Tuesday, January 16th, 2024

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Just five companies, all heavily involved with AI, have boosted the major averages into bull market territory.

One of those stocks, Nvidia, was up 189% in the first half alone.

Nvidia is a legendary home run, but our Weiss Ratings AI specialist, Jon Markman, has homed in on one high-rated AI stock in particular.

It’s our pick for The #1 AI Stock of 2024 and Beyond

Hello Stock Traders!

The S&P 500 is almost there. It’s just a hair away from breaking its record high of 4,796 that it set on Jan. 3, 2022. And that could signal the start of a bull market.

But it wasn’t always this rosy. In 2022, the index took a nosedive and dropped more than 20% from its peak, landing us in a bear market. Ouch. However, things started to look up last year, thanks to lower inflation and enthusiasm over emerging sectors like artificial intelligence (AI). The market is expected to keep up the momentum in 2024.

So if you have some cash lying around and you’re looking for the best time to invest, now might be it. You don’t want to miss this opportunity to grow your portfolio with stocks that will thrive in a bull market. Here are two awesome buys this month.

1. Costco: Membership, Mayhem, and Mountains of Money

Costco Wholesale (NASDAQ: COST) recently made headlines with a December announcement of a $15/share holiday bonus – their signature surprise dividend that keeps on giving. These windfalls have become a tradition, with the last one clocking in at $10 per share back in 2020. While their regular dividend is a modest 0.61%, their consistent, long-term growth coupled with these sporadic cash drops make Costco an investment worth celebrating.

Their unique “pay-to-shop” model, offering wholesale prices in exchange for an annual membership fee, has completely revamped the retail landscape. Product sales themselves? Not the real gold mine. In fiscal 2023, Costco raked in over $6 billion in profits, with membership fees fueling a whopping 73% of that pot. And with a 90% renewal rate, their future looks brighter than a warehouse brimming with fresh croissants.

Global expansion is another factor pushing their cart in the right direction. With 871 stores across 14 countries, their footprint is impressive, but far from maxed out. Six of those countries boast five or fewer Costco locations, hinting at a vast new runway for growth before they even break out their passports.

Over the past five years, their annual revenue has galloped by 59%, with operating income up a healthy 76%. But the most jaw-dropping figure is their free cash flow, which has skyrocketed a mind-boggling 231% to nearly $9 billion. This war chest suggests they have the muscle to fuel both international expansion and weather any potential economic storms.

Costco might seem a tad pricey, with a forward P/E of 43 compared to the S&P 500’s average of 22. However, their robust cash reserves, consistent growth trajectory, and highly profitable business model likely justify this premium valuation. Think of it as securing your front-row seat at the Costco growth show.

2. Amazon: The E-Commerce Empire Dominating Every Avenue

While Costco is crushing it on the physical side of retail, Amazon (NASDAQ: AMZN) is ruling the online sector. The company has the largest market shares in e-commerce in several countries, with its share at 38% in the U.S. alone. That’s more than six times the share of Walmart, which comes in second with 6% of the market.

Amazon’s dominance of online retail has also made it a leader in other industries by accident. For example, the company was behind nearly 70% of all U.S. video game purchases as of September 2023. Amazon’s enormous reach gives it the brand power and financial resources to do whatever it wants.

And what it wants is to diversify its revenue streams. Amazon is not just an online retailer. It’s also a cloud computing giant, a streaming service provider, a smart home device maker, a grocery chain owner, a pharmacy operator, and a space exploration company. And that’s not even the full list.

Amazon is constantly innovating and exploring new markets, making it one of the most versatile and resilient companies in the world. It’s no wonder that its revenue has grown 112% in the last five years, reaching $566 billion in 2023. Its operating income has also increased 145% to $35 billion in the same period.

Amazon is also an expensive option, with a forward price-to-earnings ratio of 66, three times the S&P 500 average of 22. But the company has probably justified that high price tag with its incredible revenue diversity, constant innovation, and unparalleled market position.

So there you go. Two stocks that are great buys for cash investors. They might cost a lot, but they also offer a lot of value. And who knows, maybe they’ll surprise you with some extra cash along the way.

–James

Up next: With the Fed attempting a historic soft landing for the US economy, investors rejoice as a potential market boom could be on the horizon.

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Remember the mid-90s? Ah, the days of dial-up internet, Tamagotchis, and…wait for it…a soft landing for the US economy.

Yes, it’s been almost 30 years since the Fed pulled off this masterful trick, balancing rising interest rates and inflation without crashing the stock market. Now, in 2024, they’re attempting another soft landing, and for stock market enthusiasts, the stakes are high.

Think of it like a tightrope walk. The Fed walks a fine line – raise rates too high, and the economy plummets (cue the crash-landing music). Keep them too low, and inflation runs wild, eroding your hard-earned cash like a mischievous gremlin in a savings account. But if they nail it? Well, then we’re talking fireworks over the financial district, baby!

Now, history paints two very different pictures for soft and hard landings. Remember the “dot-com bubble” and the “Great Recession”? Those darlings of economic history were born from hard landings, leaving stock markets bruised and battered. Soft landings, on the other hand, like the mid-90s beauty, saw the stock market waltz happily onwards, serenaded by sweet returns.

So, why should you care? Well, if the Fed sticks the landing this time, your portfolio could be in for a joyous jig. Think 10-20% growth, like an energetic Zumba class for your investments. Plus, the economy would remain the picture of health, which is always good news for everyone (except maybe those gremlins).

But wait, there’s a plot twist! (Isn’t there always?) A hard landing could see the market do a tango with volatility, with a 15-20% correction as its less-charming dance partner. Not exactly the moves you want in your portfolio.

So, what’s the outlook? Crystal balls are notoriously blurry, but there are some promising signs. The US economy, like a tough competitor in the gym, has been surprisingly resilient, even with higher interest rates.

And if you need another reason to be optimistic, just think about this – generative AI. This game-changer has sparked a global investment frenzy, injecting a much-needed boost into the economy like a shot of economic espresso.

Ultimately, predicting the market is like reading the mind of a particularly mischievous squirrel. It’s tricky, unpredictable, and sometimes downright frustrating.

But by understanding the stakes of a soft landing (and its less-graceful cousin, the hard landing), you can make informed decisions about your portfolio and maybe even do a little happy dance of your own when the market starts singing a sweet tune of growth.

Now, excuse me while I go and invest in some AI companies. Those little robots might just be the key to keeping the economic maching from turning into a disaster. And who knows, maybe they’ll even invent flying cars by next year. Now that’s a future I can get behind!

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