7 Top-Performing S&P 500 Stocks to Watch
InvestorPlace - Stock Market News, Stock Advice & Trading Tips This list of top-performing S&P 500 stocks demonstrates why these companies ar...
The stock market can be a confusing place to navigate these days. Usually, it is volatile and has inevitable ups and downs. But we are living in an age of pandemics and hyper-growth stocks. Some of the valuations are mind-boggling, to say the least. In such an environment, finding consistent performers becomes a very difficult task. Luckily, you can always refer to the top performers of the S&P 500 and see if there are any that you like enough to invest your money.
Although it might sound like a boring strategy, picking tried-and-tested performers is a sure-shot way of fireproofing your portfolio. Yes, you might miss out on the odd growth stock. But you will rest easy knowing you have invested in a safe, mature investment. S&P 500 stocks offer great returns over the long term. And you must remember, to get to the S&P 500, a company must satisfy stringent criteria.
Just as a refresher, a company should be a U.S. company, have a market capitalization of at least $13.8 billion, be highly liquid, and have a public float of at least 10% of its shares outstanding. Also its most recent quarter’s earnings and the sum of its trailing four consecutive quarters’ earnings must be positive.
Understandably, for a company to attain this kind of credibility and volume is not easy. If a company has managed to gain that kind of volume, you can rest easy when investing in the stock, such as these:
- Nvidia (NASDAQ:NVDA)
- PayPal (NASDAQ:PYPL)
- Carrier Global (NYSE:CARR)
- ServiceNow (NYSE:NOW)
- Newmont (NYSE:NEM)
- West Pharmaceutical Services (NYSE:WST)
- NortonLifeLock (NASDAQ:NLOK)
Top-Performing S&P 500 Stocks: Nvidia (NVDA)
Artificial intelligence computing leader Nvidia continues to be one of the most consistent tech stocks out there. Shares of the semiconductor company are up an astounding 1,333% in the last year. Clearly, the company cannot put a foot wrong.
Much of the success is connected to solid earnings performance. During the last five years, the company has grown the bottom line and the top line by 48.8% and 32.1%, respectively. But the last year was absolutely amazing for the Santa Clara, California-based firm. For fiscal 2021, revenue was a record $16.68 billion, a jump of 53% from $10.92 billion in the year-ago period.
Much of the credit has to go to the pandemic. Nvidia shares shot up exponentially during the health crisis, making it the best performing stock in the S&P 500 index and surpassing Intel (NASDAQ:INTC) as the largest U.S. semiconductor company by value.
Intel faltered with the development of its newest chips, and Nvidia picked up the spoils. The company is enjoying investor favor because its chips are in hot demand as people turn toward video games en masse for distraction while stuck at home. Let’s also not forget Nvidia and Advanced Micro Devices (NASDAQ:AMD) are the two most prominent players in the semiconductors space.
Because we are in the middle of an ongoing shortage of semiconductors in the U.S., these companies are very important to the working of several industries. In the eyes of analysts, the only thing these companies need to worry about is their supply chain. If Nvidia manages to take care of this area, I do not foresee any hiccups for the company.
Due to the coronavirus-driven turn to online shopping and digital transactions, PayPal saw record levels of payment volumes last year. In 2020, PayPal’s total payment volume or TPV grew by around one-third year-on-year.
In the second quarter of 2021, PayPal’s net payment volume amounted to around $311 billion, representing a 41% year-on-year growth, generated through more than 3.74 billion transactions that PayPal processed during that period.
Considering these numbers, Paypal shows no signs of slowing down on account of a post-Covid-19 economy. The payment processor expects an addition of about 50 million active users in 2021 and forecasts annual revenue of about $25.5 billion, well above the $21.4 billion estimated by analysts.
“At the beginning of the pandemic, consumers amid lockdown had no choice but to do all of their shopping online,” Chief Executive Officer Dan Schulman said.
“Today, the vast majority of consumers state that post pandemic, they will continue to shop online at their current elevated levels because it is more convenient, easier and saves time,” Schulman added.
Top-Performing S&P 500 Stocks: Carrier Global (CARR)
Despite its reputation as a stay-at-home play, multinational home appliances manufacturer Carrier Global is doing surprisingly well this year. Shares have a one-year return of 92.6%, and the company has delivered earnings beats in its last two quarters.
Carrier Global produced $17.5 billion in sales in 2020, a fall of 6% from the year-ago period. Its net income declined to $2 billion from $2.16 billion. However, in the fourth quarter sales were up 2%. Meanwhile, the company reduced net debt to $7.9 billion from $10 billion. It also spent $400 million on R&D investments last year and added 120 new products.
Carrier Global is also a green play. Building owners are starting to invest in better ventilation as part of sustainable initiatives. Taking advantage of this trend, Carrier Global is encouraging building owners to retrofit heating, ventilation, and air conditioning (HVAC) systems and is pursuing mergers and acquisitions in the HVAC space.
Silicon Valley-based ServiceNow is a cloud‑based platform offering digital workflow services and solutions for employees and enterprises. The large-cap SaaS company has been a Wall Street darling for several years now; it has a five-year return of 760.4%.
In its most recent quarter, the workflow software provider reported net income of $59 million, or 29 cents a share, compared with $41 million, or 20 cents a share, in the year-ago period.
Adjusted for stock-based compensation, depreciation, and amortization, and other costs, earnings were $1.42 a share. Revenue rose to $1.4 billion from $1.1 billion in the year-ago quarter. Subscription revenues improved 31% to $1.33 billion, while professional services and other revenues grew 41% to $79 million.
ServiceNow also deserves credit for improving its partner base. During the reported quarter, ServiceNow inked an agreement with Microsoft’s (NASDAQ:MSFT) new Windows 365 solution to let users easily access Cloud PCs directly through Microsoft Teams.
Considering all of these positive developments, it should be no surprise that the company is doing so well. In fact, things are expected to get even better. For the fiscal third quarter, non-GAAP subscription billings are forecasted between $1.32 billion and $1.325 billion, representing a jump of 23% year over year.
Top-Performing S&P 500 Stocks: Newmont (NEM)
Incorporated in 1921, Newmont is the world’s largest gold mining company. Based in Greenwood Village, Colorado, the company has mines in Argentina, Australia, Canada, Dominican Republic, Ghana, Mexico, Peru, Suriname, and the U.S.
Gold stocks are often seen as an effective hedge against inflation. That’s why NEM has done well this year. Recently, shares corrected from a 52-week high of $75.31 to current levels between $56 and $57 a pop. You can blame this on the recent dip in gold prices. A U.S. recovery and the threat of the Federal Reserve to raise interest rates is leading to bearish sentiment.
But real interest rates will remain negative for a long time, so investing in gold is never a bad option. And because Newmont is a bellwether of the industry, the investment decision is relatively straightforward.
The gold miner recently delivered another stellar quarter, with $1.6 billion in adjusted EBITDA and $578 million in free cash flow. Newmont produced 1.4 million attributable ounces of gold and 303 thousand attributable gold equivalent ounces from co-products. Looking ahead, Newmont’s has guided for stable production of more than 6 million ounces and improving costs from 2021 through 2024.
West Pharmaceutical Services (WST)
Founded in 1923 by Herman O. West and J.R. Wike of Philadelphia, West Pharmaceutical Services designs and manufactures the rubber stops used in vaccine packaging, vials, and pre-filled syringes, among other products. Much like several other pharmaceutical stocks, the pandemic was a tremendous tailwind for the company.
West Pharmaceutical, in its fiscal year 2020, generated more than $2.15 billion in sales. The Exton, Pennsylvania-based company, posted healthy sales and earnings growth in the latest quarter second quarter. Due to high demand, the medical company logged second-quarter earnings of $2.47 a share, a substantial uptick from $1.21 a share in 2020’s second quarter. Net income came in at $187.3 million, up from $91.2 million in the year-ago period.
As governments scramble to contain the virus, West Pharmaceutical will continue to do well. With the delta variant, we now know that booster shots will be in our future. All of that will translate into higher revenues for this one, ensuring its place on the list of top-performing S&P 500 stocks.
Top-Performing S&P 500 Stocks: NortonLifeLock (NLOK)
NortonLifeLock provides cybersecurity software and services. A Fortune 500 company and a member of the S&P 500 stock-market index, the software company is in the news recently because it is acquiring rival Avast in a cash and stock deal, valuing Avast between $8.6 billion and $9.2 billion, depending on the election of Avast stockholders.
NLOK will raise approximately $5.4 billion of new debt to finance the deal. Investors will have to watch this area closely. However, markets are viewing this deal favorably because NLOK will have well over 500 million total users and approximately 40 million direct customers once the acquisition closes.
Avast is a listed Czech-based cybersecurity company with more than 435 million users and 16.7 million paying subscribers. Its seven top markets are the U.S., the U.K., France, Germany, Canada, Brazil and Russia. Although the increased debt is certainly a concern, positive FCF generation should allow the company to decrease leverage significantly post-merger close.
Furthermore, the acquisition will allow the company to increase in size and expand its geographic footprint. With all this in mind, it’s not surprising that the company is on this list of top-performing S&P 500 stocks.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.
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