A Bull Market Is Coming. Here Are 3 Stocks You’ll Absolutely Want to Own.

The stock market has bounced back and appears to be headed for a strong finish to 2023. The U.S. economy remains strong, with robust GDP growth of 5.2% in the third quarter. Inflation is easing. There’s even speculation that the Federal Reserve could reduce interest rates next year.

We’re not quite in a new bull market yet. However, there’s good reason to believe that a bull market is coming. If so, here are three stocks you’ll absolutely want to own.

1. Microsoft

Can there be a bull market without Microsoft (MSFT -1.16%) stock performing well? Maybe, but the odds are against it. The tech giant makes up 7.3% of the S&P 500 and nearly 10.5% of the Nasdaq-100.

With technology playing such a key role in the business world today, it’s hard to imagine a strong bull market without tech stocks showing strength. And if tech stocks, in general, are performing well, Microsoft is likely to do so. The company stands at the center of nearly every top technology trend around.

There’s no bigger tech trend these days than the skyrocketing interest in artificial intelligence (AI). Microsoft’s investment in and partnership with ChatGPT creator OpenAI has put the company at the forefront of AI development. Its Azure cloud services platform is benefiting from the AI boom and should continue to do so.

Gaming is another important part of Microsoft’s appeal. The company’s gaming revenue jumped 9% year over year in its latest quarter. Even better for the future, Microsoft now has Activision Blizzard under its wings with the closing of the acquisition in October.

2. Amazon

Amazon (AMZN 0.64%) stock has been an even bigger winner than Microsoft as 2023 winds down. I suspect that it will keep the momentum going in a new bull market for several reasons.

Most importantly, share price increases tend to track with earnings growth. I look for Amazon to encourage improve its profitability as its cost-cutting efforts and streamlining undertaken in recent quarters continue to pay off.

AI should furnish a strong tailwind for Amazon as well. As CEO Andy Jassy noted in the Q3 conference call, customers want to bring AI models to their data and “not the other way around.” Amazon Web Services (AWS) remains the leading cloud services platform based on market share. I expect AWS to deliver strong growth, especially with its new GPT-4 rival codenamed “Olympus” on the way.

We shouldn’t overlook Amazon’s core e-commerce business, though. It still has plenty of room to grow. I also think that the company’s moves into new markets including healthcare and supply chain services will be successful.

3. Vertex Pharmaceuticals

AI stocks won’t be the only game in town during a new bull market. I fully expect that Vertex Pharmaceuticals (VRTX -1.03%) will also be a big winner — just as it has been over the last couple of years.

Vertex has several key catalysts over the next few months. The U.S. Food and Drug Administration (FDA) is scheduled to announce its approval decision on exa-cel in treating sickle cell disease by Dec. 8, 2023. A second approval verdict for the gene-editing therapy in treating transfusion-dependent beta-thalassemia is anticipated by March 30, 2024.

The big biotech also has two important clinical updates just around the corner. Vertex plans to report results in early 2024 from late-stage studies of its vanzacaftor triple-drug combo in treating cystic fibrosis (CF) and its non-opioid pain drug VX-548.

I suspect that Vertex will have good news all around. Even better, though, investors can look forward to more potential catalysts down the road. The company is evaluating experimental drug inaxaplin in a pivotal investigate targeting APOL1-mediated kidney disease. It’s also making progress with several programs in early stage clinical testing that hold the potential to cure type 1 diabetes.