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

The S&P 500 index remains a cornerstone for gauging the broader stock market performance, encapsulating around 500 large-cap U.S. stocks. Over the last five years, this benchmark has delivered a robust total return of 109%, and over the last decade, it has skyrocketed with a total return of 257%. While investing in an exchange-traded fund (ETF) tracking the S&P may seem like a safe bet, there are prime individual stocks poised to outperform this index in stellar fashion. Let’s dive into two growth stocks that stack the odds in your favor for potentially lucrative returns in the coming five years.

Amazon: A Tech Giant with Room to Run

First up is Amazon (NASDAQ: AMZN), a titan in the tech industry that has garnered remarkable gains of approximately 22% this year. It’s worth noting that this outperformance slightly lags the S&P 500 index’s 23%, but there are exceptionally bright prospects on the horizon.

So, why should we be optimistic about Amazon? The business trajectory remains extremely encouraging. In the second quarter, Amazon reported a **10% year-over-year revenue increase**, raking in **$148 billion**. Additionally, the operating income catapulted more than **100% year-over-year**, landing at **$14.7 billion**. The company’s cloud segment, Amazon Web Services (AWS), is particularly standing out with a **19% revenue increase**, reaching **$26.3 billion**. The digital advertising segment couldn’t be more impressive, climbing roughly **20% year-over-year** to about **$9.5 billion**.

On the e-commerce front, North America saw sales ascend by **9%** to **$90 billion**, while the international segment achieved a **7% increase**, hitting **$31.7 billion**. This solid growth in higher-margin AWS and digital advertising units, paired with e-commerce margin improvements, is setting the stage for phenomenal profit growth in future quarters.

It’s prudent to highlight the uncharted potential lurking within the e-commerce segment, which, although slower-growing, remains a significant revenue driver. The transformative impact of artificial intelligence (AI) is on everyone’s lips, and it’s already suggested that AWS will leverage AI to boost sales. However, the impact of AI on Amazon’s retail business seems vastly underestimated. As AI and robotics enhance warehouse and delivery efficiency, the hidden profit potential of Amazon’s expansive e-commerce reach could unfold dramatically.

Home Depot: The Retail Leader Ready to Surge

Next, let’s take a look at Home Depot (NYSE: HD), a steadfast champion in the retail domain. Home Depot has consistently trounced the market, boasting returns nearly double that of the S&P 500 over the last decade. In challenging times like these, Home Depot has proven its mettle, demonstrating resilience through external pressures, including high mortgage rates and inflated consumer prices.

In its most recent earnings report, Home Depot reported a modest sales increase for the fiscal second quarter, driven by recent acquisitions and new store openings. However, comparable sales slipped by **3.3%**. The average ticket also fell by **2.2%**, especially affecting bigger-ticket items, which saw a decline of **5.8%**. Despite these contraction indicators, Home Depot remains profitable and strategically adaptive. More compellingly, digital sales grew by **4% year-over-year** in the same quarter, underscoring the effectiveness of their omnichannel approach, with nearly half of orders being picked up in-store.

Home Depot is strategically directed toward sustaining growth through various levers. They’re slated to open **12 new stores** in fiscal year 2024 while investing heavily in acquisitions and bolstering services for its professional customer segment. With interest rates poised to decrease, there’s every reason to believe that digital innovation and robust store growth will help Home Depot quickly rebound.

Final Takeaways

In the dynamic environment of today’s market, both Amazon and Home Depot stand out as compelling growth stocks with the potential for exceptional returns that could outperform the S&P 500 over the next five years. Their strong fundamentals, combined with innovative strategies and growth initiatives, leave little doubt about their potential trajectories. As a savvy trend-following trader, keeping a close eye on these stocks while embracing their underlying momentum will be essential for navigating the next leg of market action. So, buckle up and keep your portfolios ready for what may just be the next big wave!