November 5, 2024

Top 2 S&P 500 Growth Stocks Set to Dominate the Market Over the Next 5 Years

Prediction: These 2 Magnificent S&P 500 Growth Stocks Will Crush the Market Over the Next 5 Years

The S&P 500 index, a compass for investors navigating the vast waters of U.S. equities, has delivered an impressive total return of 109% over the last five years and a staggering 257% over the last decade. For those investing with a conservative approach, the choice to utilize an exchange-traded fund (ETF) that tracks this benchmark is sound. However, certain individual stocks within this index are poised to potentially outperform the market averages, and today, we delve into two standout growth stocks you should consider for the next five years.

This Tech Giant Still Has Room to Run

Keith Noonan of The Motley Fool highlights Amazon (NASDAQ: AMZN) as a stock with the potential to outperform its S&P 500 rivals. Despite a year-to-date gain of 22%, slightly lagging behind the index at 23%, there are strong indicators that Amazon’s growth trajectory will lead to significant returns over the next five years.

First and foremost, Amazon’s core business framework is robust. Their latest quarterly report reveals a year-over-year revenue increase of 10%, totaling $148 billion, with operating income more than doubling to $14.7 billion. The crown jewel here remains Amazon Web Services (AWS), which saw revenue surge by 19% to $26.3 billion, bolstered by another impressive 20% increase in the digital advertising sector, culminating at approximately $9.5 billion.

Additionally, the North American market reported sales of $90 billion, marking a solid 9% increase, while the international sales figures also exhibited a healthy growth of 7%, hitting $31.7 billion. These expansions stem primarily from the higher-margin AWS and digital advertising units, paving the way for improved profit margins company-wide. Though Amazon’s e-commerce operations account for a significant portion of revenue, their potential for increased automation and efficiency via artificial intelligence (AI) could very well unlock untapped profit opportunities.

As these technologies integrate into their logistics, Amazon’s ability to provide expedited delivery at lower costs will likely provide an enticing edge over competitors, marking it as a stellar investment for the long haul.

This Retail Leader Can Keep Crushing the Market

Jennifer Saibil from The Motley Fool presents Home Depot (NYSE: HD) as another formidable stock, one that has proven its mettle against market fluctuations for many years. Home Depot has consistently delivered returns nearly double that of the S&P 500 over the past decade, and the trend is expected to continue, even amid challenges stemming from high mortgage rates and consumer inflation.

Despite the struggles in the real estate market impacting the home improvement segment, Home Depot reported a modest sales uptick in the fiscal second quarter, thanks to strategic acquisitions and new store openings. While their comparable sales dipped by 3.3%, the company’s profitability and resilience set it apart from competitors. Notably, in-store digital sales rose by 4% year-over-year and captured half of their order volume, showcasing the firm’s effective omnichannel strategy.

The company is not merely content with maintaining the status quo; it is on an aggressive path to expand its footprint by adding 12 new stores in fiscal 2024 and investing in improved service delivery for professional contractors. With the prospect of declining interest rates, the broader market could see a resurgence, and there’s substantial reason to believe Home Depot will recover and thrive once again.

Conclusion

For conservative investors seeking robust growth potential within the S&P 500, both Amazon and Home Depot present compelling cases backed by solid performance data and strategic plans for expansion. The tech giant is navigating the complexities of AI and cloud services, while the retail powerhouse is adeptly handling external pressures while positioning itself for future growth. As we survey the horizon for these stocks, it is clear they are poised not only to endure but to flourish in the economic landscape of the next five years.

Ignoring these two formidable stocks in your investment portfolio could mean passing up on substantial gains. So take note, plan wisely, and let these market leaders guide your financial decisions in the coming years.

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