Summary

• Global markets have been impacted by geopolitical tensions, inflation, and the 2024 U.S. presidential election. With the right opportunities and strategy, investors stand to gain in 2025.

• In 2025, consider making data-driven decisions using a strategy that identifies stocks collectively strong on growth, value, profitability, earnings revisions, and momentum.

• Seeking Alpha’s portfolio of Top 10 Stocks for 2024 is up 125% vs. the S&P 500’s 25%, with top picks, including AppLovin up 713%, Celestica up 215%, and Modine +94%.

• SA’s Quant Rating System offers powerful analytics and draws on a model whose Top 10 stock recommendations have crushed the S&P 500 in 2023 and 2024.

• I am Steven Cress, Head of Quantitative Strategies at Seeking Alpha. I manage the quant ratings and factor grades on stocks and ETFs in Seeking Alpha Premium. I also lead Alpha Picks, which selects the two most attractive stocks to buy each month, and also determines when to sell them.

What moved the markets in 2024?

The markets in 2024 were riddled with caution and optimism. Volatility and mixed stock market movement saw the S&P VIX Index reach a three-week high amid election uncertainty. The month of August experienced sharp declines sparked by the yen carry trade unwind, with the S&P 500 tumbling 6% in its first three trading days. Yet, the S&P 500 recovered, gaining 23%, the Nasdaq rose 30%-plus, and the Dow gained nearly 13% to deliver a banner year.

Equity market growth was driven by strong corporate earnings, cooling inflation, and resilient consumer spending. The global economy saw moderate expansion as central banks eased monetary policies, inflation rates normalized, and lingering pandemic-related supply chain pressures continued to diminish. The U.S. has been a key outlier in terms of single-country economic performance, experiencing more substantial growth among its major peers. Unemployment remains relatively low, and inflation is stubbornly above the central bank’s target.

Economic Performance of Major Economy

Political tensions in Russia-Ukraine and the Middle East periodically contributed to market volatility throughout the year. However, the effects remained somewhat limited, with markets showing broad resilience to geopolitical risks.

The Federal Reserve’s 50 bps interest rate cut in September, the first rate cut in more than four years, significantly contributed to market performance in late Q3 and early Q4. This move signaled a shift toward supporting economic growth, benefiting interest rate-sensitive sectors.

Markets responded strongly to Donald Trump’s election victory, with indexes reaching multiple consecutive all-time highs following his win. However, the reaction was mixed across sectors. While crypto assets, tech, and small-cap stocks soared, healthcare stocks, particularly in the biotech sector, suffered due to anticipated policy changes.

What’s in Store for 2025?

Wall Street’s two-year bull market could rally for its third year in 2025 as strong corporate earnings, solid job reports, and central banks on track to cut rates fuel investor optimism.

The AAII Investor Sentiment Survey

After an impressive Q3 big tech earnings season, nearly 40% of American Association of Individual Investors (AAII) survey respondents were positive about the market outlook over the next six months – a figure above the 37.5% historical average.

Despite ongoing concerns about inflation, the Federal Reserve’s pivot to cutting interest rates, strong economic resilience, and potential regulatory easing from the new administration has contributed to optimism for the New Year.

In 2024, my top selections included multiple consumer discretionary and tech picks, as well as individual selections across the communication services, financials, industrials, and energy sectors. Despite multiple bouts of volatility throughout the year, my picks delivered 125%, with seven out of 10 picks soundly beating the market.

2024 - 10 Top stock picks crushing performance

2024 Top 10 Stock Picks Performance

Based on Seeking Alpha’s rigorous Quant Ratings and Factor Grades, my 2024 top stock picks also outperformed the Magnificent 7, the tech giants with outsized influence over index gains. My basket of stocks delivered an impressive 125% return, significantly surpassing the Magnificent Seven's 57% gain.

Quant Top Picks 2024 vs. Magnificent 7 vs. S&P500

Additionally, when looking back at my Top 10 Stocks for 2023, the selections have delivered over 115% since their selection in January 2023.

Top Quant Picks 2023 vs. S&P500

My selections for 2025 include some carry-overs from 2024 based on their strong fundamentals, excellent momentum, and analyst revisions. Although several of my selections are trading near 52-week highs, momentum investing has proven successful over time, given persistent market trends and behaviors that reinforce the trend. For the new year, consider stocks with robust fundamentals that have proven to deliver results amid macro and geopolitical headwinds

Will there be a bull market in 2025?

2025 could see a bull run, building on the impressive momentum of 2024. However, potential challenges still loom on the horizon. Inflation has moderated in 2024 but may prove stubborn in the year ahead, perpetuating further uncertainty around interest rates as the Federal Reserve navigates a complex economic landscape. Geopolitical challenges and potential tariff escalations could incite volatility in the markets. Current valuations pose a significant risk, as they are above forward and backward-looking historical averages. Throughout 2024, the Magnificent 7 stocks showed mixed performance, acting as a safety trade during market uncertainty but showing signs of a potential slowdown with lower forward growth rates.

Given the complex interplay of factors impacting equity markets today—from interest rates to sector rotation and earnings sustainability—having a comprehensive quantitative framework provides investors with a more reliable and informed decision-making framework.

Top Financial Stocks

Financial stocks performed well in 2024, with the sector up around 30%. While some financials might face challenges from further rate cuts, the sector could continue to benefit from a resilient economy and potential regulatory easing.

1. OppFi Inc. (OPFI)

• Market Capitalization: $651.78M

• Quant Rating: Strong Buy

• Sector: Financials

• Industry: Consumer Finance

• Last 30 Days Change: +91%

• Quant Sector Ranking (as of 1/7/2025): 5 out of 686

• Quant Industry Ranking (as of 1/7/2025): 2 out of 39

Powered by AI-driven underwriting, OPFI leverages its scalable tech platform to provide credit access to under-served middle-income consumers. The company delivered exceptional Q32024 earnings results, with revenue reaching a new high of $136M. At the same time, GAAP net income more than doubled year-over-year, driven by improved credit performance, higher yields, and better operational efficiency. The company boasts select profitability metrics, with a 100% gross profit margin and a 32% return on equity, which are substantially higher than the sector median.

OPFI Factor Grades

OPFI Factor Grades

OPFI’s ‘A+’ valuation grade is a standout given the stock’s incredible 90% price return in the last three months. The company is currently trading at more than a 25% reduction in terms of its FWD P/E, while its TTM PEG GAAP multiple is more than 95% discounted relative to the financials sector. OPFI is positioning itself as a broader digital financial services platform, evidenced by its investment in small business lender Bitty. With solid fundamentals and positive timeliness indicators like EPS revisions and price momentum, OPFI is a small cap poised for further upside potential should the sector experience a sustained rally.

2. PayPal Holdings, Inc. (PYPL)

• Market Capitalization: $89.76B

• Quant Rating: Strong Buy

• Sector: Financials

• Industry: Transaction & Payment Processing Services

• Last 30 Days Change: -10%

• Quant Sector Ranking (as of 1/7/2025): 17 out of 686

• Quant Industry Ranking (as of 1/7/2025): 2 out of 43

PayPal Holdings, Inc. is a leading fintech company providing global digital payment solutions and financial services. With more than 400 million active accounts and an enormous reach, PYPL offers a comprehensive suite of products to complement its flagship peer-to-peer transfer capabilities. The company is driving growth through multiple initiatives, including its new "Fastlane" checkout solution and strategic partnerships with major players like Shopify (SHOP). These efforts have contributed to a FWD revenue growth that is 25% greater than the broader financials sector. PYPL sports an ‘A’ Profitability grade supported by its incredible $7.67B in cash from operations and an ROE of 22%, which is over 100% above the sector median. Solid growth, exceptional profitability, and price momentum have led to an astounding 38 FY1 up revisions in the last 90 days and zero down revisions, demonstrating Wall Street consensus optimism around the stock.

PYPL Revisions Grade

PYPL Revisions Grade

While the company’s recent performance has detracted from its valuation profile to some degree, PYPL is trading at a sector-relative discount in terms of its price-to-sales and price-to-cash flow ratios. Despite increased competition, PayPal’s brand recognition, robust financial position, and focus on innovation make it well positioned for future growth in the increasingly popular digital payments landscape.

Top Consumer Discretionary Stocks

The consumer discretionary sector was strong in 2024, up over 25% despite higher interest rates. Resilient consumer spending and economic growth fueled the rally as the sector stands to gain further in 2025, with expected interest rate cuts and lower inflation.

3. Brinker International, Inc. (EAT)

• Market Capitalization: $6.26B

• Quant Rating: Strong Buy

• Sector: Consumer Discretionary

• Industry: Restaurants

• Last 30 Days Change: +29%

• Quant Sector Ranking (as of 1/7/2025): 2 out of 486

• Quant Industry Ranking (as of 1/7/2025): 1 out of 42

Despite a challenging 2024 restaurant environment plagued by persistent inflation, Brinker International executed a remarkable turnaround in 2024. Brinker, the parent company of Chili’s, doubled down on value-focused marketing and improved operations. Chili’s “3 for Me” value meal and social media-driven Triple Dipper promotion helped drive 14% sales growth and a 6.5% traffic increase in Q1 FY2025. Other growth highlights include an incredible year-over-year EPS diluted growth of 32% and a FWD EBITDA growth of 19% vs. the sector’s 2.7%. EAT’s efforts have resulted in strong profitability metrics, including $425M in cash from operations.

EAT Growth Grade

EAT Growth Grade

EAT’s solid strategy execution is reflected in its strong price momentum, which has delivered an astounding 244% over the last year. Wall Street optimism is reflected in the company’s revisions grade. EAT has received 19 FY1 up revisions in the last 90 days and zero down revisions. Analysts expect EPS to grow more than 50% in Q2 FY2025 as the stock offers investors solid exposure to growth, profitability, and solid momentum within the sector, like my next consumer discretionary pick.

4. Stride, Inc. (LRN)

• Market Capitalization: $4.56B

• Quant Rating: Strong Buy

• Sector: Consumer Discretionary

• Industry: Education Services

• Last 30 Days Change: +30%

• Quant Sector Ranking (as of 1/7/2025): 15 out of 486

• Quant Industry Ranking (as of 1/7/2025): 1 out of 25

Stride is a technology-based education company providing innovative online and blended learning solutions for K-12 students, career learners, and adult education. The company offers a comprehensive suite of products and services, including a proprietary and third-party curriculum. LRN is focused on meeting the demand for flexible, customer-focused virtual learning solutions, specifically emphasizing career-forward skills. In Q1 FY2025, the company saw an 18.5% increase in enrollment, totaling a record 222,000, with revenue increased 15% and adjusted operating incoming increasing 295%.

LRN Q1 FY2025 Investor Presentation

The company’s tremendous growth has translated into solid profitability. LRN boasts a TTM EBITDA margin of 16%, which is a staggering 40% above the sector median, and offers an incredible $7.41 in cash per share vs. the sector’s $2.42.

LRN Profitability Grade

LRN Profitability Grade

While the company’s ‘A+’ momentum has impacted the company’s overall valuation grade, LRN is trading at a 50% discount in terms of its TTM PEG GAAP and a 22% discount in terms of its FWD EV/EBIT relative to the Consumer Discretionary sector. As families and individuals increasingly seek alternatives to traditional education, Stride’s established virtual learning platform is well positioned to capture growing market demand.

5. Urban Outfitters, Inc. (URBN)

• Market Capitalization: $5.39B

• Quant Rating: Strong Buy

• Sector: Consumer Discretionary

• Industry: Apparel Retail

• Last 30 Days Change: +0.1%

• Quant Sector Ranking (as of 1/7/2025): 12 out of 486

• Quant Industry Ranking (as of 1/7/2025): 3 out of 36

Lifestyle retailer Urban Outfitters operates a portfolio of retail brands, including Anthropologie, Free People, Urban Outfitters, and FP Movement, which target an array of consumer segments. The company launched Nuuly in 2019, aiming to capitalize on the growing clothing rental market in order to attract younger, sustainably minded customers. The company’s efforts have been a resounding success. In Q3, Urban delivered record results, with total sales up 6%, beating EPS estimates by $0.23 compared with the previous year. Growth was driven by the strong performance of its premium brands Anthropologie and Free People, while Nuuly sales increased 48% Y/Y.

URBN Q3 FY2025 Investor Presentation

These financial performance metrics have contributed to its solid Quant Growth grade, which includes an EPS FWD GAAP growth of 35% vs. the sector’s 4% and a FWD operating cash flow growth of 51%, which is a 490% increase vs. the sector median. Through increased marketing spend, reduced markdowns, and effective inventory management, URBN has been able to strengthen profitability. The company boasts an incredible $412M in cash from operations and a solid net income margin of 6%. The company’s excellent growth and above average profitability have contributed to an exceptional revisions grade, with 11 FY1 up revisions and zero down revisions in the last 90 days.

URBN Revisions Grade

URBN Revisions Grade

URBN currently trades in line with the sector in terms of its valuation; however, certain metrics are heavily discounted, such as its FWD GAAP P/E of 15x vs. the sector’s 19.3x. URBN is a top American urban retailer, offering investors solid fundamentals coupled with considerable optimism for its trajectory in 2025.

Top Industrial Stocks

The industrials sector lagged the overall market in 2024. Reshoring trends, a recovering manufacturing sector, and lower interest rates may boost the sector in 2025.

6. Argan, Inc. (AGX)

• Market Capitalization: $2.12B

• Quant Rating: Strong Buy

• Sector: Industrials

• Industry: Construction and Engineering

• Last 30 Days Change: +9%

• Quant Sector Ranking (as of 1/7/2025): 3 out of 615

• Quant Industry Ranking (as of 1/7/2025): 1 out of 34

Argan is the top Quant-rated Engineering and Construction stock that provides services to the power, industrial construction, and telecom infrastructure sectors. As a servicer of both traditional gas-fired power plants and renewable energy facilities, AGX is uniquely positioned to capitalize on the continued surge in U.S. energy demand driven by data centers, manufacturing reshoring, and EV adoption.

"With our energy agnostic capabilities, Argan is uniquely positioned to facilitate the construction of any type of power facility. So, as it has become more evident that the most efficient way to ensure stable grids and reliable power generation is through a combination of traditional gas-fired power plants as well as renewables, we're well suited for any and all projects that bolster energy generation," said David Watson, CEO of Argan, Inc.

In Q3 2024, AGX recorded its second-highest quarterly earnings result ever, with 57% revenue growth to $257M. It delivered a positive adjusted EPS surprise of $0.74, contributing to the company’s overall ‘B’ Growth Grade. Other growth highlights include a 26% FWD EBITDA, which is a 263% increase vs. the sector. AGX’s extraordinary price momentum has outstripped the sector over the last four quarters, returning over 200% on a trailing one-year basis.

AGX Momentum Grade

AGX Momentum Grade

Despite the gains, AGX’s valuation has improved since the beginning of December. The company is delivering on key metrics like its TTM PEG GAAP of 0.33x vs. the sector’s 1.1.x. With a substantial project backlog and the ability to service traditional and renewable energy projects alike, AGX is poised for future growth opportunities in 2025.

7. DXP Enterprises, Inc. (DXPE)

• Market Capitalization: $1.30B

• Quant Rating: Strong Buy

• Sector: Industrials

• Industry: Trading Companies and Distributors

• Last 30 Days Change: +21%

• Quant Sector Ranking (as of 1/7/2025): 11 out of 615

• Quant Industry Ranking (as of 1/7/2025): 2 out of 43

DXP Enterprises is a Houston-based company that supplies critical industrial equipment across various sectors. The company’s largest division is its Service Centers segment, which sells pumps, bearings, and power transmission products. Its service centers also offer maintenance and repair services to industrial customers. In Q3, DXPE drove performance through multiple acquisitions, which has long been central to its growth strategy but has come at the expense of short-term margins.

“If you noticed, SG&A was probably as a percent of sales was a little high. And so we are – I think it’s important to note that we are not trying to manage the business to maximize profits at the expense of sales and that – in quite the opposite, we have a lot of bets on the table to grow sales,” said David Little, Chairman and Chief Executive Officer of DXPE.

Despite prioritizing growth over margin optimization, DXPE maintains healthy profitability with 17% ROE (a more than 25% increase vs. the sector) while delivering exceptional growth metrics, including 45% Y/Y EPS GAAP growth. Trading at an attractive valuation, with a forward Price-to-Sales of 0.8x vs. the sector’s 1.5x, DXPE offers investors exposure to industrial services growth at compelling multiples.

Top Tech Stocks

The tech sector soared in 2024, driven by AI advancements and quantum computing innovation. Certain tech stocks are likely to see continued growth in 2025 as cloud adoption and expanding AI applications continue to grow.

8. Celestica Inc. (CLS)

• Market Capitalization: $11.50B

• Quant Rating: Strong Buy

• Sector: Information Technology

• Industry: Electronic Manufacturing Services

• Last 30 Days Change: +37%

• Quant Sector Ranking (as of 1/7/2025): 13 out of 550

• Quant Industry Ranking (as of 1/7/2025): 1 out of 16

Celestica has emerged as a standout Electronic Manufacturing Services stock and two-time Alpha Pick. The company’s success has been driven by its strategic pivot into AI infrastructure manufacturing, particularly through its focus on networking switches for data centers. The company’s Connectivity & Cloud Solutions segment, representing 67% of total revenues, has grown 42% Y/Y, fueled by hyperscaler demand for AI computing capacity.

CLS Q3 2024 Investor Presentation

CLS Q3 2024 Investor Presentation

In Q3, CLS’ financial performance reached new heights, with revenue totaling $2.5B (up 22% Y/Y) and a record adjusted EPS of $1.04, contributing to strong price momentum in recent months. Despite returning nearly 250% in the last year, CLS has retained an extremely attractive valuation, one of the stock’s most compelling selling points. The company is trading at a significant discount to the sector across a number of metrics outlined below.

CLS Valuation Grade

CLS Valuation Grade

CLS’ 'A' revisions grade supports the notion that the stock has further room to run, with EPS projected to climb 37% Y/Y in Q4. With proven execution in AI data center hardware, expanding operating margins, and attractive valuation characteristics, CLS offers investors strong exposure to a massive growth market in 2025.

9. Intapp, Inc. (INTA)

• Market Capitalization: $4.85B

• Quant Rating: Strong Buy

• Sector: Information Technology

• Industry: Application Software

• Last 30 Days Change: +12%

• Quant Sector Ranking (as of 1/7/2025): 18 out of 550

• Quant Industry Ranking (as of 1/7/2025): 3 out of 196

At the forefront of modernizing critical operations, Intapp, Inc. provides cloud-based software solutions designed to manage client relationships, deal flow, and compliance requirements for professional services firms. The company’s net income doubled to $15.1M in Q1 FY2035, driven by enterprise client expansion and new AI products, contributing to the company’s ‘B’ profitability grade. INTA displays other strong fundamentals, in particular, an ‘A+’ growth grade supported by FWD revenue growth of 17% vs. the sector’s 5% and Y/Y operating cash flow growth of 123%.

INTA Factor Grades

INTA Factor Grades

The company ranks exceptionally high in terms of price momentum and earnings revisions on a sector-relative basis. INTA has returned nearly 75% on a trailing one-year basis, coupled with 10 FY1 up revisions and zero down revisions in the last 90 days. Intapp’s vertical-specific AI solutions and growing enterprise relationships position it for continued success in 2025.

10. Credo Technology Group Holding Ltd (CRDO)

• Market Capitalization: $12.82B

• Quant Rating: Strong Buy

• Sector: Information Technology

• Industry: Semiconductors

• Last 30 Days Change: +10%

• Quant Sector Ranking (as of 1/7/2025): 3 out of 550

• Quant Industry Ranking (as of 1/7/2025): 2 out of 66

In 2024, niche suppliers and servicers of AI infrastructure demands experienced extraordinary success, and 2025 is likely to be a continuation. Founded in 2008, Credo Technology Group is the No. 2 Quant-ranked semiconductor stock and the No. 3 Quant-ranked overall technology company. The company specializes in developing innovative products optimized for Ethernet applications, including integrated circuits and active electrical cables (AECs). CRDO’s stellar A+ Growth Grade has been driven by strong demand for its AECs for AI data centers. Key highlights include a FWD EBITDA growth of 129% vs. the sector’s 5% and an EPS FWD Long-Term Growth (3-5YR CAGR) exceeding the sector median by nearly 500%. This astronomical growth has contributed to the company’s eye-popping price momentum; CRDO has returned triple digits in the last four return periods and delivered over 300% on a trailing one-year basis.

CRDO Momentum Grade

CRDO Momentum Grade

Remarkably, CRDO is still trading at a slight discount, offering a FWD PEG Non-GAAP ratio of 1.5x, which is a 17% reduction vs. the IT sector median. With consensus optimism around the company, analysts are projecting an astounding 359% Y/Y EPS growth for the next quarter, making this stock a must-have in 2025.

New Year, New Stocks: Celebrate 2025 with 10 Top Quant-Rated Stocks

The markets showed strong resilience in 2024, with the S&P 500 gaining 23%, the Nasdaq rising more than 30%, and the Dow climbing nearly 13%. While the Magnificent 7 played a significant role in market gains, their influence began to moderate as broader market participation emerged. The year was marked by several key events:

• Trump’s election victory.

• First Federal Reserve’s rate cut in four years.

• Continued geopolitical tensions in Ukraine-Russia and the Middle East.

Looking ahead to 2025, investors and analysts alike are optimistic about a potential third year of bull market momentum, supported by strong corporate earnings, improving employment data, and anticipated central bank rate cuts in the U.S. and abroad. However, current valuations pose a significant risk, trading above historical averages, with bonds yielding more than stocks.

Most of my picks offer tremendous valuations, growth, profitability, and rising earnings revisions. We have many stocks with strong buy recommendations, and you can filter them using Stock Screens to suit your specific investment objectives. Alternatively, Alpha Picks might be ideal if you're interested in two monthly stock picks of the top "strong buy" quant stocks. Seeking Alpha’s quant ratings and investment research tools help to ensure you are furnished with the best resources to make informed investment decisions while taking the emotion out of investing. Happy investing!