“The biggest lesson I’ve learned from the stock market in 2024 has been…”

As 2024 draws to a close, here’s a smattering of Foolish wisdom from across our free-site contributing team that they’re taking away from another year investing in the stock market.

Patient investors can find opportunities to buy just about any shares at bargain prices

By Stephen Wright. Even the most attractive stocks get cheap at some point. In 2024, I’ve seen shares in some companies trading at multiples that I once thought were unimaginable.

Two examples come to mind. From the FTSE 100 there’s Diageo, and discount retailer Five Below is a US example.

Diageo shares have tended to trade at a price-to-earnings (P/E) multiple of around 23. But the stock fell to 16 times earnings this year – its lowest level for a decade.

Likewise, Five Below’s shares traded at an earnings multiple of 12 this year. On a P/E basis, the stock has never been this cheap – the ratio has typically been between 30 and 40.

The lesson is that patient investors can find opportunities to buy just about any shares at bargain prices. Given this, there’s really no reason to buy a stock at a price that isn’t really justified.

Stephen Wright owns shares in Diageo and Five Below.

Beware of holding on for too long

By Zaven Boyrazian. 2024 has been a terrific year for the stock market. And it’s been thrilling to watch my portfolio outperform, delivering double-digit returns. But not all of my investments lived up to expectations. And Frontier Developments (LSE:FDEV) serves as an excellent reminder of the risks of holding a losing stock for too long.

The game development studio was seemingly perfectly positioned to thrive in 2020. Its games were flying off the shelves, and it had an impressive lineup of new titles across its own IPs and licensed ones, including Warhammer and Formula 1.

Despite previous successes, each release failed to impress players. Sales underperformed, and earnings collapsed. And each time, I continued holding on, assuming the next release would help turn things around.

Having played and enjoyed Frontier’s games when I was younger, anchoring bias unknowingly settled in. And I ended up holding the stock through four flops that sent the share price tumbling 90%. The lesson: don’t stay invested in companies that keep disappointing customers.

Zaven Boyrazian does not own shares in Frontier Developments.

Dividends will see me through

By Harvey Jones. Housebuilder Taylor Wimpey (LSE:TW.) was having a terrific 2024 but its shares have suddenly slumped 19.51% in the last three months, wiping out most of my recent growth. Over 12 months, they’re up just 6.52%.

Hopes of a string of interest rate cuts appear to have been dashed with inflation set to be sticky, squeezing mortgage costs and buyer demand. 

I’m not worried. Taylor Wimpey has a solid balance sheet and its order book now totals £2.2bn plus joint ventures. There’s no way I’ll sell.

And the lesson learned? High-yield dividend stocks are a comfort in tricky times. Taylor Wimpey has a bumper trailing yield of 7.33% and on 15 November it paid me £164.40, which I’ll instantly reinvest.

That’ll buy me another 126 shares at today’s reduced price of 1.30p, lifting my total to 3,551. One day, my Taylor Wimpey shares will bounce back and thanks to my dividends, I’ll be holding even more of them.

Harvey Jones owns shares in Taylor Wimpey.

Momentum is a powerful beast

By Paul Summers. My main lesson has been that expensive stocks can keep rising far beyond what I consider fair value.

The best examples of this are surely the Magnificent Seven tech giants from across the pond. Despite already boasting seriously high valuations, stocks such as Nvidia have kept rising as investors whip themselves into a frenzy over the potential of AI to alter our lives dramatically (and make serious money in the process).

This doesn’t mean I plan to stop looking at company fundamentals completely in 2025. Ultimately, any stock’s long-term returns will be based on its earnings and assets. As Warren Buffett has said, ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’

But I will also be careful not to snatch at profits if the story hasn’t radically changed.

Paul Summers has no position in Nvidia

The post “The biggest lesson I’ve learned from the stock market in 2024 has been…” appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Diageo Plc and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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