This year, my strongest investment belief for 2024 is outperforming the market significantly. Should you consider purchasing it for 2025?
This year, my strongest investment belief for 2024 is outperforming the market significantly. Should you consider purchasing it for 2025?
Regardless of your fondness for a specific stock, you'll often discover another one that catches your eye even more. Eventually, you'll encounter the one that outshines all others.
In January 2024, I single out stocks that pique my interest for the upcoming year. One stock stood out as my top pick with the highest conviction. And fortunately for me, this stock has outperformed the market this year. What is this magical stock, and should you consider investing in it for 2025?
My top pick with the highest conviction for 2024
I won't create any tension any longer. My top pick with the highest conviction for 2024 was...Amazon (AMZN -1.45%). With just a few days left in the year, Amazon's shares have skyrocketed approximately 47%, nearly doubling the performance of the S&P 500 index.
Why did Amazon capture my attention so strongly? In part because I didn't perceive the company's business as risky. Amazon is the colossal gorilla of e-commerce, leading the way in the cloud services market. I admired (and still do so) its competitive edge.
Amazon's growth potential appeared inevitable to me at the beginning of 2024. I predicted that the company's Amazon Web Services (AWS) division would continue to post robust growth as businesses shifted their IT expenditures to the cloud. I believed that artificial intelligence (AI) would persistently boost AWS's growth.
I also recognized in January that Amazon was relentlessly focusing on boosting its profits. The company's earnings had tripled in the previous quarter, and I forecasted that these improvements would be evident in its financial results throughout the year, further propelling its share price.
Why Amazon has excelled in 2024
Predicting Amazon's impressive performance in 2024 didn't require supernatural powers. As one of the most recognized companies globally, its business merits closer examination.
More than a hundred other stocks with market capitalizations of $10 billion or higher posted gains larger than Amazon in 2024 (including several in my own portfolio). It's possible one of these could have been my top pick for the year.
However, Amazon has nonetheless achieved exceptional results in 2024. And it has done so for the very reasons I (and many other investors) anticipated. The company's e-commerce segment has continued to thrive with Prime Day once again breaking sales records. AWS has maintained its momentum, introducing more AI-driven offerings for customers.
Perhaps most significantly, though, Amazon's focus on profitability has paid off as expected. The chart below illustrates the company's increase in trailing-12-month net income over the past year.
Correlation tends to exist between earnings and stock prices (over an extended period). I would have been flabbergasted if Amazon's stock hadn't risen substantially in 2024, given the progress it has made in improving its bottom line.
Is Amazon stock a wise investment for 2025, as well?
I'm thankful that Amazon has proven to be a profitable investment for me this year. But is the stock a smart choice for 2025, as well? I believe so.
The investment rationale that I presented for Amazon in early 2024 remains valid today. The company still boasts a formidable competitive edge. It still holds strong growth prospects, especially with AWS. Amazon CEO Andy Jassy continues to predict a notable shift in the distribution of IT spending within the decade, foreseeing a reduction in on-premises spending and an increase in cloud services. AI continues to serve as a powerful driver for AWS's growth. Amazon's profitability is expected to grow further in 2025.
Considering all these factors, Amazon will likely remain a top pick for me going into 2025. Will it continue to reign supreme at the top of my list? I'm still pondering that question.
In my investment portfolio, Amazon's impressive performance in 2024 has led me to consider reinvesting in the company for 2025. With the company's predicted shift towards increased cloud services, robust growth in its Amazon Web Services division, and continued focus on profitability, I believe Amazon's stock has strong potential for continued growth in the finance sector.
Moreover, Amazon's leadership in e-commerce and its use of artificial intelligence to drive its growth makes it an attractive investment opportunity for those interested in the technology and finance sectors, as well as for those looking to diversify their investment portfolio.