To The Moon

$Alibaba(BABA)$ $Alphabet(GOOG)$ $ASML Holding NV(ASML)$ $Berkshire Hathaway(BRK.A)$ $Citigroup(C)$

As 2024 draws to a close, it's been an exceptional year for the market. It's been hard not to make money, with the S&P 500 currently up around 26.24%, following a strong performance in 2023 where the market also saw gains of over 20%. We've been experiencing a significant bull market. As is customary at the end of each year, the financial publication Barron’s has released its list of the top 10 stocks to buy for the next year. In this video, we'll review this list and share our thoughts on whether we agree or disagree with their selections. Some of the picks are intriguing, with a few that I’m personally interested in buying, and others that I’m staying far away from. Let’s dive into the list and see what we think.

Starting off, we can see that the 2025 picks reflect an expectation of opportunities beyond the "Magnificent 7" stocks. They suggest that value investing is still alive and well. It's important to note that all intelligent investing involves value—growth investing, for example, can still be considered value investing when buying a stock at a fair price relative to its worth.

The first pick on the list is Alibaba Group Holding. Barron’s argues that Alibaba is one of the cheapest e-commerce and cloud computing stocks globally, with a price of about $89 per share, which is just 10 times projected earnings—well below Amazon’s 45 times. Looking at the numbers, Alibaba is trading at a price-to-earnings (P/E) ratio of 9.46, while Amazon’s is 43.8. Barron’s also points out that Alibaba has about $50 billion in net cash, which is around 25% of its market value. While Alibaba’s financial position is strong, and the company’s earnings are projected to grow at double-digit rates, investing in a Chinese company involves significant risks. Despite its undervaluation, I’m personally hesitant to invest in Alibaba due to the US Government risks involved.

Next up is Alphabet (Google), which Barron’s believes can overcome competitive and regulatory challenges. The stock, which has risen 37% over the past year, had a tough period earlier, falling from around $192 to under $150 due to lawsuits. However, the announcement of their quantum computing chip caused the stock to surge back up to $196. Barron’s argues that, at $195, Google is the cheapest of the “Magnificent 7,” trading at just 21 times projected 2025 earnings, compared to 25 for Meta and 30 for Apple and Microsoft. After considering this, I agree with Barron’s analysis and believe Google still offers good value, even after its recent run-up.

The third pick is ASML Holding, a company based in the Netherlands that makes lithography machines for producing high-performance chips. While the stock has dropped about 5% over the past year and 28% in the past six months, this could present an opportunity. ASML faces little competition in its high-end EUV machines, and analysts are expecting earnings growth of over 20% in the coming years, with double-digit growth for the next decade. The company also has a strong dividend growth track record, which makes it an attractive option for investors. Despite its high P/E ratio of 35.6, I believe ASML has massive growth potential and agree with Barron’s pick for 2025.

The fourth pick on the list is what I would consider a safe bet: Berkshire Hathaway, led by Warren Buffett, one of the greatest investors of all time. However, the article begins by pointing out that Buffett made some mistakes this year, particularly reducing Berkshire’s stake in Apple by about two-thirds. Apple’s stock has soared in the past year, and many analysts, including Baron, believe Buffett’s decision was a significant error. Over the past year, Apple stock has risen by about 32%, reaching an all-time high of $255 per share.

However, if we dig into the numbers, Apple's earnings per share (EPS) have actually declined over the past year. In 2022, EPS was $6.15, dropping to $6.16 in 2023 and projected to be $6.11 in 2024. This decline is despite Apple’s large share buybacks. So, Apple’s stock increase hasn't been driven by improving earnings but by a rise in its price-to-earnings (P/E) ratio. While Apple certainly has strong return-on-invested-capital (ROIC), it’s an interesting point to note that Buffett’s decision to reduce his stake came amid slowing earnings.

Nevertheless, Berkshire Hathaway is still a solid and proven investment, with a diversified portfolio that includes many private companies we don’t always talk about.

Moving to the fifth pick, Citi Group, I wasn’t expecting a bank to make the list. However, Wells Fargo analyst Mike Mayo believes Citi will meet its financial targets, boosting its return on tangible equity to 11-12% by 2026, up from 7% this year. Citi Group has performed well recently, with a 36% increase in stock price over the past year. Earnings per share have been in decline, but Mayo predicts earnings will increase to $10 per share by 2026. This could lead to a doubling of the stock price over the next three years.

Citi also offers a strong dividend, with an initial yield of 3.12%. So, it’s a good pick for those looking for both growth and dividend income.

The sixth pick, Everest Group, is an interesting one. With a price-to-earnings ratio of just 6 for 2025, the stock is considered one of the cheapest in the S&P 500. Despite its low valuation, Everest is the fourth-largest global reinsurer, boasting strong returns and growth. The stock has seen moderate gains this year (up about 2.3%) but is a solid dividend payer with a 2.16% starting yield. The company has a strong balance sheet, which is crucial for an insurance company, with a current ratio of 12.63 and a debt-to-assets ratio of 0.06.

Next up is Louis Vuitton (LVMH), which I’ve personally added to my portfolio this year. While the stock has struggled due to weakness in China, its key market, LVMH has a strong track record of growth, profitability, and impressive margins. Despite a 19% drop in share price this year, LVMH remains a solid long-term pick, especially given its dividend growth potential. The starting dividend yield is now 2.11%, with a 5-year dividend growth rate of 15%, which is quite attractive.

Moving on, the eighth pick is Moderna (MRNA), which has been hit hard with a 59% drop in the past year. The company has a diverse pipeline, including cancer treatments and respiratory vaccines. However, I’m not fully on board with this pick. Moderna’s free cash flow has been negative for several quarters, which raises red flags for me. Despite having $9 billion in net cash, the company is spending heavily on R&D, making it a risky investment for those looking for stable cash flow.

The ninth pick is SLB (formerly Schlumberger), an oil and energy company that has seen its stock drop by 20% this year, despite the energy sector’s gains. SLB is trading at a relatively low P/E ratio of 11 for 2025, but its dividend history is concerning. The dividend was cut in 2020 and hasn't fully recovered. Given the cyclical nature of oil companies and SLB’s history of volatile earnings, I’d be cautious with this pick.

Finally, the tenth pick is Uber Technologies, which has dropped 30% from its peak last October. Despite concerns about autonomous vehicles bypassing Uber’s network, the company remains a dominant player in ride-hailing and food delivery. Uber has shown solid revenue growth, but it’s still not profitable. If you believe in Uber’s long-term potential, it could be an intriguing investment, but it’s not a company that fits my personal investment strategy.

Overall, while there are some intriguing picks here, especially in Berkshire Hathaway, Citi, Everest, and LVMH, I would approach others like Moderna and SLB with caution due to their high risks.

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