Rally Ready: 3 Stocks to Position in Before the Uptick

With fourth quarter 2023 earnings set to begin, markets look to be staging a recovery after a downturn in the first trading week of 2024. Should corporate America’s Q4 results come in stronger than expected, it will likely lead to a sustained rally in equities. For this reason, investors may want to position their portfolios for a continued bull run by adding stocks poised to rebound in the coming year.

Many well known stocks remain undervalued but could stage a recovery should the market rally from last year broaden beyond technology. Some stocks enjoyed big gains in 2023 and look likely to continue running hot well into this year. As such, investors should act now before the bulls really start rampaging across Wall Street.

Here are stocks to buy before the rally. Home Depot (HD) Analysts at Wedbush Securities just raised its rating on Home Depot (NYSE: HD ) stock to Outperform from Neutral. Wedbush also raised its price target on HD stock by 15%, taking it to $380 per share from $330. The privately held investment firm said 2024 should be a strong year for home improvement spending, with professional contractors outspending do it yourself consumers.

The upgrade comes with HD stock up 8% in the last year, trailing the market. In November, Home Depot reported third quarter financial results that beat Wall Street expectations on both the top and bottom lines. The home improvement retailer announced earnings per share ( EPS ) of $3.81 versus the $3.76 forecast.

Revenue totaled $37.71 billion, beating estimates of $37.60 billion. Despite the beat, Home Depot provided cautious guidance and trimmed its outlook. The company has faced challenges such as high mortgage rates and inflation over the last 18 months. Those challenges may ease in the year ahead. General Motors (GM) After a bruising year in 2023 and a prolonged slump in its share price, things are suddenly looking up at Detroit automaker General Motors (NYSE: GM ).

After languishing below $30 a share and trading at the same level as a decade ago for most of last year, GM stock has rallied 8% in the past month. The breakout came after the company announced it raised its quarterly dividend payment by 33% to 12 cents per share. GM is also buying back $10 billion of its own stock this year.

The dividend hike and stock buybacks happened after an extremely difficult period for General Motors. Last fall, the company endured six weeks of rotating strikes by the United Auto Workers (UAW) union that saddled the company with a rich new collective agreement. GM warned that the strike likely cost it $800 million in lost vehicle production.

Regardless, management has recommitted to shareholders with the dividend increase and buybacks, restoring faith in GM stock heading into 2024. Adobe (ADBE) In technology, software company Adobe (NASDAQ: ADBE ) still looks like a good bet. The company continues to be a stealthy way to play the artificial intelligence ( AI ) trade.

And there’s currently a buy the dip opportunity with ADBE stock down 6% since the company issued its latest earnings in December. While the company beat Wall Street projections, it offered a weaker than expected 2024 forecast, sending ADBE stock lower. For what was its fiscal 2023 fourth quarter, Adobe reported EPS of $4.27 compared to the $4.14 forecasted among analysts.

Revenue totaled $5.05 billion versus $5.03 billion that had been anticipated. The company’s sales grew 12% from a year ago while its net income increased 26% to $1.48 billion. During the quarter, Adobe hiked the cost of many of its software subscriptions. Unfortunately, Adobe called for fiscal 2024 earnings of $17.60 to $18 on $21.3 billion to $21.50 billion in revenue — below forecasts.

Adobe continues to employ AI wherever it can, adding the technology to its Photoshop and Illustrator programs for its Creative Cloud subscribers in recent months. The monetization of AI is expected to be a big driver of Adobe’s earnings in 2024. The company also recently called off its planned $20 billion acquisition of rival software firm Figma.

ADBE stock gained 72% in the last 12 months. On the date of publication, Joel Baglole did not hold (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..