In this piece, we will take a look at the ten best global stocks to buy now.
With the third quarter of 2024 ending, the discourse on the stock market for global equities has shifted back to interest rates. This comes after artificial intelligence drove markets through the course of the year, but with interest rate cuts having commenced in Europe and China’s economy refusing to roar back, global equity investors are carefully parsing through their investments to see which stocks might be worth it.
This was the gist of a note released by Goldman Sachs in July. In it, the bank advised investors to sift through stocks to eliminate those that have exposure to China. This is because Chinese economic growth has remained sluggish, and after Q2 GDP growth figures for the Asian economic giant sat at 4.7%, Goldman and Citi slashed their GDP growth estimates for 2024 to 4.7%. The two banks’ earlier estimates were 4.9% and 4.8%, and in its European investor note, GS’ analysts raised alarm for several potential headwinds for European firms that could emanate from China. The top three of these were a weak demand in China for discretionary products, the country’s plans to tax luxury goods, and potential retaliatory tariffs against European countries after the EU decided to increase tariffs for Chinese made electric vehicles. “While a great deal of earnings downgrades have already occurred year-to-date for our luxury basket, we worry that more could take place,” the Goldman analysts warned, adding that “the valuation premium of the basket has deflated, but remains on the high side of its history.”
A slowdown in Chinese consumer spending, which was also evident in the country’s latest data release that saw retail sales growth sit at 2%, is particularly worrisome for German stocks. This is because they have already felt the pinch of the slowdown during Q2 and H1 2024. For instance, German watch company Swatch saw its China sales drop by 30% in H1 while the luxury goods manufacturer LVMH experienced a 14% Asian sales drop in Q2 which came after Mercedes-Benz’s China sales dropped by 3% in Q1.
For Germany, this is particularly troubling as its economy has suffered after the disruption of cheap Russian gas in the aftermath of the Ukraine invasion. The German economy contracted by 0.3% in 2023 and continued its downward pace in Q2 by posting a 0.1% sequential contraction. German firms’ disappointing Chinese performance came when the country’s overall exports to China dropped by 14% annually in May to sit at €7.5 billion.
Shifting gears, let’s take a bird’s eye view of global stocks. On this front, JPMorgan has some insights. In its mid year outlook, the bank’s chief global economist Bruce Kasman shared that “Global growth has moderated to a still-solid 2.4% (annual rate) and is less dependent on a U.S. demand engine, as recoveries in Western Europe and emerging markets (excluding China) find firmer footing. The manufacturing sector is also showing signs of recovery, helped in part by a pickup in business spending.” However, in the report which was published in July, the bank remained pessimistic about inflation as it shared that core inflation should sit at 3% at the close of 2024. This led it to wager that higher for longer was the way to go and led to a cumulative 35 basis points of easing in developed markets except Japan by 2024 end.
Yet, the European Central Bank (ECB) led the global charge for rate cuts. It cut interest rates by 25 basis points in June and followed it with another 25 basis point cut in September. Additionally, the Bank of England (BOE) also cut rates by lowering rates by 25 basis points to 5% in August for the first interest rate cuts since the coronavirus pandemic was wreaking havoc in 2020. Moving forward, analysts are divided on the BOE’s future rate cuts, and many believe that the ECB might be less forthcoming with the cuts as well.
While several of the world’s biggest economies have suffered this year, global stocks as a whole have performed well. One of the most well known global stock indexes compiled by the MSCI opened at 3,144 points this year. Its latest value is 3,728 to mark a neat 18.5% year to date growth. However, European stocks have lagged in this performance, with the index of the region’s top 600 stocks having delivered a 10.2% return year to date through price appreciation. This is unsurprising since these 600 firms’ Q1 2024 EPS dropped by roughly 2.5%. However, estimates suggest that these stocks can post at least a 10% EPS growth during Q3 2024.
With these details in mind, let’s take a look at the top global stocks to buy.
Photo by Marc Rentschler on Unsplash
Our Methodology
To make our list of the best global stocks to buy, we ranked the US listed stocks of JPMorgan’s International Equity ETF by the number of hedge funds that had bought the shares in Q2 2024 and picked the top stocks. This particular ETF was preferred because it chose to focus on a diversified set of global stocks as opposed to several others that focused primarily on US tech giants.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Stellantis N.V. (NYSE:STLA)
Number of Hedge Fund Holders In Q2 2024: 31
Stellantis N.V. (NYSE:STLA) is one of the biggest car manufacturers in the world. Some of its car brands include Fiat, Maserati, and Jeep. Stellantis N.V. (NYSE:STLA)’s diverse brand portfolio allows it to target all segments of the car market, which means that the firm is able to generate revenue during all kinds of economic conditions. Additionally, it benefits from a wide operations base through an industrial presence in 30 countries and a sales presence in 130 countries. However, Stellantis N.V. (NYSE:STLA)’s global exposure has also led to a slowdown as of late. One key factor when it comes to analyzing car companies is their inventory, and Stellantis N.V. (NYSE:STLA) has suffered on this front in Europe with its inventory piling up due to a slow economy. Similar risks persist in the US, where used car inventories have also piled up due to an overall slow market. Stellantis N.V. (NYSE:STLA) is also struggling to keep some plants open in America after troubles with unions, and these headwinds combined have meant that the stock is down 32.15% year to date.
On the topic of inventory, here’s what Stellantis N.V. (NYSE:STLA)’s management shared during the Q2 2024 earnings call:
“One of the things that we need to say here is that the major topic to be addressed is of course the inventory. This is what you have been highlighting and rightly so. By the end of June we are at 94 days of supply, quite similar to our closest US competitor, same ballpark of inventory but still too high. And this is what we are now addressing. We see that we are going to work on three different directions. One is to make sure that we are aligning our production planning mix to the market mix and we see that what we have in inventory is not always aligned with what the market mix requires. That means that we need to make sure that we bring all the versions that the market is asking from us and the perfect example is the new Ram 1500 DT version where some of the highest output versions were not available, some of the highest trim levels were not available on the right timing.
This has created a distortion in the inventories that are sticking and this is what we are correcting right now, now that we have validated all the versions that we need to make the market response be more appropriate. We are of course looking at the incentives and any price adjustments that will be eventually needed. There is no dogmatism in our approach. There is just a sense that we need to take care of spending your money in the appropriate way. What we have seen so far from what we are told by the dealers is that once the customers reach the showroom, the conversion rate in the showroom is excellent, which means the conversion rate we have in the showroom is meeting the expectations of our dealers because they tell me that the product is appealing, the product is great, and we have just to make sure that we have more people that go through the door.”
9. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders In Q2 2024: 31
SAP SE (NYSE:SAP) is a major player in the global enterprise resource planning and management industry. It is a brand name in the sector, with some of the largest companies such as Apple, Walmart, and Amazon using its software. This provides SAP SE (NYSE:SAP) with a wide moat, as big firms in particular are unlikely to change their software due to high costs and the risks of disruption. The firm’s software centered business model also provides it with a high margin operation and stable recurring revenue which can be used to generate stable cash flow. As per Gartner, SAP SE (NYSE:SAP) holds a 24% share of the ERP market, and despite a slowdown in enterprise spending in a high interest rate era, the firm’s cloud backlog and ERP revenue jumped by 28% and 33% during the second quarter, respectively. SAP SE (NYSE:SAP) is currently undergoing a crucial phase through which it plans to shift to a subscription based model from a license model. Through this, it aims to spread customer spending over a longer period, but SAP SE (NYSE:SAP) could face headwinds if customers are hesitant.
SAP SE (NYSE:SAP)’s management explained why it’s immune to macroeconomic headwinds during the Q2 2024 earnings call:
“I mean, Mark, indeed, I mean, we have seen a fantastic performance in half year 1, and now entering half year 2, we see very healthy pipeline. And pipeline means sales pipeline but also I see a very strong innovation pipeline.
Now when you sit together with our product owners and see what we are delivering on GenAI use cases and the customers who are sharing their feedback early on, it’s pretty exciting. I mean they see a ton of value, and you have seen now in Q2 already the first impact of Business AI on our numbers.
And then second, what I also see clearly working now is the best of suite. I mean 4 years back, we were rightfully criticized for having a bunch of best-of-breed solutions. But when you want to have a high-quality AI, when you want to steer your business end to end, when you want to connect your commerce and your omnichannel with supply chain and when you want to connect your procurement with the warehousing, I mean, that all comes together on BTP.
And I would say we are also just at the beginning. I mean please don’t forget, when customers are using their ECC solution, so their on-premise monolithic ERP solution today, that doesn’t mean that they use all the modules in the past. And now with our land-and-expand strategy, we have really, I mean, a motion that customers are really landing. And then they get that they have to connect the different parts of their company and the different parts of the supply chain. And that’s why we also stay confident for the second half of the year.”
