Best stocks for beginners of April 2024

Wayne Duggan

BLUEPRINT

Updated 9:02 a.m. UTC April 26, 2024

Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy.

The best stocks for beginners in 2024 are companies with recognizable brands and products that are consistently profitable and generate steady or growing revenue.

If you’re new to investing, it’s best to focus on buying high-quality stocks of recognizable companies with sound financial fundamentals and easy-to-understand business models.

We selected the best stocks for beginners based on upside potential, positive net income for at least four of the past five years, easy-to-understand business models, market capitalizations, earning potential and “buy” consensus recommendations.

What you should know

Broadcom is a diversified semiconductor company that designs, develops and supplies a range of analog semiconductor devices. Broadcom supplies chips for data centers, broadband, wireless, networking, storage and industrial markets.

Broadcom is highly exposed to the smartphone market, and Apple accounts for about 20% of the company’s total sales. However, Broadcom has been investing in diversifying its business in recent years, including acquiring network gear maker Brocade in 2017, software company CA Technologies in 2018 and the enterprise security business of Symantec in 2019. In November 2023, Broadcom finally closed its $69 billion acquisition of cloud software company VMware after more than a year of intense regulatory scrutiny.

Broadcom reported 5% revenue growth in the third quarter of 2023. The analysts covering AVGO stock have a median price target of $1,100.

Pros and cons

Pros

Highly exposed to large, high-growth data centers and cloud computing markets.
An aggressive acquisition strategy has diversified the business away from core semiconductor sales.
Artificial intelligence spending will drive networking semiconductor sales growth.

Cons

Significant revenue loss potential if Apple pursues its long-term plan to drop Broadcom as a supplier.
Apple and other large customers can exert pricing leverage, compressing margins.
Mature, legacy software business growth is slowing, weighing on overall growth.

More details

What you should know

JPMorgan Chase is one of the largest global financial services companies, with nearly $4 trillion in assets under management.

In early May, JPMorgan won an auction to acquire $92 billion in deposits, $173 billion in loans and $30 billion in securities from First Republic, which had been seized by regulators following a massive wave of customer withdrawals. JPMorgan paid the Federal Deposit Insurance Corp. about $10.6 billion for the assets.

Not only does the First Republic deal provide opportunities for earnings and revenue growth, but it is also a clear sign to investors that JPMorgan’s management wasn’t concerned about the bank’s liquidity or balance sheet during the height of the 2023 banking crisis. JPMorgan’s scale, diversified banking business, attractive valuation and track record of sound risk management make it a top-tier investment option for beginners.

Pros and cons

Pros

No major problems with the balance sheet, regulatory concerns or deposit runs.
Investing heavily in organic growth opportunities and distribution platforms.
Rigorously stress-tested annually by the Federal Reserve as a Category I bank.

Cons

Net interest income could be at risk if the U.S. economy dips into a recession.
Organic growth investments are not guaranteed to pay off.
The First Republic acquisition further complicates an already complex global banking business.

More details

What you should know

UnitedHealth is the largest U.S.-managed health care firm. The company provides health insurance via its UnitedHealthcare business, and it also serves as a pharmacy benefit manager via its Optum Rx business, a health care provider via its Optum Health segment and a health analytics firm via its Optum Insight subsidiary.

UnitedHealth is one of the biggest blue-chip health care companies, and it has previously targeted long-term annual earnings growth of between 13% and 16%. The health care sector is considered a defensive market sector, meaning investors can sleep easy at night knowing demand and earnings are relatively insulated from economic downturns.

Pros and cons

Pros

Leading U.S. provider of Medicare Advantage plans, which should see growing demand as the general population ages.
A solid balance sheet provides financial flexibility in an evolving health care regulatory environment.
Diversified medical insurance, pharmacy benefits and health care services businesses create opportunities to provide lower-cost services than pure-play competitors.

Cons

COVID-19 variants or other unforeseen outbreaks create risks for health insurers.
Health insurance and pharmacy benefits businesses have been targeted by regulators aiming to reduce health care costs.
It may be difficult for a company the size of UnitedHealth to maintain double-digit revenue growth over time.

More details

What you should know

Comcast is a diversified media conglomerate and is the largest U.S. cable provider with more than 32.3 million domestic broadband subscribers. Comcast’s subsidiaries include NBCUniversal, the Peacock video streaming service, Universal Pictures and Universal Studios Theme Parks.

Comcast has been successfully pivoting from its legacy cable TV business. In the third quarter, Comcast reported 294,000 domestic wireless customer net line additions and 80% year-over-year growth in its Peacock paid subscriber base, which now exceeds 28 million users. The company’s theme parks reported record adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $983 million in the quarter, which helped fund Comcast’s $4.7 billion in capital returns. Comcast has also raised its dividend in its last quarter; the communications giant has been raising its dividend since 2008.

Pros and cons

Pros

Highly recurring revenue and cash flow create significant financial visibility.
A diversified business model limits the risks associated with legacy media business.
Strong growth in Peacock streaming service.

Cons

The legacy TV business is likely in decline.
Poor reputation for customer service.
Nearly $95 billion in long-term debt.

More details

What you should know

Bristol-Myers Squibb is a global biopharmaceutical company that specializes in oncology, immunology and cardiovascular therapeutics. The company’s top-selling drugs include cancer therapies Revlimid and Opdivo and anticoagulant Eliquis.

Bristol-Myers shares underperformed in 2023, and the company recently cut expectations for new product launches and increased its spending guidance through 2025. Revenue was down 2% in the third quarter and generic competition for Revlimid continues to weigh on overall growth. However, sales of Reblozyl were up 29% to $248 million, and Opdivo revenue grew 11% year over year, excluding foreign exchange impacts. The nine drugs in the company’s new products portfolio generated $928 million in revenue for the quarter.

Pros and cons

Pros

A forward earnings multiple of 6.95 suggests an extremely attractive valuation.
Appealing 4.6% dividend yield.
Late-stage drug pipeline focuses largely on cancer and immunology, which typically generate strong pricing power.

Cons

Leading cancer drug Revlimid faces significant generic competition.
Opdivo and Eliquis will likely face heavy generic drug competition beyond 2028.
More than $32 billion in long-term debt.

More details

Compare the best stocks for beginners

Methodology

The best stocks for beginners included above all trade on a major U.S. stock exchange and meet the following criteria:

Consensus analyst recommendation of “buy.” A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
A market capitalization of at least $100 billion. If a company has a leading market share and competitive advantages in a sizable industry, it will have a greater market cap. Small and mid-cap companies with market capitalizations typically either don’t have a leadership position in their particular market or don’t operate in industries that are large enough or that have enough long-term growth potential to generate market-leading returns for investors.
An Altimeter overall grade of at least a B. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top percentile of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
Positive net income in at least four of the past five years. The best companies are consistently profitable, meaning new investors don’t have to track the company’s financial performance too closely. Screening for profitability in at least four of the past five years doesn’t penalize companies that were temporarily unprofitable during COVID-19 economic shutdowns in 2020.
Easy-to-understand business model. There are plenty of excellent companies out there in industries such as cutting-edge technology, advanced biotechnology, complex finance and other specialty fields. Unless you have personal expertise in any of these areas, a beginner should stick with stocks that have relatively easy business models to understand.

Why other stocks didn’t make the cut

Plenty of stocks out there will produce market-leading returns over the long term but may not be the best investments for beginners.

New investors shouldn’t rush into investing without preparation or a plan.

Owen Murray, director of investments for Horizon Wealth Advisors, says new investors should first consider factors like risk tolerance and time horizon. Beginners shouldn’t hesitate to get help as well.

“In my opinion, a significant risk inexperienced investors face is their own unrealistic short-term expectations that their investments should always make money. Having a long-term perspective is key,” Murray says.

If a company has a complicated business model that is difficult to understand, a novice investor may not know how to properly interpret the company’s financial results and the health of its balance sheet. Many other stocks with significant upside also come with a high risk of failure, making them inappropriate investments for new investors looking to build a long-term nest egg.

The best stocks for beginners are companies with recognizable brands and products that are consistently profitable and generate steady or growing revenue.

Final verdict

New investors should focus on high-quality stocks of companies that have sound financial fundamentals and easy-to-understand business models.

Among the stocks selected for best stocks for beginners, semiconductor company Broadcom ticks a lot of boxes. It has a strong valuation, a reasonable price-to-earnings ratio and is relatively low risk.

Broadcom has a strong financial performance that is also well-positioned for further growth.

Frequently asked questions (FAQs)

The booming popularity of commission-free trading apps like Robinhood (HOOD) has made stock trading more accessible than ever to new investors. With just a little bit of extra cash, anyone can download an app, open an online brokerage account and invest in billion-dollar companies in a matter of minutes.

Many commission-free brokers offer trading accounts with no account minimums that allow investors to trade fractional shares of stocks. You can start investing with as little as a dollar by opening up an account with brokers such as Robinhood, Fidelity or InteractiveBrokers.

Investors should avoid extremely volatile stocks, companies that are not listed on a major exchange, companies with complex business models or penny stocks (stocks that trade for less than $5 per share). The best stocks for beginners are high-quality stocks of companies that have recognizable brands and products and sound financial fundamentals.

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Wayne Duggan

BLUEPRINT

Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi

Farran Powell

BLUEPRINT

Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.