market conditions.
AI and Technology: The Growth Drivers for 2024
The key driver for the Magnificent 7's future growth is their investment in AI and cutting-edge technology. According to the Motley Fool, generative AI is expected to grow at a CAGR of 42%, reaching over $1.3 trillion by 2032. This growth is underpinned by:
Alphabet: Leading in digital advertising and cloud AI tools.
Amazon: Implementing AI across its e-commerce and cloud infrastructure.
Apple: Continuously integrating AI into its devices and services.
Meta Platforms: Using AI for content delivery and user interaction on its platforms.
Microsoft: Expanding AI applications in cloud computing and enterprise solutions.
Nvidia: Pioneering in AI hardware and software solutions.
Tesla: Advancing in AI for self-driving technology and energy solutions.
Comparative Valuation and Growth Potential
From a valuation standpoint, these stocks are positioned attractively for growth-oriented investors. For instance, Amazon is trading at just two times forward sales, while Alphabet and Meta Platforms are at 5 and 6 times, respectively. This valuation and their AI-driven growth potential make them an attractive proposition for Indonesian investors seeking higher returns and diversification.
Conclusion: A Strategic Diversification Strategy
The Magnificent 7, with their strong focus on AI and technology, offer a unique blend of innovation, growth, and market leadership. For Indonesian investors, diversifying into these stocks could mean tapping into higher growth potential and technological advancements, leading to a more diversified and resilient portfolio.
*Disclaimer:
This analysis is based on historical price movements and technical indicators. Investors are advised to conduct their own research and consult with financial advisors. The stock market is inherently volatile, and past performance does not guarantee future results. This information is provided for general information purposes only. Consider your investment objectives, financial resources and other relevant circumstances carefully before investing. This is not an invitation or an offer to invest, nor is it financial advice or a recommendation to buy or sell any investment.
