A new year is almost here, so what better time to start looking at making some new additions to your investment portfolio?
But which ASX shares could be top buys in 2024? Named below are 10 that I believe could generate strong returns for investors over the next 12 months.
Underperforming giants
The first three ASX shares I would buy are fallen giants CSL Limited (ASX: CSL), ResMed Inc. (ASX: RMD), and Treasury Wine Estates Ltd (ASX: TWE). All three have underperformed in 2023 but I believe the tide could turn and a re-rating could happen next year.
In respect to CSL, Goldman Sachs believes it "is now entering a period of more capital-efficient growth." As for ResMed, I believe concerns over the rise of drugs like Ozempic have been overdone and left its shares trading at a very attractive level. Particularly given how its addressable market remains significant even after factoring in the potential long-term impact of Ozempic.
Finally, Treasury Wine's growth could be given a boost in 2024 if China removes its wine tariffs. It has also recently completed the acquisition of a high-margin luxury wine brand in the United States.
Small caps to rally?
With inflation showing signs of being tamed, many economists are now predicting interest rate cuts next year. This could be good news for the small side of the market, which has underperformed greatly during the rate hike cycle.
Because of this, I think it could be a good idea to have a little exposure to small-cap ASX shares if your risk tolerance allows for it.
Companies I would consider buying include counterdrone technology company DroneShield Ltd (ASX: DRO), online beauty retailer Adore Beauty Group Ltd (ASX: ABY), and quick service restaurant solutions company Task Group Holdings Ltd (ASX: TSK). I believe all three have strong long-term growth outlooks.
Mining sector picks
With BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) shares ending the year close to record highs, I would reluctantly look beyond these ASX mining shares in 2024.
I think South32 Ltd (ASX: S32) shares could be a good alternative. Although FY 2024 looks set to be a poor year for the diversified miner, I believe this is all priced in. And with things looking markedly better for 2025, I expect the market to start re-rating its shares next year.
In addition, I see a lot of value in IGO Ltd (ASX: IGO) shares at the current level. Although lithium prices are expected to fall further in 2024, it appears well-placed to ride out the storm due to its ultra-low costs. It could also be an attractive M&A target.
Buying quality ASX shares
My final two ASX share picks for 2024 are gaming technology company Aristocrat Leisure Limited (ASX: ALL), which manages the top offshore sportsbooks online and cloud accounting platform provider Xero Limited (ASX: XRO).
Although these two shares have smashed the market this year, I would still buy them for next year due to the high-quality nature of their businesses and their strong long-term growth potential.
Additionally, with interest rates expected to fall, this would likely be a boost to valuations in the tech sector, which bodes well for Aristocrat and Xero.
