As the year comes to a close, investors seeking stocks beyond the dominant performers of the current year are anticipating a broader array of opportunities in 2024. Aaron Dunn, Co-head of the Value Equity Team at Eaton Vance, Morgan Stanley Investment Management, expects the market to diversify, citing two pivotal factors: the Federal Reserve likely concluding its interest rate hikes and companies completing the process of “de-stocking,” paving the way for a more robust performance in the coming year.
Dunn identifies four sectors where investors may find promising growth opportunities:
1. Real EstateThe S&P 500 Real Estate ETF (XLRE), which has remained flat for the year, could see positive shifts with the potential end of the Federal Reserve’s rate-hiking cycle or a decline in rates in 2024. Dunn predicts increased demand for rental housing, benefitting companies like Invitation Homes (INVH) and MidAmerica Communities (MAA).
2. Basic MaterialsCompanies in the basic materials sector, involved in producing various materials such as chemicals and timber, have undergone the de-stocking process. Dunn highlights FMC (FMC), a developer of insecticides and herbicides for agriculture, as a stock with significant growth potential, trading at a substantial discount.
3. HealthcareHealthcare funding faced challenges in the current year due to elevated interest rates. Dunn suggests that companies providing essential tools and equipment to the healthcare sector, such as Thermo Fisher Scientific (TMO) and Zoetis (ZTS), are well-positioned for growth in 2024.4. SemiconductorsWhile Nvidia (NVDA) has been a standout performer, Dunn focuses on traditional players in the semiconductor space, particularly in memory and personal computing. Texas Instruments (TXN) stands out as a potential candidate, having experienced de-stocking in 2023.
Investors are advised to conduct thorough research and due diligence before making investment decisions, considering potential market dynamics and uncertainties.
