2024 could be the year for FTSE 100 shares. This large-cap index achieved an 8% gain for 2023. And although it managed to reach its long-term average return, there were several outliers that vastly outperformed.
For instance, the Rolls-Royce (LSE:RR.) price tripled and Marks and Spencer (LSE:MKS) doubled over the past year. Owning both stocks would have given a significant boost to investors’ portfolios.
It may surprise some that I’d still buy both of these high-fliers for 2024.
A flying FTSE 100 share
Rolls Royce is undergoing a multi-year transformation programme. Last year, we saw multiple signs of it progressing swiftly.
Efficiency savings resulted in lower costs, and higher profits. They also allowed the aerospace engine maker to lower its debt pile.
This FTSE 100 giant looks like it’s heading in the right direction. It expects underlying profit for 2023 of £1.2bn to £1.4bn. That’s quite a jump from the £652m it produced in 2022.
Looking ahead, it expects this to grow to between £2.5bn and £2.8bn in 2027. To double profits in the next three or four years is no small feat.
Unlikely to triple again
Transformation programmes can face challenges in reaching their goals. And after a 220% share price return last year, there could be some room for disappointment in the near term.
That said, Rolls-Royce trades on a forecast price-to-earnings ratio of 24. This looks in-line with several of its competitors.
Overall, while I don’t expect this share to triple again this year, I’d still make it one of my ‘no-brainer’ top picks for 2024.
Not just any retail share
Another transformation programme currently in progress is that of Marks and Spencer. It’s on a five-year mission to deliver profitable sales growth, improve margins and deliver shareholder returns.
Its current CEO, Stuart Machin looks to be making good progress so far. In November it reported an 11% jump in sales and 56% leap in pre-tax profits for the first half of the year.
Almost all its business areas saw improvement. Resilient customer demand helped, as did a fall in inflation.
A busy festive period
UK grocers had the busiest Christmas period since the pandemic according to figures from Kantar. Shoppers have increasingly been trading up to premium ranges too. This could bode well for M&S, in my opinion.
Note that it’s expected to release a trading update on 11 January, which could potentially act as a catalyst for the shares.
After a strong year of favourable market conditions, bear in mind there could be challenges in 2024. A higher interest rate is still working its way through the economy. Customer spending power could remain uncertain as we progress through the year.
Overall, I reckon Marks and Spencer could make an excellent part of my Stocks and Shares ISA if I had spare cash to devote to it.
It offers a double-digit return on capital employed, strong profit growth and climbing margins. In addition, it trades on a price-to-earnings ratio of less than 12 times.
That sounds remarkably cheap, given its prospects.
