Ticker Reports for December 31st
3 Stocks Helping to Bring AI to Healthcare
Artificial intelligence stocks are expected to continue showing strong growth in 2025. Much of the attention focuses on the opportunity that comes from the buildout of data centers. But a practical area where AI has been making significant inroads is healthcare.
For some investors, the first place they go with that is on-device AI, which can be seen in smart devices and robotic surgical assistants. But there’s a lot more going on than that. Generative AI is being used to help make healthcare more efficient. Not only does this help reduce staff burnout, but it also opens avenues for personalized medicine.
That means companies will spend money to increase their AI capabilities in this space. Many profitable companies will be able to pass some of that money on to shareholders in the form of dividends and/or capital gains. Here are three compelling medical stocks for you to consider in 2025.
Google Health Makes Alphabet a Magnificent Choice
If you’re looking for growth stocks in 2025, the Magnificent 7 stocks should make your short list. However, in 2024, it became evident that investors were looking for value even among these top technology stocks.
The same will be true in 2025, which is why Alphabet Inc. (NASDAQ: GOOGL)looks like a Buy. The company is practically synonymous with AI, and its Google Health initiative is helping it make strides in the healthcare sector.
In addition to building AI into tools for ultrasounds and breast cancer screening, Alphabet has a series of large language models (LLMs) that stem from its launch of Med-PaLM 2 in 2023. And for developers, Alphabet has launched its Open Health Stack to help developers “hasten the creation of digital health solutions.”
However, with the stock pulling back at around $196, is GOOGL stock a Buy? Analysts suggest it is. Although the consensus price of $206.69 leaves only about a 7% upside for the stock, the analyst forecasts on MarketBeat show some significantly higher targets, including JPMorgan Chase & Co. (NYSE: JPM), which gives the stock a target of $232.
Medtronic Is Using AI to Make Healthcare More Efficient
The newly created Department of Governmental Efficiency (DOGE) has government waste on people’s minds, but waste and inefficiency in the healthcare system have been an obsession for Medtronic PLC (NYSE: MDT) for many years.
The medical device company is perhaps best known for its use of AI in smart devices, such as its robotic surgical assistant platforms, colonoscopy and endoscopy systems and insulin pen that integrates glucose sensor data for patients with type 1 diabetes who need multiple daily injections.
The company is also making strides in using AI for analyzing large volumes of data to aid physicians in diagnosing and predicting outcomes. In the process, it’s considering the growing need for personalized healthcare in treating diseases.
MDT stock is down about 11.5 % in the three months ending December 30. Some of that may be due to concerns of interest rates staying higher for longer. However, this is setting up as a good buy-the-dip opportunity not only for its leadership in AI, but for a dividend that has increased for 48 consecutive years.
Buy Stryker for the Dividend Now and Growth Later
Stryker Corp. (NYSE: SYK) is a competitor of Medtronic. Not surprisingly, many of the company’s AI innovations compare favorably with those of Medtronic and other names in the sector.
However, one area where Stryker may stand out is its dividend. The yield isn’t particularly impressive at just 0.93% (Medtronic has a yield of 3.52%). But yield isn’t everything. Stryker has a payout ratio that’s more than 50% less than that of Medtronic, and its dividends have been increasing at an average annual rate of 9% in the last three years. Plus, the company has increased its dividend for 32 consecutive years.
SYK stock gained about 20% in 2024, including a drop of about 8% in the last month of the year. This puts the stock about 12% below the consensus target of analysts.
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3 Stocks Ringing in The New Year With Large Buyback Announcements
Share buybacks are an important way that corporate management teams look to return value to their shareholders. Buying back stock decreases the number of outstanding shares a company has in the market. Because there are fewer shares, the company’s earnings per share rise, all else held equal. Markets often see buybacks as a vote of confidence in the company's direction, as they reflect an investment the company is making in itself.
Buybacks that lead to higher stock prices also provide more tax-flexible returns than dividends. Dividends paid by U.S. corporations are typically taxed at the same rates as long-term capital gains. However, investors must pay taxes on dividend income when they receive it. Investors don’t have to pay taxes on capital gains until they sell. This allows for a deferment of the tax payment.
This means that investors can keep their money invested for longer, instead of sending it to Uncle Sam. This can potentially create larger, compounded returns. Below, I’ll dive into three U.S. companies that just announced large, and in some cases massive, buyback programs. All market capitalization and return, and implied upside figures are as of the Dec. 30 close.
GE Vernova: Electrifying the World and Potentially Returns with Share Buybacks
GE Vernova (NYSE: GEV), the energy and electrification equipment giant, just announced a sizable buyback authorization of $6 billion. Shares have gone on a tear since they spun out of their former parent company, General Electric. A 152% return in 2024 isn't too shabby. The buyback authorization now represents just under 7% of the company’s market capitalization.
At the same time, the company announced its first dividend payment of $0.25 per share. The company's dividend yield is just 0.3%. But it's a good sign to see it providing income to shareholders so early in its history as an independent entity. The company has been a favorite of Wall Street analysts. On average, they have been raising their price targets as news and earnings reports emerge. GE Vernova recently announced that it has signed deals to power data centers with its natural gas turbines. This is a source of investor optimism and long-term upside.
Match Group: Swipe Right on Dividends, Buybacks, and AI Potential
Match Group (NASDAQ: MTCH) also just announced a big buyback authorization. Its market capitalization is over double the size of GE Vernova’s. The company’s $1.5 billion buyback authorization equates to 18% of its market cap. Like GE Vernova, the company also announced the initiation of dividend payments. If annualized, the company’s $0.19 per share quarterly dividend gives it a dividend yield of 2.3%.
When it comes to returns in 2024, that is where the similarities with GE Vernova end. Shares are down 10%. At its recent Investor Day, the dating app company laid out its plan to turn things around. Unsurprisingly, it involves using AI. The company is working to implement AI to help people find more matches and turn matches into real connections. This includes implementing chatbot-like features that help users come up with better responses and transition the online conversation to an actual date. It will be interesting to see if these new features can reignite revenue growth that clocked in at under 2% last quarter.
Olin: Materials Stock With Massive Buyback Announcement and +30% Upside
Olin (NYSE: OLN) is a lesser-known name, but its recent share buyback authorization is anything but small. The $2 billion authorization was recently increased from $700 million. With a market capitalization of just under $3.9 billion, the authorization represents nearly 52% of the company’s value. The basic materials stock didn’t fare well in 2024, providing a total return of -38%. However, like Match Group, the company’s Investor Day laid out how it plans to get back on the right side of the market.
The company makes many products, including chlorine, epoxy, and Winchester firearm ammunition. The company isn't focused on massive revenue growth. It expects these broad markets to grow at 3% to 6% annually over the next five years. Instead, the company aims to drive $250 million in structural cost reductions by 2028. It also plans to return over 50% of its operating cash flow to shareholders through 2029. Wall Street sees significant value in this stock. The average of two December price targets from Citigroup and Barclays implies 33% upside in the shares.
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Why 2024 Was Great for Stocks—and Why 2025 Could Be Even Better
It has been a strong year for stocks, and the best may be yet to come.
With only one trading day left in 2024, the S&P 500 Index is up approximately 23%. However, as investors look back on the year, they’ll see a textbook example of why the stock market is a poor proxy for the economy, which has delivered unclear and, in some cases, conflicting data points.
For example, many indicators suggest the U.S. economy is doing well. Consumer spending is stable, unemployment is down, the inflation rate is down from its 2022 highs, and the Federal Reserve has started to cut interest rates.
On the other hand, oil and gasoline prices are behaving like there’s little demand. Gold and Bitcoin are rising as if a major economic crisis is approaching. And the median wage for U.S. workers, $43,222.81, is only about $12,000 above the poverty level for a family of four.
Despite this, and with few exceptions, putting money in the market gave investors the chance for the strongest return—and analysts are forecasting an even better year in 2025.
Why 2024 Was a Great Year for Stocks
The simplest explanation for the market’s strong performance in 2024 is earnings growth. As early as 2022, companies began to shed payroll and undertake other cost-cutting measures to impact the bottom line. Those moves accelerated in 2024.
However, to the frustration of many buy-and-hold investors, the strongest gains have been limited to a handful of stocks in a handful of sectors. Artificial intelligence (AI) stocks have done well. Much of the attention has gone to companies providing the critical hardware for the AI infrastructure, like NVIDIA Corp. (NASDAQ: NVDA). But as the year comes to an end, investors are looking toward stocks like Palantir Technologies Inc. (NYSE: PLTR)and SoundHound AI Inc. (NASDAQ: SOUN) as the future of AI.
But AI stocks haven’t been the only ones to see gains. The GLP-1 craze has lifted shares of biopharmaceutical companies like Novo Nordisk A/S (NYSE: NVO) and Eli Lilly & Co. (NYSE: LLY). And companies in other sectors have outperformed the S&P 500, including blue-chip names like Walmart Inc. (NYSE: WMT), JPMorgan Chase & Co. (NYSE: JPM), and American Express Co. (NYSE: AXP).
In each and every sector, earnings have separated the winners from the losers. Companies that showed they could deliver strong earnings and/or raise their guidance have been rewarded—perhaps to excess. Conversely, companies that missed on earnings and/or lowered their guidance have been punished—also perhaps to excess.
Why 2025 May Be Even Better for Stock Investors
The primary reason to believe that 2025 may be a great year for stocks is based simply on probability. Since 1926, the S&P 500 has delivered a positive return 73% of the time. Over that same period, the index delivered a double-digit return 60% of the time.
The math is supported by macroeconomic conditions. The last time the S&P 500 delivered a negative return was in 2022. At that time, the rate of inflation was at 40-year highs, and the Federal Reserve was starting its campaign to raise interest rates. Heading into 2025, inflation is sticky but significantly lower than it was in 2022, and interest rates are moving in a lower—and more bullish—direction.
And then there’s that thing known as “animal spirits,” the emotional and psychological factors that influence consumer and investor behavior, often leading to changes in economic activity. There has been a palpable shift in investor sentiment since the U.S. presidential election, and there are many reasons why investors should trust that enthusiasm will last through 2025.
To begin with, one of the first items of business for the incoming administration will be making the 2017 tax cuts (i.e. the Trump tax cuts) permanent. The president-elect has also pledged to reduce the corporate tax rate from its current level of 21% (which is already the lowest since 1939) to 15% for companies that make their products in the United States.
But there’s much more for investors to consider. In addition to lowering taxes, the incoming Trump administration wants to cut regulations related to energy production, financial services, healthcare, and environmental protections. Investors are already seeing evidence that this may stimulate mergers and acquisitions (M&A) activity, which has slowed to a crawl under more antitrust scrutiny.
Then there’s the Department of Government Efficiency (DOGE), a proposed initiative aimed at identifying and eliminating wasteful government spending, streamlining bureaucratic processes, and improving the cost-effectiveness of federal programs. It’s a wildcard for sure, but even if the initiative accomplishes only a fraction of its goal, it will benefit the broader economy. That’s because less government spending may do a good bit of the Federal Reserve’s work in terms of getting the inflation rate down to its preferred target of 2%.
On the demand side, the Federal Reserve has said it will not cut interest rates as much as it initially projected. However, the trend will still be for at least a handful of rate cuts throughout the year, which should keep consumer spending afloat.
Where to Invest in 2025
Of course, believing the market will move higher is one thing; making decisions about where to put that money is another. Here are some sectors to consider:
Technology
Not surprisingly, the tech trade will still be active in the new year. AI will remain a hot theme, and so will semiconductors. Investors may want to pay attention to software stocks as a company’s ability to monetize AI will be a key driver of profitability.
Industrials
Despite efforts to cut government spending, much of the money from the Infrastructure Act is contractually obligated through 2026. That means companies in this sector will continue to be solid investments.
Energy
The Trump administration has made U.S. energy independence a priority, and that bodes well for oil and gas stocks.
Utilities
The demand for data centers and building out an AI infrastructure are just two reasons to believe that electric and natural gas stocks will be among the winners.
Investors Should Expect Volatility
Markets don’t move in one direction all the time. With many stocks at lofty valuations, a pullback in the first quarter of 2025 is not only likely but would be welcomed by many investors who want to get in on some of their favorite stocks at more appealing prices.
Apart from valuation concerns, there are other unknowns heading into 2025. For starters, the breadth and impact of the Trump tariff policies are unclear. And while the downside is probably overstated, it’s safe to say that the battle to control inflation is not over.
The new year also brings geopolitical uncertainty. How the Trump Administration handles the Russia-Ukraine war and how well it quiets tensions in the Middle East and China will be critical to calm the markets.
With all that said, volatility is normal. Investors should take the advice that time in the market is better than trying to time the market. The trend is for stocks to move higher. Don’t fight the trend.
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