ProPicks rebalances in January: What to buy, what to sell now

2023 closed as a solid year for stock markets worldwide as bets that the Fed will start lowering interest rates as soon as early 2024 prompted investors back to risk assets after a more than forgettable 2022.

But despite the seemingly solid bull run, analysts rightly argue that 2023 was a year for stock pickers, with a handful of companies beating the market by a hefty margin and carrying a good chunk of the benchmark gains as many others underperformed.

In fact, a whopping 72% of the S&P 500’s components failed to beat their benchmark index during the year, while the remaining 28% absolutely crushed the market with once-in-a-lifetime gains.

Against this backdrop, investors faced similar luck with their portfolios: they either crushed the market or - most likely - underperformed the benchmark indexes simply by holding on to the wrong stocks.

That’s where our flagship AI-powered stock-picking tool, ProPicks, can prove a game-changer for 2024.

Using state-of-the-art AI resources, ProPicks picks the best stocks available in the market, granting top-tier performance for InvestingPro users with full access to the tool.

Strategies are then rebalanced at the beginning of each month, adding new stocks that are likely to outperform going forward and removing the ones that have already passed their prime. Source: ProPicks

For the second month since its debut, all of our five strategies that are rebalanced monthly beat their benchmark indexes by a solid margin, making the yearly and compounded 10-year performance of the strategies an even bigger landslide in favor of ProPicks.

Here’s the December performance of all the strategies, followed by their full-year returns and their compounded 10-year performance:

• Beat the S&P 500: December - 7.3%; FY23 - 47.8%; 10Y - 979.3%
• Dominate the Dow: December - 5.2%; FY23 - 28.1%; 10Y - 617.3%
• Tech Titans: December - 13.3%; FY23 - 28.9%; 10Y - 1,381%
• Top Value Stocks: December - 5.9%; FY23 - 54.7%; 10Y - 867.5%
• Mid-Cap Movers: December - 8.6%; FY23 - 40.3%; 10Y - 647.3%

(*Best of Buffett strategy is rebalanced quarterly and, thus, only compared to the benchmark in that same period).

In order to keep up the excellent performance, the strategies have been rebalanced again at the beginning of January. Let’s take a look at two stocks that were added by the strategy and one that was dropped.

InvestingPro users can see all the January updates here.

Not yet a Pro user? Subscribe here and start outperforming the market immediately.

Join now for up to 50% off for a limited time only as part of our New Year promo!

* Readers of this article can enjoy an exclusive 10% discount on our yearly plan with the code JANREB1 and a similar 10% discount on the by-yearly Pro+ plan by using the coupon code JANREB2 at checkout.

2 ProPicks Buys for January

Stock 1: Lennar Corp

• Strategy: Top Value Stocks
• InvestingPro Upside Potential: 35.2%

As real state stocks steal the show on the back of the perspective of lowering interest rates, Lennar Corporation (NYSE:LEN) has been added by our Top Value Stocks strategy as one of the top picks to ride the trend.

On top of the positive macro perspective after two difficult years, the Miami, Florida-based homebuilder has all the fundamental strengths to keep on outperforming.

The company demonstrates a high return on invested capital, maintains a favorable cash-to-debt ratio on its balance sheet, and anticipates sustained dividend payments due to robust earnings.

It also holds a ‘great’ financial performance, according to InvestingPro, and a robust upside potential of 35.2% over the next 12 months. Source: InvestingPro

Like this pick? InvestingPro users can see the 30+ new picks for this month along with all the full strategies just by subscribing here.

Stock 2: DocuSign

• Strategy: Tech Titans
• InvestingPro Upside Potential: 23.8%

As tech stocks keep leading the pack in the face of a more dovish macro environment, savvy investors begin to search for stocks that have strong balance sheets but haven’t yet fully ridden the risk-on train to overbought levels.

That’s precisely the case with DocuSign (NASDAQ:DOCU). One of the pandemic winners, the stock remains yet to reclaim investors’ full attention and, thus, presents more attractive levels than the competition.

With a favorable cash-to-debt ratio on its balance sheet, the company anticipates net income growth this year, boasts impressive gross profit margins and has shown a robust return over the last month.

That’s why InvestingPro gives it a solid 23.8% growth potential under a good financial health score. Source: InvestingPro

Like this pick? InvestingPro users can see the 30+ new picks for this month along with all the full strategies just by subscribing here.

1 ProPicks Sell

Stock: Palo Alto Networks

• Strategy: Dominate the Dow
• InvestingPro Fair Value: -17.8%

After an impressive 111% rally in 2023, Palo Alto Networks (NASDAQ:PANW) has hit overbought levels that are not in line with ProPicks’ risk profile.

Although the macro environment still appears favorable to the company, many fundamental factors are screaming ‘sell.’ With a PE ratio of 148.4x, which is high even for the fast-growing cybersecurity space, the stock is expected to drop in the upcoming months as its short-term obligations exceed liquid assets.

That’s the main reason why the company holds a -17.8% target on InvestingPro, as seen in the chart below. Source: InvestingPro

As a matter of fact, ProPicks users who sold the stock on January 1 (when the cut was first announced) managed to escape Palo Alto’s lackluster start to the year, with the stock dropping a hefty 2% on the first trading day of the year.

Wishing you had sold it as well? InvestingPro users can see all the changes in strategies by subscribing here.

Join now for up to 50% off for a limited time only as part of our New Year promo!

* Readers of this article can enjoy an exclusive 10% discount on our yearly plan with the code JANREB1 and a similar 10% discount on the by-yearly Pro+ plan by using the coupon code JANREB2 at checkout.