Ten stocks top investors are backing in 2024

British stocks endured a rocky ride in 2023. The FTSE 100 index of leading shares reached peaks in February, April and September, only to drop significantly in November before a late-year rally to hit 7,733 on the last trading day of December to record a 2.4pc rise over the year.

The rise comes as some listed British companies boomed. Aerospace business Rolls-Royce saw its share price triple in 2023, while shares in Marks & Spencer gained 114pc.

We asked investing experts for their top stock picks for 2024.

Alex Campbell, of trading app Freetrade

Pfizer

It was a pandemic darling but Pfizer’s shares took a beating in 2023: they lost 44pc last year after revenues from the company’s Covid vaccine and treatment fell. 

We’re not all getting our annual vaccine booster any more and this has meant Pfizer’s revenues and earnings figures look anaemic.

But it’s worth looking beyond the pandemic to a deep and growing pipeline of treatments on the market now or coming to the market soon. 

There’s also Pfizer’s acquisition of the genetic medicine specialist Seagen, which is worth an estimated $10bn (£8bn) in revenues by 2030.

Non-Covid-related revenues are expected to grow at a percentage in the high single digits while up to $45bn in revenue from new drug launches and acquisitions is expected. 

That would allow the company to exceed the revenues made during the pandemic.

With the share price about half the levels of 18 months ago and a steadily growing dividend that equates to a current yield of nearly 6pc, this giant of the pharmaceutical industry is worth a look for 2024.

Burberry

Closer to home, it may be worth considering an icon of British fashion in the form of Burberry.

The luxury goods market struggled in 2023 as cost-of-living pressures meant fewer people were buying the higher-end fashions produced by Burberry. 

There was also been a decline in foreign demand as Chinese tourism, one of the big drivers of demand for European luxury brands, remained subdued throughout the year. 

The “China reopening” narrative that was expected to shape global markets in 2023 never materialised.

But change is afoot. Tourist numbers are gently increasing and global economies seem to be turning a corner. If inflation stays low, consumers may be feeling a bit more flush with cash and willing to splurge on that pricey brolly or trench coat.

I wouldn’t rule Burberry out for an opportunistic takeover either. A private equity fund or luxury goods conglomerate may see the chance to go shopping for bargains. The shares trade at just 12 to 13 times earnings, which may be too good a deal to give up.  

Mamta Valechha, share analyst at Quilter

Adidas  

In 2023 Adidas focused on reviving its brand, cleaning up inventory, improving relationships with retailers, steadying the ship in China and finding a solution to the Yeezy merchandise it had to unload following the end of its relationship with the controversial rapper Kanye West.

We have seen growth in the brand – the Samba is officially the shoe of the year and Chinese influencers and sportspeople are willing to work with Adidas again.

Yeezy was a big risk going into 2023. The first two tranches were sold immediately and we expect Adidas to sell the remainder in 2024. 

Finally, Lionel Messi’s move to Inter Miami has driven a huge brand boost in the US for football merchandise.

The key question is whether this brand jump can be sustained in 2024. We think it can. 

Orders for the first half of the year have already been placed by retailers and orders for the second half are being placed now, so the company’s management has great visibility and remains very bullish.

JD Sports

We believe JD’s positioning as a global brand and sportswear retailer and its international opportunity are under-appreciated by the market.

JD remains the most important global strategic partner for top sportswear brands including Nike and Adidas, which gives it access to superior product allocations and exclusive products, while it is also directly benefiting from sports brand consolidation among wholesale partners. 

The retailer also has a well-invested store estate, complemented by strong digital capabilities.

Improving profitability in international markets and acquired businesses also presents a material tailwind to earnings. Finally, its strong cash position gives JD the opportunity to expand through mergers and acquisitions, where it has a strong record of creating value.

Ben Barringer, technology analyst at Quilter

Microsoft

Microsoft is a one-stop shop for everything a business needs in technology: infrastructure, operating systems, software, search, advertising, gaming, AI – the list goes on. 

The fact that AI can be put into all its products gives Microsoft a huge value runway, which in turn gives it a considerable pricing runway and makes it an interesting stock for investors to consider.

Amazon

There are two sides to Amazon: Amazon Web Services and the retail business. AWS growth appears to have bottomed and is expected to improve in the near future, while the retail business continues to accelerate.

Amazon invested heavily in both businesses during the pandemic and is now harvesting that investment. 

Ultimately it comes down to capacity utilisation, and Amazon’s improved cloud data centre and ecommerce fulfilment centre utilisation will result in better profitability.

Dan Coatsworth, investment analyst at AJ Bell

Journeo

Investing in smaller companies is not for everyone but, for those willing to consider them, Journeo stands out. It provides technology systems for bus and rail operators and real-time information for passengers.

For example, the company says its digital wing mirrors improve visibility for bus drivers, eradicate blind spots and reduce the risk of accidents.

News from the company has been positive over the past year with strong trading, and acquisitions have opened doors to new opportunities. 

Analysts expect pre-tax profits to reach £3.9m this year and £4.4m next – quite a breakthrough compared with £900,000 in 2022.

At 266p Journeo’s shares trade at about 11.5 times next year’s forecast earnings. That low figure puts the stock into “value” investing territory even after the shares nearly doubled in 2023.

Whitbread

Whitbread’s Premier Inn chain is a reliable place for travellers to get a room for the night without breaking the bank. Business people are also happy to stay in its hotels because they are clean and of decent enough quality.

The more people stay in its hotels, the more opportunities Whitbread has to make ancillary revenue through food and drink as well as push up room rates.

A solid performance in Britain gives the group a stronger footing to fund expansion in Germany. It also gives management the confidence to improve facilities in Britain, such as installing new beds and upgrading rooms to “Premium Plus”, for which it can charge more.

The fact that Whitbread can also afford to grow dividends and buy back shares implies that it has confidence in the future.

Premier Inn markets itself as a place to get a good night’s sleep and that’s exactly what investors might expect from owning shares in Whitbread. 

However, they must not think of it as a risk-free proposition. An economic downturn in 2024 could cause headwinds for the chain, although Whitbread’s management should know how to navigate such conditions.

Victoria Scholar, head of investment at Interactive Investor

Barratt Developments

Housebuilders have faced a lengthy list of headwinds over the past year including cost inflation, squeezed mortgage affordability and waning demand. 

However, falls in inflation and expectations that the Bank of England will cut rates in 2024 could provide a more favourable outlook for the housebuilders, including Barratt Developments, in the year ahead.

Barratt’s shares have bounced off their lows since October and momentum appears to be gathering. The share price is still around 40pc below its pre-pandemic highs and a price-to-earnings ratio of around 10 is roughly in the middle ground for the sector.

Even after a dividend cut last year it still yields an attractive 6.4pc. This could be particularly enticing amid the shaky economic backdrop. Indeed, net cash of £1.1bn leaves Barratt in a healthy position to weather any immediate storms.

It has stepped back from investment in new land and opted for a “highly selective” approach. 

At the same time, a continued focus on cost control, the targeted use of incentives and sales to the private rental and social housing sectors are all likely to become dominant themes in the shorter term.

Matt Britzman, share analyst at Hargreaves Lansdown

Lloyds Banking Group

British banks certainly aren’t feeling the love right now. Having seen interest income boom over the past year or so as interest rates have risen, things appear to have peaked. 

Add a cost of living crisis that casts doubt over whether borrowers will be able to repay loans and investors are rightly cautious.

Even so, there are several tailwinds we see playing out that we don’t think markets have fully accounted for. 

Low-yielding mortgages written over the past few years are about to be switched to new ones at higher rates. Loan defaults have stayed lower than many thought; Lloyds has seen no real rise in arrears. It boasts one of the higher-quality mortgage portfolios.

There’s a 6.9pc forecast yield on offer and the bank’s strong balance sheet offers potential for further share buybacks too.

With uncertainty in the air it may seem counterintuitive to pick a bank for 2024. But sometimes gloomy outlooks present an opportunity. Britain’s major banks are trading at discounted valuations – we think that offers an attractive entry point.