The bull market is coming: 2 stock split stocks that could make you rich in 2024

If you want to buy stocks in the new year, historical patterns are on your side. Since its establishment in 1971, Nasdaq composite After a year of recovery like the one we experienced in 2023, it rose an average of 19% each year. Also, as the Federal Reserve is expected to cut interest rates and begin lowering rates; Financial policythere is no reason to think that 2024 will be an exception to this long-term pattern.

One way investors can bet on a new bull market is through stock splits, stocks of companies that have recently split their shares into larger units to make more shares available to individual investors. is. While a split won’t change the fundamentals of the business, it could increase liquidity and signal that these companies are moving in the right direction.

Let’s find out why Nvidia (NVDA 0.22%) and tesla (TSLA -3.03%) Fits the bill.

Nvidia

Chipmaker Nvidia is experiencing explosive growth. Often, the stock price is out of reach for small investors who don’t have access to information. Fractional shares. To address this challenge, the company has split its stock five times since 2000, including his 4-for-1 conversion in 2021. The good news is that Nvidia’s bull run doesn’t seem to be over yet. Especially as it benefits from the growing interest in the power generation sector. Artificial intelligence (AI).

Despite soaring 244% in the past 12 months, NVIDIA stock appears to have some head left. According to Bloomberg analysts, the AI ​​industry will grow at a compound annual growth rate (CAGR) of 42% as the technology becomes more sophisticated and adapted to more use cases. It could extend to dollars. Nvidia stands to benefit due to its 80% market share in advanced chips that enable training for these applications.

As competition intensifies with rivals such as Advanced Micro Devices, the opportunity appears large enough for multiple companies to share in the action. Additionally, Nvidia’s early lead gives it a competitive edge, as more programmers are familiar with Nvidia’s hardware and are building software and servers specifically designed for its use. It has increased.

Even though net income increased more than 12 times to $9.2 billion, NVIDIA stock remains reasonably valued at just under 25 times forward earnings. This is below the Nasdaq 100 average of 28, suggesting it’s not too late for investors to bet on Nvidia’s long-term potential.

tesla

Like Nvidia, Tesla is also a rapidly growing company that relies on stock splits to manage its expanding stock price. Most recently, it included a 3-1 split in 2022. Like many automakers, Tesla faces macroeconomic challenges from high interest rates and competition. But the company’s strategy to become a mass-market carmaker remains on track.

In the short term, the EV industry is under significant pressure. With interest rates high and recent inflation weighing on consumers’ wallets, people are putting off buying new cars, forcing automakers like Tesla to cut prices to maintain market share. There is. That said, the company is using this opportunity to accelerate its mass-market strategy.

Image source: Getty Images.

CEO Elon Musk claims the company is developing a $25,000 car called the Model 2, which is expected to be unveiled this year. According to Reuters, the company is also developing a 25,000 euro ($26,838) vehicle at its Berlin factory. Lower-cost options could help Tesla offset lower margins with higher volumes, but Vertical integration efforts Lowering production costs could help this strategy, as with lithium refining.

At a price-to-earnings ratio of 68 times, Tesla stock is expensive considering the challenges it faces in the near term. However, the company remains a high-priced stock. And historically, that growing reputation has proven the naysayers wrong.

focus on the basics

Historical patterns and stock splits can give investors confidence in the market, but over the long term, fundamentals take a backseat. Nvidia and Tesla are great buys due to their dominant industry positions and potential to ride the wave of transformative technology.

But to me, Nvidia seems like the better option at this point due to its fast revenue growth and relatively low valuation.