We all want to beat the market. It’s easier said than done, but doing your homework can give you an edge over the standard exchange-traded fund (ETF) portfolio these days. Here are three stocks that beat the market S&P 500 which I think I can start again with time.
1. Apple
An investment gem for years, Apple (NASDAQ:AAPL) was in the news a few weeks ago for becoming more valuable than Microsoft (NASDAQ: MSFT)The company has outperformed the S&P 500 by 234% over the past five years.
This is one of Warren Buffett’s favorite sectors, and for good reason. Its products are very useful, and phone and computer companies have a high barrier to entry. It takes deep pockets and a solid infrastructure to get involved in this sector.
Opponents of my Apple pick will likely point to last year’s 2.8% revenue decline and a weak first quarter in 2024. What I think is missing here is the potential demand Apple could create by integrating AI-powered programs into its products.
More recently, discussions around Apple have focused on the announcement of Apple Intelligence, its planned AI business, and a potential partnership with Metaplatforms on generative AI. This could be just what Apple needs to take the momentum seen by stocks like Nvidiawhose semiconductor chips are essential to AI-based businesses.
I like Apple, which represents a new source of demand for this technology company. It has the product range to implement AI in a way that will appeal to its broad consumer base. As I said before, Apple devices offer a lot of features. Integrating AI into these devices can only increase this advantage.
2. Costco
Costco Wholesaler (NASDAQ:COST) is a first-rate gem. The discount king creates consistent annual growth and profits for shareholders, and its low-price strategy positions it well in our inflationary economy, where consumers seek the best deals.
Warren Buffett’s former business partner Charlie Munger loved Costco, and it’s easy to see why. The company has outperformed the S&P 500 by 134% over the past five years, thanks to a strong membership base that drives comparable store sales (comps). In the first 16 weeks of the company’s fiscal year, total comparables were up 4.7%, with e-commerce up 12.6%. May sales results showed comparables up 6.4%, with online sales up 15.3%.
These numbers don’t match Nvidia’s, but the key here is consistency and profitability over time, as well as a business model that benefits consumers at all times. Costco has averaged double-digit revenue growth over the past five years, which is only a fraction of the years of revenue and net profit increases, and there’s no sign that the situation will change.
3. Cava
I wish you could go back and join Chipotle Mexican Grill (NYSE: CMG) before it was Chipotle? Cava Group (NYSE:Cava) maybe this is your chance.
The latter restaurant chain operates very similarly to its Mexican counterpart, but focuses on Mediterranean cuisine. I challenge you to find many competitors of this caliber in the Mediterranean space, and Cava could be an excellent choice in the long term.
Having only gone public last year, Cava shares have beaten the S&P 500 by about 100% over that time. The restaurant chain has seen significant growth as it strives to create a Chipotle-like story. First-quarter revenue rose 30.3% year over year to $256 million, while total restaurant count increased 22.8% year over year to 323 locations.
As such a young company and the quintessential growth stock, Cava found profitability particularly early, earning $13.28 million last year. To be honest, that’s not significant on a per share basis, amounting to just $0.12 per diluted share, but compared to a loss of $1.30 the year before, I like to see a company focus right from the start on profitability.
Full-year guidance calls for sales growth of 4.5% to 6.5%, with net new store openings of 50 to 54. To be clear, this is an entirely focused investment on growth. Earnings are not the main factor that will determine the stock price.
Should you invest $1,000 in Apple right now?
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Randi Zuckerberg, a former Facebook market development director and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Butler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Costco Wholesale, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Cava Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a position in the stocks mentioned and recommends Apple, Chipotle Mexican Grill, Costco Wholesale, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Cava Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. disclosure policy.
3 Great Stocks That Can Beat the S&P 500 was originally published by The Motley Fool
