Here Are Some of John Buckingham's Favorite Stocks for 2024

So I would certainly consider those big tech names.

Are you invested in Nvidia, the leading AI chip company?

No. We used to own it 10 years ago. It's a fine name – and the poster child of AI – but it's expensive. 

On the chip side, I'd rather be investing in the capital equipment makers – picks and shovels – because you need that equipment to produce the chips. 

For example, Lam Research Corp. is a good stock to own. It has very reasonable valuations, dividend yields too and is likely to be a beneficiary no matter who wins the AI race.

Another of your themes: "A Run on the Banks by Shareholders but Not by Depositors." Please explain.

There's an opportunity for investors to go into the banking space, but for the most part, you want to stick with quality. 

I've been through the S&L crisis and the housing bust, and I've seen that the better capitalized banks tend to take market share.

They're also able to make acquisitions during tough times, and they generally come out of a downturn stronger capitalized and stronger businesses.

JP Morgan is the perfect example of that. They're the lender of last resort: When the government has an issue with banks, they come to JP Morgan.

The stock has held up much better than the regional banks this year. I think that JP Morgan is a core holding that investors should have in the banking space. If JP Morgan goes under, we're all going to go under.

Western Alliance is a bank that's been hit very hard, but it's well run, and there's great opportunity to be buying it today at very inexpensive valuation metrics and with very rich dividend yields.

Also, PNC Financial has historically always been a well-run bank. They're going to do just fine through the difficult times that banks are facing today.

Please discuss your theme: "Shoot First and Ask Questions Later."

Some stocks have been whacked this year far harder than justified.

A lot of babies have been thrown out with the bathwater: There have been significant moves in both directions, often on news that, in years past, wouldn't have warranted such big moves.

The fact that these stocks have been battered this year makes me very optimistic about going forward.

We just bought PayPal, the payment processing company. That stock has been a horrible performer since peaking during the pandemic at over $300; today it's at $50.

Though the stock is down significantly this year, earnings are continuing to grow. P/E is 10.

We think this is [exceedingly] cheap for a company that's likely to be very viable: A lot of people will still use PayPal for the foreseeable future, and I think the company will continue to grow.

 Any other stocks applicable to this theme?

Whirlpool, the appliance-maker, recently got whacked even though their earnings were better than expected. 

It's an incredibly profitable company, trading at around seven times earnings with a big dividend yield as well.

It's sensitive to the housing market. [But] housing has held up much better than most might have envisioned, given the rise in interest rates.

There's a lot of pent-up demand for housing, and I think that Whirlpool is likely to post very strong profits and that ultimately the market should be willing to pay six or seven times earnings.

"Good Things Come in Small (and Mid) Packages" is another category you're enthused about.

Small caps offer very attractive valuations today, especially relative to their history. Further, the dividend yield is very attractive. You can build a portfolio of undervalued small cap stocks that have significant capital appreciation potential and offer income as well.

Western Alliance [noted above] is a regional bank that, like most, has been hit hard on worries about deposit flight, higher interest rates, loan demand and what regulators are going to do in terms of capital requirements going forward. 

It's been hit even though the company has continued to grow, generate substantial earnings and raise its dividend all through this turbulent period.

Another small-cap company I like is railcar manufacturer Greenbrier, trading at around 10 times estimated earnings.

Railroads have to continue to upgrade and replace railcars. So there's plenty of growth to come for Greenbrier. 

The earnings expectations aren't necessarily in the bag, but they already have orders for lots of cars. Yet the stock is trading at a very inexpensive price tag.

And finally, there's your theme, "It's a Great Big World Out There." Please elaborate.

The U.S. market has generally outperformed foreign markets over the last four or five years. But this year, foreign markets have certainly done better than the average stock in the U.S.

But we think there are still opportunities in international stocks. We invest only in companies that trade in the U.S. 

You can have exposure to foreign companies via American Depository Receipts or American Depository Shares.

When shipping overseas, DHL, the package carrier, is the better way to go versus FedEx or UPS. It's reasonably priced, and the company derives 75% of its revenue outside the Americas. 

Also, there's nothing wrong with focusing on Europe these days since it's been a laggard in terms of its economy and stock market. Opportunity is there for long-term investors.

What else do you look for in international?

You can invest in U.S. companies that derive substantial business overseas. For example, Cummins, which makes engines and power [systems]. 

Forty-two percent of their business comes from outside the U.S., and the international portion is growing nicely, up 13% in the last quarter. 

Cummins has a generous dividend and just raised it this year by 7%. That's better than the rate of inflation.

There are lots of opportunities to benefit from global growth via companies that are domiciled in the U.S.