Despite the market’s incredible run in 2023, there are still plenty of stocks that are playing catch-up and have room for rapid expansion. Nearly three-quarters of stocks in the S&P 500 underperformed the benchmark index over the past year as gains were concentrated primarily in technology stocks. This means that there are many securities that are due for a breakout in the coming months. With this in mind, investors should look for signs that the market rally is broadening out and take positions in stocks of well-managed companies that have catalysts on the horizon to drive their share prices higher. Favorable economic conditions and declining interest rates can also add a tailwind to several stocks in the coming year. As we move into 2024, here is the ultimate growth trio: three stocks set for rapid expansion.
Growth Stocks: American Airlines (AAL)
With air travel back above pre-pandemic levels, it’s time to consider airline stocks. And American Airlines (NASDAQ:AAL) looks like a safe bet. The world’s biggest carrier is off to a good start in 2024, with AAL stock having risen 5% so far in January. There’s still plenty of runway ahead for American Airlines, with the share price currently at half the level it was at before the pandemic struck in 2020. With air travel in the U.S. at record levels during the December holidays, American’s next earnings print is likely to be a strong one.
The carrier’s financial results should also get a boost as fuel prices moderate. The price of crude oil is down to $72 a barrel now from around $90 a barrel at the time of the company’s last print. Analysts at Jeffries Financial Group (NYSE:JEF) just upgraded AAL stock to “buy” from “hold,” citing improving aircraft utilization and its modern fleet of existing aircraft. Jeffries said it’s excited about American Airlines March 4 investor day, where company executives are likely to highlight premium upside for shareholders.
Chesapeake Energy (CHK)
Chesapeake Energy (NASDAQ:CHK) is about to become the largest natural gas producer in America after its $7.4 billion purchase of Southwestern Energy (NYSE:SWN). The all-stock transaction will see Southwestern investors receive 0.0867 shares of Chesapeake for each share of Southwestern they own. The combined companies should produce 7.9 billion cubic feet of natural gas each day, making it the biggest natural gas producer in America.
Once the merger is finalized, the combined gas companies will have a market capitalization of nearly $20 billion. Synergies from the merger are estimated at $400 million and the new company hopes to raise its dividend payment to shareholders by 20% over five years. The deal is expected to close in this year’s second quarter. CHK stock is down 8% over the past year. However, the company’s share price is up 7% on news of its acquisition of Southwestern Energy.
The U.S. housing market has held up well in the face of rising interest rates and stubbornly high prices, making the stocks of home builders an attractive option for investors. Among the best is Lennar (NYSE:LEN), one of the largest home builders in the continental U.S. Right before Christmas, the company issued fiscal fourth quarter financial results that handily beat Wall Street forecasts. LEN stock has gained 55% over the last 12 months, including a 3% increase in the first few trading weeks of 2024.
Lennar reported EPS of $4.82 and revenue of $11 billion for its fiscal Q4. Analysts had expected earnings of $4.59 and $10.20 billion in sales. For the entire fiscal year, Lennar announced earnings of $13.73 per share on $34.20 billion in revenue. Both full-year figures also beat analyst expectations. With the U.S. Federal Reserve signaling three interest rate cuts this year, rates charged on home mortgages should move lower, driving sales.
Lennar’s new orders in its most recent quarter rose 32% from a year earlier and remain strong.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.