Summer is winding down, and 2024 seems to be flying by. Leading artificial intelligence (AI) players and megacap techs including Nvidia and Microsoft continue to generate excitement and dominate the stock market conversation. However, some analysts now believe that bullish momentum is poised to rotate into smaller, lesser-known companies.
Whether the big rotation winds up happening remains to be seen, but it would be a mistake to become overly fixated on just a handful of big AI stocks to the exclusion of other great opportunities out there.
With that in mind, read on to see why these Motley Fool contributors think that On Holding (NYSE: ONON) and Take-Two Interactive Software (NASDAQ: TTWO) stand out as great buy-and-hold investments to pounce on right now.
Hot on the competition's heels
Jennifer Saibil (On Holding): Fancy footwear is becoming a crowded market, and Nike is feeling the heat. Even premium brand Lululemon Athletica , once the king of elite athleisure, has made a few missteps and has been on the receiving end of some intense investor backlash.
On Holding, best known for its Cloud line of athletic shoes, is emerging as a top player that's been performing (nearly) flawlessly, and the market sees a bright future for this top growth stock.
On is fairly new on the market, and as it becomes sustainably profitable, investors are finally starting to listen up. The second quarter was another fantastic showing, and strong results combined with a large market opportunity are leading to high stock gains.
In the 2024 second quarter, sales increased 29% year over year (on a currency neutral basis). That was split almost evenly between direct-to-consumer and wholesale, and together all of its channels are bringing On's products to a large cohort of die-hard fans.
It's ramping up deliberately and efficiently, which leaves a long growth runway and creates robust margin expansion and profitability. Management said it's expanding through a "controlled, multichannel" model.
Gross margin widened from 59.5% to 59.9%, which is the best in the industry, as net income increased 834%. Net margin expanded from 0.7% to 5.4%.
Management expects growth to accelerate in the back half of the year and for a 30% sales increase for 2024. Earnings per share (EPS) came in a penny below Wall Street expectations at $0.17, but the rest of the report was so strong that the market was willing to overlook that miss.
On targets a clientele that is affluent (and hence more resilient), and its innovative shoes and sneakers focused on comfort are gaining a legion on loyal fans. These shoppers are willing to shell out for On products even if they're economizing elsewhere.
On top of that, it is still a relatively unknown brand in many regions. In its home base of Switzerland, it has only around 50% brand penetration, and that gets lower everywhere else, down to 4% in Australia. The long-term opportunity is wide and attractive.
Expect On stock to keep rising. It's below its 52-week high right now, but that's not going to last long, and now is a great time to buy.
This stock could be a game changer for your portfolio
Keith Noonan (Take-Two Interactive): As far as overall risk-reward profiles go, Take-Two Interactive is one of my favorite stocks right now. Despite having very strong prospects over the next five years, the company's share price has fallen 6% in 2024 and is about 30% below its lifetime high.
Assuming the broader market avoids a dramatic bearish turn, I believe there's a very good chance the company can bounce back and hit new valuation highs by the end of next year.
If you're not already familiar with the business, Take-Two is one of the world's leading publishers of video games and is best known for hit franchises including Grand Theft Auto ( GTA ), Red Dead Redemption , and NBA 2K . The company also has a large mobile games division, which was augmented by its acquisition of Zynga in 2022.
Although Take-Two's business revolves around delivering fun and games, the stock offers serious upside potential. Crucially, the gaming company is gearing up to release the next major installment in its hugely successful GTA franchise. Grand Theft Auto VI is now slated to be released next fall and will likely go on to become this decade's most profitable video-game product.
Its immediate predecessor, GTA V , stands as the most profitable entertainment release in history and offers some indications about what investors can expect from next year's big debut.
With its most recent update, Take-Two revealed that Grand Theft Auto V has now shipped more than 200 million copies globally. Despite the game first being released in 2013, players have also remained highly engaged in the title's online multiplayer mode. As a result, in-game purchases have continued to be a significant performance driver for the company.
Grand Theft Auto VI has been designed with that same kind of decade-long product life cycle in mind, and it will likely go on to be a major success.
Take-Two Interactive Software's stock has seen some volatility this year due to uncertainty in the mobile-game business and GTA VI being released later in 2025 than initially expected. Nonetheless, I think investors can score big wins by taking advantage of the pullback. Some strong performance for the game is already priced into the stock, but the market appears to be underestimating the extent to which the title will be a cultural and financial phenomenon.
Jennifer Saibil has no position in any of the stocks mentioned. Keith Noonan has positions in Take-Two Interactive Software. The Motley Fool has positions in and recommends Lululemon Athletica, Microsoft, Nike, Nvidia, and Take-Two Interactive Software. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike, long January 2026 $395 calls on Microsoft, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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