If I Could Buy Only 3 Stocks in 2024, I Would Pick These

Investors can own as many stocks as they want whenever they want, and thankfully so. After all, more stocks mean more diversification. In this vein, The Motley Fool suggests holding at least 25 different stocks at any given time.

Sometimes, though, it's eye-opening to think about which stocks you would buy if you could only buy a small number of them. Such an exercise forces you to identify the market's most promising risk-versus-reward scenarios.

With that as the backdrop, here's a rundown of the three names I would buy this year if I only had room and money to add another three tickers to my portfolio. (These picks, of course, only make sense for you if they improve your portfolio's diversification rather than making it less balanced.)

1. MercadoLibre

MercadoLibre (NASDAQ:MELI) is often referred to as the Amazon of Latin America. It's not an unfair comparison, but it is an incomplete one.

MercadoLibre is also akin to eBay, Shopify, and PayPal. Its wide lineup of tools has helped the company become South America's premier name in brick-and-mortar and e-commerce technology. The company facilitated nearly $41 billion in payments in the first quarter of this year while also serving as the middleman for $11.4 billion worth of sales of goods and services. Its subsequent revenue of $4.3 billion during the quarter was up 36% year over year, driving a 71% improvement in net income.

And this is still just the beginning. In many ways, South America is now where North America was roughly 20 years ago, when high-speed internet was still relatively new and smartphones were still only an idea. In the same way that Amazon was in the right place at the right time with the right business model, MercadoLibre is positioned to capitalize on the region's brewing mobile-technology boom.

And it is booming. Market researcher GSMA says 75 million people in South America became mobile internet users just within the past five years, while Canalys reports the region's smartphone shipments surged 26% year over year in the first quarter following the fourth quarter's growth of 20%.

Even so, only 65% of the continent's population currently uses a wireless broadband-capable smartphone. The rest are coming around, though. GSMA believes South America's mobile internet penetration rate will grow to 72% by 2030, with most of those connections likely to be ultra-high-speed 5G by that point.

Because e-commerce grows in step with consumers' growing ability to be online, Americas Market Intelligence is looking for Latin America's e-commerce market to grow 24% this year, then by another 21% next year, and then match that pace again in 2026.

MercadoLibre is arguably better positioned than any other name to capitalize on this growth.

2. Alphabet

Few investors would deny that Google parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is still a force to be reckoned with. But plenty of people also seem to presume its highest-growth glory days are in the past. The search engine industry is fully matured, after all, and crowded with credible competition like Microsoft's artificial intelligence powered Bing.

If you don't think Alphabet has any growth engines left to rev, however, think again. Its cloud computing venture is an example. While still only a fraction of the size of Amazon's and Microsoft's cloud businesses, this segment still produced revenue growth of 28% during the first quarter of the year.

Better yet, Google Cloud is now consistently and meaningfully profitable, generating $900 million worth of operating profits in the three-month stretch ending in March. Mordor Intelligence expects the worldwide cloud computing market will grow at an annualized pace of more than 16% through 2029, so Alphabet's cloud segment holds tremendous profit promise.

Ratings agency Nielsen says the company's YouTube service is more watched within the United States than conventional streaming services like Netflix or Walt Disney's Hulu and Disney+. YouTube's top line improved 21% year over year in first quarter, as Alphabet continues to figure out how to make it a destination platform within the highly fragmented and often-unprofitable streaming space.

Google Search's advertising business might not be as stagnant as some suspect, too. Its ad revenue grew more than 14% during the first quarter of the year, helped by the search engine's sustained reach. GlobalStats says Google still handles about 90% of the world's web searches, as it has for well over a decade.

So Alphabet looks as strong as it's ever been. The fact that shares are rallying despite plenty of well-voiced worries should tell you everything you need to know about what investors see for its foreseeable future.

3. Bank of America

I would round out my limited number of stock picks for 2024 with a new position in Bank of America (NYSE:BAC).

It's not an easy name to get exciting about owning right now. The stock has underperformed since early 2022, dragged down by the economic malaise caused by sky-high inflation. Although high interest rates generally widen banks' profit margins, the subsequent trade-offs of that dynamic are diminished demand for loans as well as a greater number of loan defaults and delinquencies.

BofA's provision for loan losses grew to $1.3 billion in the first quarter, while net interest income slipped 3% to $14 billion, dragging per-share profits down from $0.94 in the first quarter of last year to $0.83 this time around. Other business lines like corporate banking and investment management are also running into headwinds.

Largely lost in all the noise, however, is that nothing about the banking industry's current challenges is new. This is a highly (and predictably) cyclical business tethered to an equally predictably cyclical economy.

We do not know exactly when inflation will finally abate or when the global economy will perk up again. We do know, however, we want to be positioned in BofA before it becomes clear that this recovery is happening. Like most stocks, this one tends to move predictively rather than reactively.

In the meantime, you're plugging into a ticker that's paying a healthy, reliable dividend. Although you can certainly find stocks with a bigger dividend yield than Bank of America's current forward-looking yield of a little more than 2.4%, this big bank is protecting its business and balance sheet in a way that ensures it will be able to continue funding its dividend payout as well as raise it.

Its annualized dividend payment of $0.96 per share is less than one-third of this year's expected per-share earnings of $3.25, and even relatively less than next year's estimate of $3.59. That's a nice cushion for anyone seeking dependable investment income.

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*Stock Advisor returns as of June 24, 2024

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, Bank of America, MercadoLibre, Microsoft, Netflix, PayPal, Shopify, and Walt Disney. The Motley Fool recommends eBay and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, short July 2024 $52.50 calls on eBay, and short June 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.