The S&P 500 index can be a goldmine for stocks that have huge growth potential. Over the last few decades, many shares in this index (Nvidia, Amazon, Apple, etc) have made investors an absolute fortune.
Here, I’m going to highlight three S&P 500 stocks that I reckon will soar over the next five years, and make passive index fund strategies look silly. Are these names worth a closer look today?
Over the next five years, the cybersecurity industry is likely to experience prolific growth as companies embrace artificial intelligence (this will increase the attack surface). This industry expansion should fuel strong growth at CrowdStrike (NASDAQ: CRWD).
It’s one of the largest players in the cybersecurity sector with a market-cap of around $120bn. It aims to secure the most critical areas of risk for businesses – endpoints, cloud workloads, identity, and data – to keep customers ahead of cyber criminals.
Now, like a lot of high-growth stocks, CrowdStrike carries a fair bit of risk from an investment perspective. Not only does it operate in a very dynamic environment (the cybercrime landscape’s always shifting) but it has a high valuation because its earnings are still small.
Taking a five-year view however, I see a ton of potential. I think it’s worth a look right now.
Another industry I believe will see massive growth in the years ahead is semiconductor (chip) manufacturing. And one company that looks well placed to benefit here – and could be worth considering as a long-term investment – is KLA Corp (NASDAQ: KLAC).
It specialises in process control and yield management solutions for the industry. So it’s essentially a ‘picks-and-shovels’ play on the theme – it should do well no matter which companies have the best chips.
One thing I like about this company from an investment perspective is that it’s very profitable. Return on capital employed (ROCE) is very high, meaning that the company should have plenty of capital to reinvest for future growth (and get bigger).
I’ll point out however, that the chip industry is cyclical (up and down). So while I’m bullish on the long-term outlook here, there could be periods where this stock experiences some short-term underperformance.
Finally, I’m bullish on Axon Enterprise (NASDAQ: AXON). It’s known for its Tasers (stun guns) but it also manufactures other policing and security solutions such as body cameras and drones.
This company has been growing at an incredible rate in recent years. Over the last five years, for example, revenue has climbed from $531m to $2,083m.