The fresh 2024 is on a trajectory to see the reversal of the Fed’s interest rate hiking cycle. Fed fund futures keep pricing in this likelihood, now seeing a 64% probability of the first rate cut in March, followed by 100% rate cut probabilities throughout the year.
At the same time, recession indicators are still active. New York Fed places US recession probability by treasury spread at 51.8%. The rate cuts could prevent or lessen the recession blow depending on the inflation trajectory.
In turn, companies are heading to benefit from reduced borrowing costs, easier capital access, and boosted stock valuations. In a feedback loop, cheaper interest rates boost consumer spending, further fortifying the companies’ bottom lines.
In this macroenvironment, investors typically pick proven blue chip stocks to hedge against risk. The “Magnificent Seven” have already absorbed over $11 trillion in capital, making them much more challenging to move. These lesser blue chips pose solid diversification stakes during 2024.
Visa, Inc.
As blue chip-based risk dampening goes, Visa Inc (NYSE:V)is the top contender. Sharing a global payment duopoly with Mastercard Inc (NYSE:MA), Visa increased its net revenue by 11% in 2023, to $8.6 billion in the fiscal fourth quarter. Year-over-year, V shares gained 24% vs MA’s 21.5%.
Per the latest Q4 2023 earnings report, the global payment processor also racked double-digit growth in key areas.
Visa’s total cross-border payment volume increased by 20%, having to process 10% more transactions year-over-year. Visa’s profitability increased by 18% annually, at $8.28 GAAP (Generally Accepted Accounting Principles) earnings per share (EPS).
Visa shareholders can also count on the company’s generous stock repurchase program, mitigating value dilution in a potential recession scenario. During 2023 (twelve months ending September), Visa repurchased $12.4 billion worth of V shares at an average price of $222.98.
Taking these factors into account, 31 analyst inputs pulled by Nasdaq place V stock as a “strong buy.” The average V price target is $281.94 vs the current $258. The high estimate is $305 vs the low forecast of $243 per share.
Advanced Micro Devices, Inc.
What is MasterCard to Visa, Advanced Micro Devices Inc (NASDAQ:AMD) is to Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC). While Nvidia took the investing spotlight by transitioning to data center supplier for generative AI demand, AMD keeps ramping up its competitive edge.
As of Q3 2023, AMD increased its market share in the desktop PC market by 5.8% year-over-year. Likewise, more people bought AMD’s mobile and server offerings, at 3.8% and 5.8% respectively.
Mercury Research places AMD desktop unit share at 19.2%. Across all segments, AMD’s revenue share is holding at 16.9%. In the latest Q3 2023 financial report, AMD’s revenue is up by 4% year-over-year, with net income delivering $299 million compared to $66 million from a year-ago quarter.
Relying on its competitive pricing, AMD revenue for the quarter increased by 21%, mainly owing to the 4th gen AMD EPYC CPUs. The Ryzen series is still the show’s star, delivering 42% more year-over-year revenue in the mobile processor arena.
AMD’s EPYC processors are also gaining ground in cloud computing adoption across AWS (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT) Azure, and Oracle (NYSE:ORCL). More competitively priced, AMD is known to be a value-oriented company, making it favorable for consumers in a recession scenario.
Based on these factors, 32 analyst inputs pulled by Nasdaq place AMD stock as a “strong buy.” The average AMD price target is $133.19 vs the current $139. The high estimate is $170, while the low forecast is $98 per share.
Thermo Fisher Scientific, Inc.
Thermo Fisher Scientific Inc (NYSE:TMO) missed the sales forecast in October, causing the shares to drop. However, Thermo Fisher rallied by 7.3% in the last three months, and for a good reason. The company supplies science instruments, diagnostic tools, laboratory consumables, and analytics software in drug development.
In other words, Thermo Fisher is to the biotech sector what semiconductor foundries like TSMC are to AMD or Nvidia. The global biotech market is projected to be worth $210.71 billion by 2030 at a compound annual growth rate (CAGR) of 12.8%.
Although TMO generated 1% lower year-over-year revenue in Q3 at $10.57 billion, its GAAP diluted earnings per share (EPS) was 17% higher from a year-ago quarter, at $4.42 per share. Moreover, the company’s profitability, expressed by operating margin, increased by 160 points (1.6%), showing strong positioning for long-term growth.
Moving forward, Thermo Fishers expects to reach $42.7 billion in revenue for 2023, with an adjusted EPS of $21.50. After the October slump, investors took that as a buy-in opportunity.
Based on 20 analyst inputs pulled by Nasdaq, TMO stock is a “strong buy.” The average TMO price target is $544.89 vs the current $542.90. The high estimate is $640 vs the low forecast of $475 per share.
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