Schaeffer's Top Stock Picks for '25

8 Trading Lessons to Take From Our 2024 Stock Picks

Taiwan Semiconductor stock was our best-performing pick this year

Managing Editor
Dec 24, 2024 at 9:59 AM
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Subscribers to Chart of the Week received this commentary on Sunday, December 22.

If you’re procrastinating on investing goals and resolutions for 2025, allow our Top Stock Picks of 2024 to lend a hand. Schaeffer’s 12 picks for the last year encompassed a wide range; retail, semiconductor, biotech, value, growth, cyclical, and more are represented. Because of that breadth, we can draw some broad market conclusions that offer some important trading lessons to take into 2025.

2024 Stock Picks Performance

Let Your Winners Run

The most important takeaway from the table below is that nine of the 12 picks for 2024 are in the black for the year, with seven of the nine boasting gains of 20% or more. Four of those seven got stronger as the year went on. If you had taken your chips off the table for Taiwan Semiconductor Mfg Co Ltd (NASDAQ:TSM), DoorDash Inc (NASDAQ:DASH), Cloudflare Inc (NYSE:NET), or Cintas Corp (NASDAQ:CTAS) after outsized gains in the first quarter, you would have missed out on even more gains.

It’s Never Over

NET, Dropbox Inc (NASDAQ:DBX), and Intuit Inc (NASDAQ:INTU) are all using outsized gains in the fourth quarter to move above breakeven for 2024. After two quarters relatively flat, all Samsara needed was one breakout quarter to post solid gains for the year. Even Unity Software Inc (NYSE:U), one of the year’s worst performers, pared its steeper losses after a stellar third quarter.

Tech Is Not Always Your Friend

Tech stocks are not the surefire bet many seem to think. While names like TSM and Samsara Inc (NASDAQ:IOT) were notable winners, U and UiPath Inc (NYSE:PATH) lagged far behind. It’s a reminder that fundamentals and the sector matter; you can’t just paint tech with a broad brush and expect gains to suddenly sprout. Semiconductors and video game software are very apart in their broad market impact, just look at the year-to-date performances of TSM and U.

Semiconductors Are a Powerhouse

TSM deserves its flowers. Despite battling persistent geopolitical headwinds with China and now grappling with the impact of Trump tariffs in 2025, the chip stock carved out a channel of higher highs and closed below its ascending 100-day moving average just four times in 2024. Recent consolidation around $200 and below the Oct. 17 record high of $212.60 is a plot point to watch heading into 2025, because this stock – and most semiconductors -- look like beasts for many years to come.

TSM Stock Chart

Sentiment Matters

Back in September, Gilead Sciences Inc (NASDAQ:GILD) was flagged for breaking above a psychological trendline while overdue for bull notes. Sure enough, after a post-earnings gap of 6.8% in early November, seven brokerages hiked their price targets, fanning the flames of GILD’s gains. Keeping an eye on Wall Street sentiment should be a fundamental tenet of any investors’ thesis.

It’s a Long Year

Of the 12 stocks, with 48 quarters between them all, not a single name turned in a perfect year, and not a single name was a four-quarter loser. It goes to show that it's never as good as it feels, and it's never as bad as it seems. CTAS was a steady performer all year but suffered a post-earnings drawdown of 10.6% earlier this month and is now in the red for the fourth quarter. Thanks to a 15.8% post-earnings pop in October, the worst-performing pick, Walgreens Boots Alliance Inc (NASDAQ:WBA), is hanging on to a fourth-quarter gain.

Options Tell All

Reading options trading tea leaves can help stay ahead of the curve. WBA is up off the mat, sporting a 5.4% quarterly gain and has added 16% off its Nov. 21 record lows at $8.08. The stock currently sports a 50-day call/put volume ratio of 3.53 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 100th percentile of readings from the past year. On the other side of the coin, Samsara stock, the worst-performing of the picks in the fourth quarter, has a 50-day put/call volume ratio of 1.04 that ranks in the 88th percentile.

Finishing Strong

Despite the whipsaw price action from November to December in the broader market, eight of the 12 picks are poised to finish the fourth quarter in the black. Factoring in a Q3 that saw a similar outperformance, and stocks really came to life in the second half of 2024. That’s not to say that there will be a smooth ramp from 2024 to 2025, but it’s an important caveat to consider if you’re discouraged by a Santa Claus rally yet to materialize.

 
 

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