Eight great trading ideas you can steal from Citi private bank

• Citi’s got a few high-conviction investing ideas for 2024, and you might want to put these on your radar. After all, these assets appear to be undervalued, underappreciated, and poised for strong growth – and that’s a recipe for higher returns over a shorter time horizon

• The ideas span multiple industries: semiconductor equipment makers, cybersecurity, energy, copper, pharma, and defense, to name a few.

• But they also include certain sectors in Japan and private asset managers in the US.

The folks at Citi Private Bank spend a lot of time focused on so-called core investments. After all, those stocks, bonds, and other assets do make up some 85% of the portfolios of its ultra-wealthy, high-net-worth clientele. But that’s not where their interests end. They’re also forever coming up with ideas for where to invest the other 15% – seeking out assets that are undervalued, underappreciated, and poised for strong growth. Here are their eight best ideas for 2024.

1. Semiconductor equipment makers.

In the past year or so, AI has taken off like a rocket, both in terms of technical advancements and AI research and investment. Now, Citi doesn’t expect all newcomers to the generative AI field to be successful, but it does expect them all to need advanced semiconductor production equipment (SPE) to operate. And since the stocks of those firms have underperformed the semiconductor producers so far, Citi says there could be strong catching-up gains ahead. So rather than chase the “silicon gold miners”, like everyone else, Citi says, you might want to take a look at the “pick and shovel” companies that sell sophisticated machines and materials to the industry. The iShares Semiconductor ETF (ticker: SOXX; expense ratio: 0.35%) provides exposure to both semiconductor producers and semiconductor equipment manufacturers, but you may also want to consider investing in established SPE companies, like Applied Materials, Tokyo Electron, LAM Research, or KLA.

2. Cybersecurity.

Geopolitical risk is going to continue to be a theme in 2024 – with critical elections in the US, Europe, India, and elsewhere. This year, voters are likely to see more manipulation of news, data, and images than they have in the past. And that will bring a new focus to cybersecurity. Citi’s research shows that cybersecurity spending is already a top item in the tech spending budgets of leading US firms. And with stock valuations in the industry falling toward pre-pandemic levels, there could be a nice opportunity here for investors. To take advantage, you could consider buying the First Trust Nasdaq Cybersecurity ETF (CIBR; 0.6%).

3. Western energy producers, equipment, and distributors.

Russia’s invasion of Ukraine realigned energy supply chains and had Europe turning to gas suppliers from the US and the Middle East. And as conflict broke out in the Middle East, we saw a renewed focus on the risks of overly concentrated energy supplies and geopolitical tensions. Citi says the relatively low valuations of most oil and gas producers, pipelines, and equipment makers will make them attractive investments to consider – not only for their income-producing qualities, but also as a hedge against shocks and inflation. To bring this idea into your portfolio, you might consider the Energy Select Sector SPDR Fund (XLE; 0.1%) or the iShares U.S. Oil Equipment & Services ETF (IEZ; 0.4%).

4. Copper miners and clean energy infrastructure.

The transition away from fossil fuels and toward clean energy involves extensive investment and experimentation. Citi sees a ton of future demand in copper, which is limited in its potential supply and has no real substitute. The electrification of infrastructure and almost every part of an electric vehicle will require big quantities of this shiny metal. And Citi says profitable copper producers could be one of the lower-risk opportunities in this megatrend. What’s more, copper’s price tends to move in the same direction as global growth – and much of the world sees that improving. If you want some copper miners into your investment mix, the Global X Copper Miners ETF (COPX; 0.65%) could get the job done.

5. Medical tech and tools.

AI’s expected to be a huge shot in the arm for drug discovery and testing. And it’s starting at an interesting time: stock valuations have fallen sharply as interest rates have risen and as the pandemic-driven medical tech frenzy has faded. So the private bank expects to see a strong improvement in cheaply valued medical tech stocks and more mergers and acquisitions in the field as big companies look to add some muscle to their drug pipelines. If this idea rings true for you, consider the SPDR S&P Health Care Equipment ETF (XHE; 0.35%) or the iShares Biotechnology ETF (IBB; 0.45%).

6. Defense contractors.

The ongoing conflicts in Ukraine and the Mideast are stretching the manufacturing capacity of US and European defense equipment and arms producers. And that’s meant that some shipments have fallen behind. With no real end in sight for either conflict, global defense companies are likely to remain in unfortunate demand. The Global X Defense Tech ETF (SHLD; 0.5%) invests in the industry.

7. Private capital asset management firms.

Most US banks have underperformed the broader US stock market as increased regulation has stifled their lending ability. And that’s also created an opportunity for certain rivals: notably, private capital asset managers. Those firms have entered the market to fill the void that banks have left behind. You may be able to benefit as well, investing directly in the listed managers that oversee private credit funds like Ares Management or Blue Owl.

8. Certain Japanese assets.

The Bank of Japan (BoJ) took a very different approach to the inflation spike of 2021 and 2022, keeping its short-term interest rates near zero or below, while the world’s other central banks dramatically hiked theirs. This year, Citi says you can expect even more differences, with the BoJ likely to increase interest rates, while other major central banks cut theirs. And there are several ways to potentially profit if that happens: you could invest directly in the Japanese yen, which would become more attractive to foreign investors and savers, or buy shares in Japanese banks like MUFG. Japanese tech firms in battery technology, robotics, automation, or semiconductor equipment, like Tokyo Electron, could also do well. The Global X Japan Robotics & AI ETF (2638; 0.59%) invests in some of the top stocks there.

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Capital at risk. Analyst insights are provided for information purposes only.