Google parent Alphabet (GOOGL) will replace Verizon Communications (VZ) in the Dow Jones Industrial Average at the opening of trading on Monday, June 29, making the 30-stock bastion of blue chip companies increasingly exposed to all things digital.

Alphabet is best known to consumers as the operator of Google and YouTube, but as S&P Global notes, GOOGL's diversified portfolio spans advertising, cloud infrastructure, artificial intelligence, hardware, self-driving cars and healthcare technology.

"Adding Alphabet will broaden and strengthen the DJIA's exposure to these dynamic areas of the U.S. economy," S&P Global said in a press release. "Its larger market capitalization and share price, together with the breadth of its businesses, make it a more representative Communication Services constituent in the DJIA."

The move refers to Alphabet's Class A shares. The Class C shares (GOOG) will not be in the Dow.

Telecom giant Verizon, which has been in the Dow since 1984, sounds like a pretty poky business by comparison. Apple (AAPL) replaced AT&T (T) in the Dow in 2015. You may notice a pattern here.

S&P Global notes that Verizon represents only one-half of one percentage point of the DJIA due to its low share price. The Dow is a price-weighted index, and thus "persistently lower-priced stocks have an immaterial impact on the index," S&P Global said.

As much interest as such events generate, being tapped for the Dow is more symbolic than material. After all, the S&P 500 is the main benchmark for U.S. equity performance. That's why the total amount of money passively tracking the index comes to around $12 trillion.

For example, the largest exchange-traded fund (ETF) in the world, the Vanguard S&P 500 ETF (VOO), has more than $1.7 trillion in assets under management alone. A comparable product for the DJIA, the State Street SPDR Dow Jones Industrial Average ETF Trust (DIA), holds just $43 billion in assets under management.

Lastly, as noted above, the Dow is weighted by price rather than by market cap. Although GOOGL has an outsized influence on the movements of cap-weighted benchmarks, such as the S&P 500, Nasdaq Composite and Nasdaq-100, at current prices, GOOGL will be as material to the DJIA as, roughly, Sherwin-Williams (SHW).

Nevertheless, the blue-chip average will now include many of the biggest names among tech and communication services stocks: Apple, Amazon.com (AMZN), Nvidia (NVDA) and Microsoft (MSFT), as well as Salesforce (CRM), Cisco Systems (CSCO) and International Business Machines (IBM).

Is GOOGL stock a Buy?

GOOGL joining the Dow is not in and of itself a reason to buy the Magnificent 7 stock. Nothing about its fundamentals has changed. And while shares are currently in a 15% drawdown from their May peak, Wall Street remains bullish.

Of the 63 analysts covering GOOGL surveyed by S&P Global Market Intelligence, 42 rate it at Strong Buy, 14 say Buy and seven call it a Hold. That works out to a consensus recommendation of Strong Buy.

The Street's investment case for GOOGL comes down to AI. (Duh.)

"Alphabet remains at a minimum competitive, if not a leader, in the development of generative AI, the rapidly developing and perhaps disruptive new computing paradigm," writes Argus Research analyst Joseph Bonner, who rates shares at Buy. "We continue to like Alphabet's underlying businesses and believe that GOOGL shares are attractively valued given the company's growth runway."

The bottom line: If you liked GOOGL before its accession to the bluest of blue-chip clubs, there's no reason to change your mind. But don't buy it just because it's a better fit for the Dow Industrials than Verizon.

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Longtime shareholders in Micron Technology (MU) used to be longtime sufferers. Not anymore.

The company for decades plodded along in the volatile, low-margin business of making computer memory chips. That's a tough racket. Chips are a commodity. They're cyclical. Meanwhile, chipmakers have to constantly plow cash into research and development — to say nothing of capital expenditures — just to keep pace with peers.

Micron escaped its formerly poky past thanks to the era of artificial intelligence (AI). The ongoing build-out of AI infrastructure isn't just creating massive demand for specialized chips from the likes of Nvidia (NVDA); it's also fueling a run on companies that supply storage. Demand for Micron's wares — Dynamic Random-Access Memory (DRAM), NAND Flash memory, Solid-State Drives (SSDs) and Ultra High Bandwidth Memory (HBM) – has absolutely exploded.

The once-ugly duckling is now a swan. And with shares up more than 850% over the past year, MU stock is no longer a long-term laggard. Indeed, it's been an improbably good bet for truly patient investors.

The lone major American computer memory manufacturer is one of the industry's "Big Three." It competes on the global stage with South Korean heavyweights Samsung (SSNLF) and SK Hynix (HXSCL). And business has never been better.

That's not too shabby for a company that was founded in the late 1970s in the basement of a dental office in Boise. Along the way, Micron helped lead the way in the development of memory chips, demonstrating a particular strength in increasing density. With more than 60,000 patents, it's an engineering powerhouse.

But the grim realities of relentless R&D and capital expenditures in an industry where chip prices regularly plummet made Micron a tough stock to love. Anyone who couldn't stomach prolonged drawdowns of anywhere from 40% to 70% did not belong in the name.

The bottom line on MU stock?

Micron's red-hot run has done wonders for its returns over every standardized investing period you care to look at. For its entire life as a publicly traded company, MU generated an annualized total return (price change plus dividends) of almost 21%. That beats the S&P 500 by about 11 percentage points.

More recent results are simply stupendous. Over the past three years, MU returned 133% vs 23% for the broader market. The five-, 10- and 15-year return periods delivered massive outperformance as well.

Which brings us to what $1,000 invested in Micron stock 20 years ago would be worth today.

Have a look at the above chart and you'll see that a thousand bucks invested in MU two decades ago would today amount to almost $57,000. That's good for an annualized return of nearly 23%.

By comparison, the same sum socked away in an S&P 500 index fund would be worth about $8,600 today – or 11.4% annualized.

Will the good times keep rolling for this darling of an AI play? Wall Street sure thinks so.

"This is the memory bottleneck trade where the company can't nearly supply the backlog of orders," writes David Miller, chief investment officer at Catalyst Funds. "AI workloads need a huge amount of high bandwidth memory and storage. Micron gives you a way to play that part of the AI buildout at a reasonable forward earnings multiple."

Miller's views are widely shared. Of the 44 analysts covering MU stock surveyed by S&P Global Market Intelligence, 39 rate it at Strong Buy, nine say Buy and four call it a Hold. One analyst rates it at Strong Sell. Nevertheless, that works out to a consensus recommendation of Strong Buy, with high conviction to boot.

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Mastercard (MA) shareholders might not be too thrilled with the stock's more recent run, but few names have treated buy-and-hold investors to better returns over the long haul.

The world's second-largest payments processor has lost some of its luster over the past few years, but that's more to do with the legal and regulatory landscape than the company's operations. Threats to Mastercard's duopoly with Visa (V) are overblown, bulls say, and shares are priced for future outperformance for patient investors.

Buy-and-hold types who've been in the blue chip stock for ages can attest to Mastercard's strength. And while its competitive moat might not be quite as wide as it once was, the company's global brand remains as powerful as ever.

That's no small feat. A firm that was launched more than 50 years ago by a consortium of regional banks to compete with Visa today operates in more than 210 countries and territories. Nearly 40 million businesses accept Mastercard credit cards, of which there are 3 billion in circulation.

Payments processors aren't all that sexy, but Mastercard has indeed notched some nifty wins for capitalism. In the 1980s, the company issued the first international payment card in the People's Republic of China, as well as in what was then the Soviet Union.

Mastercard also has a history of innovation in security features, pioneering the now-standard practice of putting laser-etched holograms on cards. Later, it spearheaded the global rollout of the chip technology that today makes cards far more secure.

But investors were best served by the company's transition from a bank-owned cooperative to a publicly listed company in 2006. Anyone who invested in Mastercard during those early post-IPO days should have no problem paying off their purchases.

True, shares are lagging the S&P 500 by a wide margin over the past year or so. MA hasn't kept up with the broader market over the past half-decade either. Partly, that's a function of the way the tech sector — and all things related to artificial intelligence (AI) — have soared since ChatGPT debuted at the end of 2022.

MA is also contending with industrywide concerns. Persistent scrutiny of swipe fees has been a headwind for years. And now, the bipartisan Credit Card Competition Act of 2026 threatens Mastercard and Visa's lucrative duopoly. Calls to cap interest charges, while unworkable, are also spooking investors. (Shares in Visa have likewise underperformed the market for years now.)

You can see these anxieties playing out in Mastercard's valuation. Shares currently trade at less than 22 times estimated earnings. That's 20% lower than their five- and 10-year averages. A stock that once commanded hefty premiums thanks to its high operating margins (nearly 60%) and wide competitive moat has been repriced to reflect rising risks.

Interestingly, Berkshire Hathaway (BRK.B) sold its stakes in both Mastercard and Visa during the first quarter of 2026. The payments processors had been a couple of Warren Buffett's favorite stocks since 2011. Apparently, CEO Greg Abel, who is now calling the shots, sees things differently. Make of that what you will.

The bottom line on MA stock?

As noted above, Mastercard stock has been disappointing for more recent investors. Shares lag the broader market on an annualized total return basis (price change plus dividends) over the past one-, three- and five-year periods. Heck, over the past 52 weeks, MA stock is off about 4% vs a 30% gain for the S&P 500.

Beyond those recent periods, however, the returns have been priceless.

Over the past decade, MA stock leads the broader market by almost 3 percentage points. Over the past 15-year period, it beats the S&P 500 by more than 7 points.

Which brings us to what $1,000 invested in Mastercard stock 20 years ago would be worth today. Spoiler alert: a lot.

Have a look at the above chart and you'll see that a thousand bucks invested in MA stock two decades ago would today amount to almost $121,000. That's good for an annualized return of more than 27%.

By comparison, the same sum socked away in an S&P 500 index fund would be worth about $8,600 today – or 11.4% annualized.

That's remarkable outperformance. Happily for bulls, Wall Street analysts think Mastercard is priced to resume its winning ways.

"Solid quarterly earnings again underscored the resilience of MA's operating model amid a more mixed payments and macro backdrop," writes BofA Securities analyst Matthew O'Neill, who rates shares at Buy. "The underlying constant currency demand outlook remains intact, supporting confidence in Mastercard's long-term earnings durability and capital return profile."

O'Neill has plenty of company on the Street. Of the 39 analysts covering MA stock surveyed by S&P Global Market Intelligence, 29 rate it at Strong Buy, seven say Buy and three call it a Hold. That works out to a consensus recommendation of Strong Buy, with high conviction to boot.

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Target (TGT) is one of the oldest and most iconic brands in American retail, but shares in the national discount chain have been a bad buy-and-hold bet for ages.

The big-box chain that came to define the concept of "cheap chic" traces its roots to a single family-owned department store in the early days of the 20th century. Six decades later, a rapidly expanding middle class in the midst of the baby boom drove consumer demand for one-stop shopping at value prices. It's no coincidence that Target shifted to a discount format at the same time that Walmart (WMT) and K-Mart entered the market.

A merger and decades of expansion set Target up to be the comparatively upscale alternative to Walmart during the heyday of big-box chains at the end of the 20th century. Whereas Walmart's slogan was "Always Low Prices, Always," Target led with "Expect More. Pay Less."

By the beginning of the 21st century, the Minneapolis-based chain was a certified national retail behemoth. And then things started to go wrong.

The onslaught of Amazon.com (AMZN) and other e-commerce companies took a toll on all brick-and-mortar retailers. Chronic underinvestment in its digital strategy caused Target to fall far behind Walmart in the rapidly growing channel. Today, Walmart is the second-largest U.S. e-commerce retailer after Amazon – albeit a distant second. Target, meanwhile, ranks fifth.

A massive data breach in 2013 that exposed the financial information of as many as 110 million Target customers certainly did the company no favors. Even worse was Target's abortive expansion into Canada. The foray, which lasted only two years, ended in 2015 with the company shuttering 133 stores and taking a $5.4 billion quarterly loss.

Target's product mix also makes it more sensitive to economic ups and downs. Where Walmart's and Costco's (COST) top lines benefit from consumer staples that tend to hold up better when consumer spending slows down, Target depends more on discretionary items. Food, toilet paper and diapers are more recession-proof than apparel and consumer electronics.

More recently, Target's margins have been hampered by shrink – the loss of inventory due to theft, damage or administrative error – and tariffs. A decade ago, the company enjoyed gross profit margins north of 27%, or more than two percentage points higher than they run today.

It should come as no surprise that a turbulent couple of decades haven't been great for TGT stock.

The bottom line on TGT stock?

True, Target is a dividend-raising machine. Equity income investors have seen their payouts rise annually for more than five decades. As a member of the S&P 500 Dividend Aristocrats, there's no doubt that TGT is one of the best dividend stocks for dependable dividend growth.

Sadly, a poor track record of price appreciation wipes out the benefit those dividends contributed to shareholders' total returns.

For its entire life as a publicly traded company, Target generated an annualized total return (price change plus dividends) of just 5.4%. That lags the S&P 500 by more than 5 percentage points.

And while the consumer staples stock is up 38% over the past 52 weeks – vs 31% for the broader market – every other standard time frame is a dud. Shares in TGT generated negative total returns over the past three- and five-year periods. As for the past 10- and 15-year periods, TGT lags the S&P 500 by wide margins.

Which brings us to what you'd have if you invested a grand in TGT stock a couple of decades ago.

Spoiler alert: not nearly enough.

Take a look at the chart above and you'll see that if you put $1,000 into TGT stock 20 years ago, it would be worth about $3,900 today. That's good for an annualized total return of 7%.

The same sum sitting in a low-cost S&P 500 index fund over the past two decades would be worth almost $8,000 today, or 10.8% annualized.

There's no way around it: Target has been a buy-and-hold bust for truly long-term investors.

As for where TGT stock goes over the next 12 months or so, Wall Street is very much split on the name. Of the 37 analysts covering the stock surveyed by S&P Global Market Intelligence, 9 call it a Strong Buy, two say Buy, 23 have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Hold.

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Shares in Chipotle Mexican Grill (CMG) have been a long-term market beater, but there's a twist. The fast-casual food chain is a great example of what happens when a company's days of hyperfast growth have long passed.

Like McDonald's (MCD), CMG claims humble origins, starting with a single location. The first Chipotle opened in Denver in 1993 and it quickly became a hit. Founder Steve Ellis's focus on high-quality and fresh ingredients served in a fast-food format was revolutionary at the time.

The fast-casual restaurant concept was born.

Within five years, the chain operated 16 locations spread around Colorado. McDonald's – game knows game – was a minority investor. MCD's injection of capital allowed Chipotle to expand rapidly, further whetting the burger chain's appetite. Pretty soon, MCD became CMG's majority owner. By 2005, Chipotle was a national phenomenon with 500 restaurants across 25 states.

At this point, it was time for McDonald's to cash out. The CMG investment, while lucrative, was a distraction from the company's core fast-food business model. And so McDonald's spun off Chipotle Mexican Grill in an initial public offering for the ages. CMG went public in January 2006 at a price of $22 a share. It closed at $44, or a 100% gain in its first trading session.

Traders and investors would continue to enjoy outsized gains for years as the company's expansion and national impact only seemed to accelerate. Even the Great Recession couldn't slow the chain down. Indeed, the value proposition of fast-casual dining attracted cash-strapped customers away from pricier sit-down restaurants.

By 2015, Chipotle had more than 2,000 locations across 48 states. The stock was up 1,500% from the IPO closing price. And then a near-disaster struck. Shares lost almost half their value over the next two years amid multiple outbreaks of food-borne illnesses. It turned out that fresh ingredients also carried the risk of making customers violently ill from E. coli and Norovirus.

The consumer discretionary stock eventually rebounded and went on another spectacular run, but more recent returns have been disappointing. Investors were no longer willing to pay a hefty premium when growth began to slow. A stock that once traded as high as 50 to 80 times earnings estimates saw its multiple collapse by half. CMG found itself branded by some as a fading giant.

The bottom line on CMG stock?

Have a look at the below chart and you'll see that truly long-term investors in CMG are sitting on market-beating returns. As for shorter time frames, however, the results are not good.

True, for its entire life as a publicly traded company, CMG, which doesn't pay a dividend, generated an annualized total return of 19.8%. That beats the S&P 500's annualized total return (price change plus dividends) by 9 percentage points. That's a big deal.

Unfortunately, other time frames are not nearly so remunerative.

The large-cap stock lags the S&P 500 over the past one-, three-, five-, 10- and 15-year periods. Indeed, over the past 52 weeks, CMG lost more than 30% vs a gain of more than 30% for the broader market.

The past two decades have been much more kind. If you put $1,000 into CMG stock 20 years ago, it would be worth about $32,000 today. That's good for an annualized total return of 18.9%.

The same sum socked away into an S&P 500 index fund over the past two decades would be worth almost $8,000 today, or 11% annualized.

CMG stock has been a terrific buy-and-hold bet, but it appears to be heading in the wrong direction. Its days of hyperfast growth are behind it.

As for where CMG stock goes from here over the next 12 months or so, Wall Street is bullish on the name. Of the 38 analysts covering the stock surveyed by S&P Global Market Intelligence, 22 call it a Strong Buy, four say Buy and 12 have it at Hold. That works out to a consensus recommendation of Buy with high conviction.

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American stocks have performed well over the past three years, with annualized returns greatly exceeding the long-term average of 10.5%. That is true of both the S&P 500 index and the tech-heavy Nasdaq. The big question now is: What are the best bets in 2026?

"At the end of every year, I get the question of whether investors should buy stocks that have dropped or should I stick with my winners," says Sam Stovall, chief investment strategist at research company CFRA. "It depends on what happened the prior year."

Broadly speaking, if the market was loss-making in the previous year, then buy low. If the market is up, then keep those stocks that performed well, Stovall says. He bases this on deep analysis of how stocks have performed for decades.

It should be evident that 2026 should be a "stick with the winners" year. By mid-November, the S&P 500 had rallied 16% in 2025, according to data from Morningstar. The returns for 2023 and '24 were both over 20%. The tech-heavy Nasdaq followed a similar pattern but with far better annual returns over the same period.

Subsector leaders

The S&P 500 comprises 11 broad sectors, which can be further divided into 127 subsectors. Stovall selected the top-10 sub-industries with the highest price returns and then chose a favored S&P 500 stock in each category.

The top-performing subsector was electronic components, and CFRA's favored stock in the subsector is Amphenol Corp. (APH). The company sells its products to various industries, including automotive, defense systems, broadband, and mobile device makers. The stock gained 93% by mid-November.

The gold mining subsector was ranked third, and the favored stock is Newmont Corporation (NEM), which was up 136%. It's the largest global gold miner and has managed to weather the ups and downs of its niche since its founding in 1916.

Stovall also likes Universal Health Services (UHS) as the preferred stock in the health care facilities sub-category, which ranked fifth. The stock had total returns of 25% through mid-November. The company has grown its revenue every year since 2020, and the stock is priced at a modest 9.6 times projected earnings.

AI infrastructure

Artificial intelligence goes beyond chips, allowing investors more stock choices in an area where huge growth is forecast for the coming years. There are broadly three components of AI, says Nitin Sacheti, founder and portfolio manager of New York-based Papyrus Capital.

First, there are widgets, also known as small hardware components, such as sensors for temperature, humidity and airflow, that help operate data centers more efficiently. Additionally, there are Neo Clouds, a new type of cloud service that specializes in ultra-high-performance computing, which AI requires.

Then there is the much-needed electricity and cooling for those data centers and, finally, the software that delivers information to the customer. Forty percent of U.S. electrical power is generated from natural gas, so higher electricity demand will benefit natural gas companies such as Golar LNG (GLNG), which is down 9%.

Sacheti is also confident that 2026 will be a boom for software companies. "We'll see dispersion of AI," he says. In other words, more people will likely adopt the new technology. That's because AI software is improving fast and will continue to do so.

Microsoft (MSFT) is likely to be one of the stocks to benefit from more AI users, Sacheti says. The stock rallied 21% and has consistently grown its revenue every year this decade. If the company continues growing, investors should benefit handsomely from developing better AI software.

Household staples

Not all professional investors are focused on fast-growing tech companies. Consumer staples companies, which produce essential products such as toothpaste or laundry detergent, were dumped by investors in 2025. The Vanguard Consumer Staples ETF (VDC) declined 5% from August 19 through mid-November, while the S&P 500 rose approximately 5%.

The decline reflects consumers' preference for staples over luxuries. "With America struggling right now, that's what people do," says Ryan Stever, chief investment officer at Intech, an exchange-traded fund company in West Palm Beach, Florida. They turn to staples, not luxuries.

Yet stock prices for staples stocks have fallen, which may be an opportunity for investors to buy staples ETFs or stocks such as Procter & Gamble (PG) at a lower-than-usual price. The stock declined 12% through mid-November.

"It is often forgotten that the major component of U.S. GDP is still the consumer," Stever says. "I think that when times are tighter, we could see a return to some basic needs."

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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Earnings season, those quarterly corporate financial reporting periods, can bring a lot of surprises — sometimes unexpected ones.

In late October, for instance, General Motors reported a 50% drop in profits compared with the same quarter the year before. After the announcement, GM stock rose nearly 15%. That same day, Netflix reported a nearly 8% climb in profits. Its shares plummeted 10% on the news.

What gives? In both cases, what mattered most wasn’t whether profits were rising or falling, but how the company’s results compared with Wall Street’s expectations, which are largely dictated by guidance from the company. Netflix’s recent quarterly earnings, for instance, fell short of analysts’ expectations; GM’s came in ahead.

Company earnings-and-revenue guidance is essentially a forecast from corporate executives about how the firm will likely perform for the coming year or quarter ahead. Although the guidance isn’t required, many large firms provide it.

These corporate projections matter because they help shape the estimates and recommendations of Wall Street analysts — and that can sway whether investors buy or sell a given stock.

What’s more, over the short term, whether a company’s actual financial results come in above or below analysts’ estimates can move the share price, too, sometimes dramatically. All told, an understanding of the nuances of the corporate guidance game can be a useful tool for investors.

An evolving practice

The relationship between company guidance and Wall Street estimates is tight.

The Securities and Exchange Commission (SEC) first required public companies to report their financial results four times a year in 1970. With quarterly earnings reports came quarterly estimates from Wall Street analysts. Soon after, a small New York brokerage firm started to average the estimates into a so-called consensus.

Over time, thanks in part to changes in securities laws that gave public companies greater protection from shareholder lawsuits, more firms began to offer forecasts to better guide the growing number of analysts, who relied on them to calculate their own earnings estimates.

Since then, however, many Wall Street observers have decried the short-term focus that is spurred by quarterly guidance and earnings expectations. Concerns about short-termism even prompted a recent proposal from the White House, now being explored by the SEC, to allow public companies to report their results semiannually instead of quarterly.

"When the quarterly process is a milestone on the way to a longer-term goal, there’s nothing wrong with it," says Sarah Williamson, chief executive of FCLTGlobal, a think tank that advocates long-term investment thinking. "The problem is when that quarterly behavior leads to people taking shortcuts rather than building towards a long-term strategic approach."

Fewer publicly traded firms offer guidance on future results these days than in years past. Only about 20% of S&P 500 member companies offer regular performance projections today, down from the 50% that provided guidance to Wall Street analysts in 2004, according to FCLTGlobal. Many new public companies never adopt the practice.

"Quarterly guidance is like smoking. It’s a lot easier not to start than to quit," says FCLTGlobal’s Williamson.

That said, the firms that provide guidance are loath to lower previous projections or pause them. Either move typically means that a company’s business is struggling.

In a 2008 study, University of Florida Warrington College of Business professor Jennifer Wu Tucker, working with two coauthors, found that most companies that stopped providing quarterly guidance in the early 2000s did so because they were performing poorly and had a greater risk of missing their earnings expectations.

Consider this more recent example: After tariff uncertainties started to rise, toy maker Mattel paused providing full-year guidance for 2025 earnings and revenues last May, only to cut its previous forecast two months later. Shares fell 16% the next trading day.

The surprise factor

Share prices can move significantly depending on whether a company beats analysts’ consensus estimates in any given quarter (a positive surprise) or falls short of estimates (a negative surprise). But both offer valuable cues to investors.

The more consistently a company beats earnings estimates, for example, the better the stock price tends to perform. Ramkumar Rasaratnam, chief investment officer for equities at AXA Investment Managers, found that stock in companies that delivered very low earnings growth but consistently beat expectations tended to outperform shares in firms that boasted higher earnings growth but regularly reported results below expectations.

"Earnings surprise is consistently rewarded by the market, but earnings growth is not," says Rasaratnam.

Conversely, when firms report profits that fall below analysts’ expectations, that’s a good sign the business is struggling.

Last July, for instance, UnitedHealth Group, dogged by higher-than-expected medical costs and an unexpected drop in revenue in its Optum Health business, missed consensus estimates for the second quarter in a row by 17%, a substantial shortfall.

But bad tidings had been brewing: The July-quarter miss came two months after the firm had pulled its full-year earnings guidance for 2025 and just days after the health care giant acknowledged that it was complying with a Department of Justice investigation into its Medicare billing practices. Needless to say, the stock suffered.

"Investors are brutal" when companies miss earnings estimates, says Irene Tunkel, chief U.S. equity strategist for BCA Research. Though UnitedHealth stock has rebounded some since, the shares dropped 60% between April and August of 2025.

Many companies purposely lowball the guidance they provide Wall Street, Tunkel says, adding that she suspects they do so to widen the gap between their guidance and what they actually deliver. It helps explain why most companies beat analysts’ estimates. In the second quarter of 2025, for instance, 81% of S&P 500 members beat their consensus estimates for profits and 80% beat their expectations for revenues, according to data provider FactSet.

Putting the cues to work

The managers of FullerThaler Behavioral Small-Cap Growth Fund (symbol FTXNX) use positive earnings surprises as a starting criterion when they pick stocks. But they’re choosy. "We’re only looking at a small percentage of earnings surprises," says Ed Stubbins, a partner at Fuller & Thaler Asset Management.

Specifically, they favor the sort of earnings surprises that are propelled by a growth catalyst, one that may persist in the future. Most earnings surprises are driven by external factors, such as changes in commodity prices, tax rates or accounting rules. But when company managers say a new product is selling much better than they expected and is fueling earnings growth, Stubbins says the fund’s managers are inclined to step in and buy the stock, in part because they think investors will be slow to react.

Over the past five years, the approach has worked well. FullerThaler Behavioral Small-Cap Growth’s five-year annualized return, 15.7%, beat 96% of its com-petition (funds that focus on small, growing companies).

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Stocks are trading at record levels and valuations are stretched. While that by no means suggests the bull market has to end soon, it does make it harder to find names that industry analysts rate as bang-the-table buys.

True, the S&P 500 is pricey by a slew of metrics — but that's partly due to its market-cap-weighted construction. The Magnificent 7 stocks driving much of the bull run have a collective weighting of more than 30% in the benchmark index.

However, look at the equal-weight version of the index, in which every component accounts for 2%, and you'll see a more attractive picture.

While the S&P 500 gained nearly 40% since its early April bottom — and trades at more than 23 times forward earnings — the equal-weight S&P 500 is up a more modest 25% in the same span. As such, it trades at less than 18 times forward earnings.

That's not bad.

As the cliche goes: It's not a stock market; it's a market of stocks.

Meanwhile, third-quarter earnings season is underway, and the outlook for corporate profits, revenue and guidance is bright.

"Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages," writes John Butters, senior earnings analyst at FactSet. "In addition, S&P 500 companies are reporting impressive numbers for revenues relative to analyst expectations and year-ago results."

Some of the strongest corporate profit margins since 2021 also helps explain why the market fetches its current multiple, notes DataTrek Research co-founder Nicholas Colas. "It also provides a pathway to even higher valuations," he adds.

Given this supportive backdrop for equities, we decided to suss out some of Wall Street's favorite stocks to buy now — and to see what the bull cases on these names looked like.

Targa Resources

Targa Resources (TRGP) is a top way to play a rebound in the midstream sector of the oil and gas industry. Analysts like the way it operates in nearly every segment of its industry and adore its geographic diversity.

When it comes to gathering, processing, transporting and storing natural gas and natural gas liquids (NGLs) in places such as the Anadarko and Permian Basins, analysts say Targa "overshadows" other energy companies.

"Expected completion of projects in the Permian and Delaware position Targa for further growth," writes Argus Research analyst John Staszak, who rates shares at Buy.

With shares down about 12% for the year to date, they look like a bargain. Analysts' average price target of $206.15 gives TRGP implied upside of about 33% in the next 12 months.

No wonder Argus has so much company in its bullish call. Of the 22 analysts covering TRGP surveyed by S&P Global Market Intelligence, 16 call it a Strong Buy, five say Buy, and one has it at Hold. That works out to a consensus recommendation of Strong Buy.

Take-Two Interactive Software

Video-game publisher Take-Two Interactive Software (TTWO) owns some of the strongest franchises in the massive industry. From Rockstar Games' Grand Theft Auto (GTA) series to NBA 2K from 2K Games, the company doesn't lack for lucrative hits.

Shares are up nearly 40% so far this year, but analysts say they have more room to run. All eyes are on the May 2026 release of Grand Theft Auto VI, which should be a major catalyst.

As important as GTA is to the company's fortunes, it's hardly a one-trick pony. TTWO releases a new edition of its NBA 2K game annually, while major franchises such as Red Dead Redemption, Borderlands and Civilization have historically helped it report beat-and-raise quarters.

That said, investors need to have confidence in the enduring popularity of GTA before they take the plunge into TTWO stock.

"Take-Two's prospects will always be more speculative than we'd prefer, as we think that it will always be dependent on developing the next massive hit," Morningstar notes.

Of the 27 analysts covering TTWO, 21 call it a Strong Buy, three have it at Buy, two rate it at Hold, and one has it at Strong Sell. That works out to a consensus recommendation of Strong Buy.

Boston Scientific

If you've ever undergone a minimally invasive medical procedure, chances are you've used something made by Boston Scientific (BSX). From stents and catheters to pacemakers and implantable defibrillators, BSX is critical to modern medicine.

Analysts say the company's strong pipeline, new product launches and additional acquisitions should continue to support revenue growth and margin expansion.

"BSX has a steady cadence of new product flow across its portfolio and is delivering above-industry growth, with particular outperformance over the past year-plus," notes Oppenheimer analyst Suraj Kalia, who rates shares at Outperform (the equivalent of Buy). "BSX is adding to the portfolio through tuck-in M&A and has several product tailwinds."

Shares are lagging the broader market by about 3 percentage points so far this year, but that just has them primed for outperformance, bulls say. Analysts' average price target of $126.14 gives BSX implied upside of about 25% in the next 12 months.

Of the 34 analysts covering BSX, 25 rate it at Strong Buy, seven say Buy, and two call it a Hold. That works out to a consensus recommendation of Strong Buy, and with high conviction to boot.

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President Trump's 870-page tax-and-spending bill is as big as advertised. Whether it is a beautiful bill from an investment standpoint is in the eye of the beholder. Like most new legislation, the One Big Beautiful Bill Act (OBBBA) has winners and losers.

A larger tax credit, a bigger tax deduction, a more sizable write-off, a less-onerous regulation, or a booster shot from increased government spending can lift profits for companies that benefit.

On the flip side, the end of a sizable subsidy, the phasing out of a tax break or major cuts to government programs can impair sales, resulting in earnings headwinds for negatively affected companies.

Below, we list some of the biggest investment beneficiaries of Trump's Big Beautiful Bill, and some of its victims, too. Prices and returns are as of July 31.

Play offense with defense

Trump's signature legislation delivered on his promise to spend more to strengthen the military. OBBBA increases defense spending by $150 billion, pushing the U.S. defense budget for fiscal year 2026 over $1 trillion, the largest in U.S. history.

A sizable chunk of the money will go toward priorities such as the Golden Dome missile defense shield. Other imperatives include building naval ships and developing next-generation munitions and unmanned drone weaponry, as well as replenishing weapons stockpiles.

Increased military spending by European allies and unstable geopolitics add to the case for the defense sector.

You don't have to be an army general to conclude that weapons-related companies have a tailwind. "The defense industry is an overwhelming winner," said Michael Arone, chief investment strategist at State Street Investment Management.

Investors looking to boost exposure to the defense sector can mimic a precision-guided smart bomb and try to pinpoint individual stocks, or they can take a cluster-bomb approach and gain access to a wider array of munitions makers through a diversified exchange-traded fund (ETF) that tracks the sector.

Aniket Ullal, head of ETF research and analytics at CFRA Research, likes the iShares U.S. Aerospace & Defense ETF (ITA), which is up 36% this year and holds about 40 stocks, including top holdings such as GE Aerospace (GE), RTX (RTX), Northrop Grumman (NOC) and Lockheed Martin (LMT).

Another option is the Invesco Aerospace & Defense ETF (PPA), up 27% in 2025. Holdings include top defense contractors plus tech stocks with Pentagon ties, such as Palantir (PLTR), a data analytics company that uses artificial intelligence to support military operations and intelligence gathering.

Huntington Ingalls Industries (HII), a leading shipbuilder that earns 80% of its revenue from the U.S. Navy, "stands to benefit from the Department of Defense's renewed focus on expanding the Navy's fleet size," says CFRA analyst Matthew Miller, who rates the stock a Buy.

Seth Meyer, global head of client portfolio management at Janus Henderson Investors, is bullish on Howmet Aerospace (HWM). Its specialized aircraft components get kudos for being lighter, faster, stronger and more cost-effective.

Howmet's parts helped land the Apollo spacecraft on the moon and are used in military aircraft, such as Lockheed Martin's drones and F-35 fighter jet. The stock is a top-10 holding in the Janus Henderson Forty and Janus Henderson Contrarian funds.

Surf the reshoring wave

It's no secret that Trump wants companies to build their products on U.S. soil. The OBBBA offers tax incentives for firms to embrace the "Made in America" policy. "The bill is incentivizing behavior change," says Meyer.

Growth-friendly OBBBA provisions include making permanent a 100% bonus depreciation — a type of tax break that allows companies to deduct a percentage of the purchase price of eligible assets.

Companies can now deduct the entire cost (up from 40% previously) of qualifying property, such as machinery and equipment, in the year it's put into service — no need to spread deductions over multiple years and wait to realize the tax benefits.

The new law also allows full expensing of domestic research-and-development expenses in the year they occur, cutting corporate tax bills and boosting cash flow.

Another perk aimed at encouraging investment in the homeland is 100% expensing, or immediate deductions, for certain manufacturing spending, such as upgrades to factories or assembly lines.

Manufacturing and heavy-machinery businesses such as Deere (DE) and Caterpillar (CAT) will benefit if customers spend more on capital equipment due to savings on taxes, says Paul Stanley, chief investment officer at Granite Bay Wealth Management.

"If I need a new tractor, I'm going to invest while I know [the tax breaks] are on the books," he says. For broad exposure to the industrials sector, Stanley likes the iShares U.S. Industrials ETF (IYJ), a fund that owns about 200 stocks.

Among individual stocks, consider Trane Technologies (TT), best known for its energy-efficient HVAC systems, says Eric Teal, chief investment officer at Comerica Wealth Management.

Trane is likely to see higher demand from customers with more cash to plow into their business thanks to the OBBBA tax breaks, Teal says. Another plus: Trane has limited tariff risk, says Morningstar analyst Brian Bernard. (Trane is a member of the Kiplinger ESG 20, our favorite stocks and funds with an environmental, social or governance focus.)

Vulcan Materials (VMC), a producer of construction materials such as crushed stone, sand, gravel, asphalt and concrete, is a top pick of Sandy Villere, portfolio manager at wealth management firm Villere & Co. "There's going to be a big tailwind with all the incentives for U.S. manufacturing," he says.

Catch the AI train

The new law is a potential accelerant for the already fast-growing artificial intelligence business.

"Getting semiconductor production on-shore is a key strategic focus of the Trump 2.0 administration," says Meyer. The OBBBA gives semiconductor makers incentives to break ground before 2026 on new plants to build high-powered chips.

The carrot? Boosting the tax credit to 35% from 25%.

Capital Group portfolio manager Matt Hochstetler says tech stocks that can benefit include Micron Technology (MU) and Taiwan Semiconductor Manufacturing (TSM). (The latter is liable for U.S. corporate taxes and qualifies for the credit.)

There will be losers

Trump is not a big backer of clean energy. The OBBBA's December 31 phase-out of the tax credit allowing homeowners to deduct 30% of the cost of installing solar panels from federal taxes could lead to a 20% to 30% drop in home solar installations, denting the sales of U.S. solar panel makers, according to CPA firm Cerini & Associates.

And the end of the $7,500 tax credit on September 30 for the purchase of a new electric vehicle will cut into EV sales.

Sizable cuts to Medicaid are a negative for hospitals that treat low-income patients. Such hospitals may face lower revenues due to fewer patients, and they risk not getting paid by patients who lose coverage. The cuts will also harm health insurers that derive a large chunk of their revenue from Medicaid plans.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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When a CEO is in his nineties, you'd think investors wouldn't be caught off guard when he says it's time to hang it up. But Mr. Market seems to be displeased by Warren Buffett's announcement in May that he would hand over the reins at Berkshire Hathaway (BRK.B) at the end of 2025. (Buffett, who turned 95 on August 30, will remain as chairman.)

Since that day, Berkshire's "B" shares have fallen 12.6% — even as the broader market notched new highs, with the S&P 500 Index returning 11.8%. (Prices and returns are as of July 31, unless otherwise noted.)

You may be wondering if there's an alternative to a post-Buffett Berkshire. A few Berkshire Hathaway clones are on the market — firms with insurance at their core and portfolios of businesses and stocks built for long-term returns. Some funds either explicitly or implicitly follow the Warren Buffett way.

We looked at some of the options below. Fair warning: Replacing Buffett may be as difficult for your portfolio as it is for Berkshire.

Very little of the Berkshire transition was a surprise. Buffett has had stock-picking help for some time from Berkshire execs Ted Weschler and Todd Combs.

And Greg Abel, the man Buffett tapped as the next CEO, was first named a potential successor in January 2018. But Abel built his career as an energy executive, not a portfolio builder.

That seems to have spooked Buffett acolytes, who wonder whether Berkshire's magical long-run returns — a compounded 19.9% from 1965 through 2024 — can continue.

"Buffett is able to take his huge balance sheets and turn $1 into $2," says Vitaliy Katsenelson, a money manager and author of The Intellectual Investor. "I don't know how good Greg Abel is."

That sums up the uncertainty. But Buffett boosters suggest shareholders should remain patient.

Christopher Bloomstran, a St. Louis–based money manager, does not believe the stalled stock price "has anything to do with the likelihood that Greg is not going to do a bang-up job. I think he will. I think he's absolutely phenomenal."

Buffett's Canadian counterpart

Though Abel was born in Alberta, the man widely called "the Canadian Warren Buffett" is 75-year-old Prem Watsa, who founded insurer Fairfax Financial (FRFHF) in 1985 and serves as its chairman and CEO.

The stock trades over the counter in the U.S., and on the Toronto Stock Exchange (FFH), accessible via some brokers, including Fidelity, Interactive Brokers and Schwab. In either case, charges may apply.

With a $39 billion market value, Watsa's company has developed a similar — albeit smaller — following to Berkshire's. The Fairfax annual meeting is a multiday affair that attracts value-oriented investors from Canada and other countries.

A fan blog, the Corner of Berkshire & Fairfax, is dedicated to value investing forums and discussion of the similarities between the two companies.

Fairfax's results suggest why: The company's book value per share increased an average 18.7% per year from 1985 to 2024, while the share price increased at an annualized rate of 19.2%.

Watsa may be even more of a bargain hunter than Berkshire, and that has occasionally led to picking losers. Fairfax's portfolio has muddled along for years with a large position in BlackBerry (BB), the mobile-phone pioneer that has struggled to reinvent itself.

Fairfax has had some winners recently, though. A large position in Canadian steelmaker Stelco paid off handsomely when Cleveland-Cliffs (CLF) bought the company in 2024. Fairfax's one-third stake in Greece's Eurobank increased in value from $2.3 billion at the end of 2023 to $3.2 billion on March 31.

Stephen Boland, an analyst at brokerage Raymond James, says Fairfax is one of the most diversified insurers, both in the number of countries in which it operates and in the lines of insurance it sells.

The company is "still exposed to California wildfires — it took a big loss for that in 2024 — but it has tended to diversify the business really, really well on the insurance side," says Boland, who recommends the shares.

With what he believes was a "stellar" second quarter for the company's investment portfolio, the stock is his top pick in the Canadian insurance sector. It trades at about 10 times earnings for the year ahead, according to S&P Global Market Intelligence.

Berkshire Hathaway's insurance operations largely target consumers — its Geico subsidiary causes some analysts to categorize Berkshire as an auto insurer.

Markel (MKL), by contrast, is a "specialty insurer," with sophisticated customers. It sells products such as collectible-car insurance, liability policies for corporate boards of directors, and insurance against damage to offshore oil rigs.

Like Fairfax, Markel has encouraged comparisons to Berkshire. For 35 years, the company, headquartered in Virginia, has held a brunch in Omaha on the weekend of the big Buffett bash. More than 2,500 people reportedly attended the 2025 event.

Over the past 38 years, the company's share price has increased at an annualized rate of roughly 15%.

Berkshire stock is the single largest holding in Markel's portfolio, accounting for $1.7 billion worth of assets on March 31 — three times the size of the second-largest position. Alphabet (GOOGL), Brookfield (BN), Deere (DE) and Amazon.com (AMZN) round out the top five, with each position worth about $400 million to $500 million.

Markel's portfolio of stocks, like Berkshire's, accounts for a heavier proportion of assets than for most insurers, which tend to focus on bonds. A separate division, Markel Ventures, holds 100% ownership in 20 companies, many of which are manufacturers.

Analysts say they like Markel in the long run, but a recent spike in the shares, coupled with underwhelming insurance results, has cooled them on its near-term performance.

Activist investor Jana Partners disclosed in December 2024 it had taken a stake in Markel and wanted the company to spin off its ventures unit so that it would be a more attractive takeover target for a conventional insurer.

The Jana news boosted Markel's stock price, and it trades at about 20 times earnings for the year ahead, according to S&P. Just one of seven analysts who cover Markel rate it a Buy.

Given depressed profits, "I think they're trading kind of where they should be now," says analyst Robert Farnam, of investment firm Janney, who has a Hold rating on the shares.

But the stock may have appeal for investors who buy on dips or who have a long enough time horizon. "I consider Markel to be a terrific long-term investment," says Farnam. "This is the type of stock that you basically put into retirement accounts and forget about."

Loews (L) has an insurance company at its core and owns multiple businesses, including hotels and an energy pipeline company, so it, too, has drawn comparisons to Berkshire. But in many ways, Loews is more of a family conglomerate.

Benjamin Tisch, named CEO this year, is the third generation of his family to run the company, a component of the S&P 500, and members of the Tisch family own roughly 20% of the stock.

"Even though Loews is in the 500, there's low investor interest" because of the Tisches' outsize stake, says Catherine Seifert, an analyst with CFRA who stopped covering the company more than two years ago. "And they're not as diversified as Berkshire anyway. Honestly, if you want to replicate Berkshire, you're probably better off doing it with a series of exchange-traded funds."

Following Buffett's path

There are a handful of ETFs that explicitly follow Berkshire; but with the Buffett premium seemingly dissipating at Berkshire, you might be better off looking for other funds that incorporate Buffett-esque investing principles, such those focused on companies that enjoy wide "moats," says Aniket Ullal, head of ETF research and analytics at CFRA.

When Buffett explains his desire to invest in businesses with a long-term competitive advantage, he has long used the word moat, as in a waterway that surrounded castles of the Middle Ages.

A moat keeps potential competitors away from your business — in economic terms, it's called a barrier to entry. Berkshire's wholly owned subsidiary BNSF Railway, for example, has a moat: Only four major railroad companies remain in the U.S., and the probability that a new one will try to lay thousands of miles of track to compete is nearly zero.

The largest and oldest moat ETF is the VanEck Morningstar Wide Moat ETF (MOAT), which tracks the Morningstar Wide Moat Focus Index. The 52 companies in the index as of May 31 were the cheapest of what Morningstar considers wide-moat stocks, based on their discount to the research firm's estimate of their fair value.

The ETF's top three holdings at last report were Estée Lauder (EL), military shipbuilder Huntington Ingalls Industries (HII) and Allegion (ALLE), an industrial security firm.

Compared with similar funds, the portfolio is overweight in health care and consumer staples stocks and has less invested in consumer discretionary and financial services names, according to Morningstar.

In a market that has seen years of exuberance for high-growth names, however, the fund's philosophy has had a mixed track record. It returned 7.5% over the past 12 months, compared with 16.3% for the S&P 500.

Four times in the past decade, it has been in the top 6% of its fund category (U.S. large-company stocks with a blend of growth and value characteristics). But it had a poor 2024, ranking in the bottom 5%. The fund's expense ratio is 0.47%.

Another approach is to zero in on funds that focus on metrics that typically point to the kind of high-quality companies that Buffett favors.

We prefer the JPMorgan U.S. Quality Factor ETF (JQUA), a member of the Kiplinger ETF 20, the list of our favorite exchange-traded funds. The fund tracks an index that sifts for companies that meet 10 criteria, including measures of profitability such as strong earnings and cash flow; financial risk (low debt, high interest coverage, low share-price volatility); and earnings quality (consistent accounting practices).

It has returned 13.6% over the past 12 months, and its 0.12% expense ratio makes it one of the cheapest funds of its kind. Top sectors are technology, financial services and consumer discretionary stocks. Nvidia (NVDA) was the fund's top holding at last report. Berkshire Hathaway places in the fund's top 10.

Then again, perhaps you should follow Buffett's own investment advice for individual investors. In 1994, he told shareholders that by "periodically investing in an index fund, a know-nothing investor can actually outperform most investment professionals."

At Berkshire's 2020 annual meeting, he elaborated: "In my view, for most people, the best thing to do is to own the S&P 500 index fund. People will try to sell you other things because there's more money in it if they do." He has specifically suggested the low-cost Vanguard S&P 500 ETF (VOO), with an expense ratio of 0.03%.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Investors have been enamored with the idea of top tech disruptors able to reshape the economy since the dot-com days. Meta Platforms (META) and Tesla (TSLA) didn't exist 25 years ago, but now they're among the biggest companies in the world because of game-changing innovations.

Today, the most disruptive start-ups are owned by private equity. Typically, they're small but high-potential firms operating deeply in the red as they chase new applications for big ideas like artificial intelligence (AI), quantum computing or cryptocurrency.

But a number of established, publicly traded stocks still qualify as top tech disruptors and offer the promise of significant potential as they ride megatrends to new heights.

There is greater risk when it comes to investing in innovation. There is no guarantee a company's specific technology will scale or that it'll be a dominant player even if it does.

At the same time, the following five top tech disruptors have proven themselves through strong share performance, and each of them is supported by a market cap of greater than $1 billion.

• Industry: Capital markets
• Market value: $55.9 billion
• 12-month total return: 20.9%

Digital assets are known for their disruptive potential, but Coinbase Global (COIN) is, in many ways, the more responsible older sibling of the rough-and-tumble crypto firms in the sector. One of the largest cryptocurrency exchanges in the world has taken great pains to play by U.S. regulatory rules.

As one of the few regulated exchanges – and as a publicly traded company listed on the Nasdaq and subject to strict financial accounting standards – Coinbase offers transparency that many of its peers can't match.

This crypto leader is using its bona fides to connect with mainstream financial institutions, including offering Visa (V) branded cards that pay rewards in crypto.

This synergy of disruptive new technology and a cooperative approach with incumbent banking and payment firms has made COIN stock increasingly attractive to investors.

• Industry: Hotels, restaurants and leisure
• Market value: $11.3 billion
• 12-month total return: -31.9%

Gambling is one of the oldest pastimes in the world, so it's no small feat that DraftKings (DKNG) has managed to reinvent the experience with new forms of gaming. Since a 2018 Supreme Court ruling overturned federal prohibitions on sportsbooks, DKNG has emerged as one of the dominant players in the space.

DraftKings is everywhere, offering both traditional sportsbook betting and innovations like daily fantasy contests. The company is also expanding into online casino gaming, including video poker, Powerball and even digital "scratcher" lotteries.

DraftKings is at the center of what is shaping up to be one of the biggest multiyear growth trends of the 21st century. Analysts estimate the global sports betting market will grow by more than $220 billion from 2025 to 2029 – a compound annual growth rate (CAGR) of nearly 13%.

As it continues expanding into other gambling verticals, DraftKings is among a handful of top tech disruptors to watch, giving an old-school industry a high-tech twist for the digital age.

• Industry: Biotechnology
• Market value: $2.1 billion
• 12-month total return: 89.6%

Grail (GRAL) is a cutting-edge medical firm developing diagnostics tools to identify at-risk cancer patients early and through minimally invasive methods.

This innovation could be a game-changer on multiple levels: improving outcomes, reducing the total cost of care and, ultimately, fighting back against deadly cancers around the world.

Following a regulatory battle in Europe, parent company Illumina (ILMN) spun off Grail as a stand-alone biotech firm around its Galleri multicancer early detection (MCED) blood test.

The MCED niche offers a rare win-win, saving providers substantial costs while saving lives and improving patient outcomes.

Like all development-stage health care stocks and top tech disruptors, Grail carries risk. But its early successes should give investors confidence.

• Industry: Software
• Market value: $348.9 billion
• 12-month total return: 55.6%

You’d have to be living under a rock not to have heard of Palantir Technologies (PLTR). The stock soared 135% in 2025, making it one of the top performers in the entire S&P 500.

There are good reasons for the buzz around this multibagger stock. Palantir's data analytics and AI platform is forecast to support 62% revenue growth this year and another 43% in fiscal 2027, driven by powerful long-term megatrends.

Unlike smaller AI startups, Palantir benefits from long-standing partnerships with the intelligence community and the Department of Defense, giving it both credibility and stability.

Palantir is already profitable, building real-world AI solutions for paying clients. Those profits are expected to grow significantly, with Wall Street expecting 76% earnings growth this year and 41% next year.

A strong bottom line positions PLTR as more than just another stock riding the AI hype – it's one of the genuine top tech disruptors worth watching.

• Industry: Software
• Market value: $2.4 billion
• 12-month total return: 60.3%

The radio frequency spectrum is basically finite. Electromagnetic waves exist across a broad theoretical range. But usable frequencies are limited. So they're regulated.

At the same time, spectrum is the most critical asset for both wireless and satellite communications, including fixed network, "direct to device" (D2D) and cable operators. And the integration of AI with robotics, autonomous systems and smart infrastructure is creating even more demand

An already crowded competition for spectrum is heating up even more ahead of a Federal Communications Commission (FCC) auction in 2027. "This is a positive for fixed wireless, satellite, physical AI, and for owners of spectrum," Oppenheimer analyst Timothy Horan observes.

That includes NextNav (NN), nominally a software outfit but in reality the owner of 5.1B MHz-POPs of lower-900MHz spectrum that represents "one of the last unconsolidated sub-GHz assets at national scale." Horan suggests potential "strategic acquirers" such as AT&T (T) and Verizon Communications (VZ) as well as SpaceX are potential "credible buyers" for NN.

Indeed, as the analyst notes, NextNav's main asset is particularly attractive: "Any buildout of this spectrum would include a Positioning, Navigation, and Timing (PNT) service that is 100K-times more powerful than GPS."

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Concerns about sticky inflation, an uncertain employment situation and geopolitical unrest loom large in the big picture. But it's important for investors to understand the stock market is still up in 2025. And a select group of multibagger stocks has delivered the kind of phenomenal returns you see in the hottest bull markets.

If you're unfamiliar with the jargon, "multibagger stocks" deliver profits at a multiple of your initial investment. Doubling your money is difficult enough. So when a stock delivers "3X" or "5X" profits – that's three times or five times your original investment – it's definitely something to be happy about.

Each of the multibagger stocks on this list is up at least 350% over the trailing 12 months through September 12 vs 19.2% for the S&P 500 during the same period. These aren't microcap start-ups, either: Each of these multibagger stocks boasts a market cap of at least $10 billion, demonstrating their significant scale and investor interest.

There's obviously risk in all of these firms, given their unique business models as well as macroeconomic concerns. But with returns that blow away the competition, these multibagger stocks show that higher risk can indeed deliver higher rewards when investors pick the right names.

• Market value: $196.9 billion
• 12-month total return: 417.0%

AppLovin (APP) is a software-based marketing platform designed to connect advertisers with customers across a host of digital platforms, from streaming video to mobile games.

Its budding business on smart TVs – serving up targeted ads during commercial breaks now inserted into a host of shows people are increasingly enduring to cut down their monthly streaming bills.

Founded in 2012, AppLovin already has significant scale despite the dominance of Google parent Alphabet (GOOGL) in the ad biz. Management forecast $5.5 billion in revenue for the current fiscal year – with 27% growth to more than $7 billion to follow in fiscal 2026.

Advertising can be extremely cyclical, and AppLovin is fighting some big players. But investors like what they’ve seen over the last year in terms of sales and profitability from this upstart operator.

• Market value: $12.2 billion
• 12-month total return: 1,210.0%

Oklo (OKLO) is a 21st-century energy company, with a prime place at the intersection of artificial intelligence and nuclear power.

As AI continues to reshape the economy and various applications grow increasingly complex, electric power needs are growing in kind.

To help support this new demand, nuclear energy has returned to prominence after many decades out of the limelight. It's all about nuclear's relatively green operations compared to traditional fossil fuels.

Oklo is leading the way in this transition thanks to its advanced fission power plants that provide clean, reliable, affordable energy.

OKLO entered public markets in 2024 via a SPAC merger. With big gains over the last 12 months, Wall Street clearly sees something in this disruptive energy stock.

• Market value: $406.7 billion
• 12-month total return: 381.7%

You'd have to be totally new to Wall Street to not know the tremendous growth story of Palantir Technologies (PLTR).

PLTR is the top-performing stock in the entire S&P 500 over the last 12 months thanks to its position at the center of national security and AI megatrends.

Palantir, which provides AI-powered data processing software, made a name for itself through long-term partnerships with the intelligence community and the Department of Defense.

Unlike some other AI start-ups, Palantir is large and comfortably profitable; management just raised its full-year cash flow guidance to as much as $2.0 billion for 2025.

When it comes to the most popular investments of 2025, this multibagger stands apart with daily volume that regularly tops 70 million shares traded.

• Market value: $102.2 billion
• 12-month total return: 421.2%

Robinhood Markets (HOOD) is a fintech company with a well-deserved reputation for disrupting the old way of investing.

Founded in 2013 with a mobile-friendly and low-cost approach to investing, HOOD is the 2.0 version of early discount brokerages such as eTrade that democratized Wall Street for smaller investors.

With crypto offerings, easy access to options strategies and a strong reputation with younger traders, Robinhood continues to grow and challenge traditional leaders in finance too.

Consider its second-quarter year-over-year revenue growth of 45% to nearly $1 billion: This is no niche player but a fast-growing company redefining what’s possible for a new generation of investors.

• Market value: $1.6 trillion
• 12-month total return: 615.0%

Rocket Lab (RKLB) – an aerospace leader developing rocket launch and control systems for commercial spaceflight and defense applications – is also one of the highest fliers of 2025.

The company is not yet profitable, but management expects to operate at nearly break-even next year thanks to a growing backlog and better-than-expected revenue growth in recent quarters.

As with many innovative start-ups out there, volatility is a given, and there's elevated risk here. But there's tremendous buzz around SpaceX and Blue Origin, pet projects of billionaires Elon Musk and Jeff Bezos, respectively. Yet both remain privately held.

RKLB is perhaps the best way to play the next generation of space travel in a publicly traded stock. Indeed, investors have shown tremendous interest in the stock across the last 12 months.

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I’ve long admired the popular Pacer U.S. Cash Cows exchange-traded fund (COWZ). Less well known is that Pacer employs its free cash flow and dividend strategy overseas. In a year when U.S. stocks lag European stocks, Latin American stocks, most Asian stocks and our own expectations, Pacer Developed Markets International Cash Cows 100 (ICOW) and Pacer Global Cash Cows Dividend (GCOW) are up 17% and 13%, respectively. (The first is 99% non-U.S. and the second is 75% foreign, hence the difference. “Global” funds include U.S. issues; “international” ones do not.)

More to the point, the international ETF yields 4.4% and the global option yields 3.9%, twin reminders that foreign companies also bundle pallets of cash for their shareholders. And with the dollar off in 2025, dividends in euros or yen or Swiss francs or Polish zlotys or Malaysian ringgit mean a U.S. fund can pass along a few extra bucks on the currency exchange. Hence a bunch of international ETFs that emphasize dividends are doing even better in 2025 than the Cows.

WisdomTree International High Dividend (DTH) is up 22%. GlobalX MSCI SuperDividend EAFE (EFAS), a large-cap, rich-world index fund, is having a year for the record books, returning 30% through June 20 with a 4.5% dividend yield. The GlobalX fund is tiny, and although it’s a passive fund, it has a propensity to swing in value more than the market overall. So I’m wary of overpromoting it instead of more-diversified and larger ETFs such as the Pacer pair or iShares International Select Dividend (IDV), which is up 26% for the year so far and pays more than 5%.

Will the foreign dividend boom continue?

These golden first-half-of-2025 results aside, relying on foreign stocks for essential and predictable income is a challenge.

Overseas companies pay dividends annually or semiannually, and the amounts have no connection to previous years; a reduction does not set off investor alarms as it does in U.S. circles.

And due to this timing, funds often make outsized distributions in June, for example, and then force you to wait until December for the next big check.

The Pacer International ETF is an exception because it pays quarterly and reasonably consistently. So does Vanguard International High Dividend Yield (VIHAX). Federated Hermes International Strategic Value Dividend (IVFAX), which is one of the few actively managed funds in this category, pays monthly, though in some months the distribution is less than 1 cent a share.

Where is this foreign dividend boom headed? I asked fund managers to predict upcoming distributions and increases, and their answers were so vague that I’ll skip repeating their word salads.

A Standard & Poor’s intelligence report, dated late May, estimates 2025 will end with European firms — which dominate these international dividend funds — dialing down payout growth from 7.5% in 2024 to 3.5% this year and then to 3.2% in 2026, with the taper led by banks and automakers, which are frightened by U.S. tariffs and Chinese electric vehicles. Financial firms are as much as 40% of the weighting in funds such as the Vanguard offering, so dividend austerity by banks will knock at least a percentage point off these funds’ yields.

However, there is also growth, and the Pacer, Vanguard and Federated Hermes funds seem set to keep beating the S&P 500 for a while.

The actively managed Federated fund complements Federated’s Strategic Value Dividend (SVAAX), its active domestic dividend fund. The foreign version is light on banks and favors utilities and drugs. Volatility is low, and the 4.9% yield is compelling. It is up 19% so far this year. Give it and the Pacer international fund a shot.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Warren Buffett likes to say that price is what you pay, value is what you get. But that doesn't mean blindly indexing to value stocks is a path to long-term success.

After all, value stocks have broadly lagged growth stocks for more than a decade and there's no telling when they'll catch back up.

Besides, value is in the eye of the beholder. It's not for nothing that, on average, about 30% of the stocks in the benchmark Russell 1000 Value Index are also found in the Russell 1000 Growth Index.

"The remaining 70% are assigned to be either all growth or all value," per FTSE Russell.

Passive investors in a broad market index that tracks the S&P 500 needn't worry about the style differences between value and growth. Such distinctions are of more concern to tacticians and traders.

Nevertheless, there is something unusual about value's long-term slump.

First, a quick recap on value stocks vs growth stocks: Value stocks are equities that are perceived to be trading at a discount based on metrics such as price-to-book ratios, price-to-earnings ratios, dividend payout ratios and the like.

Growth stocks tend to trade at premiums to these metrics, as investors are willing to pony up for accelerating future free cash flows.

It's important to know that classifying stocks as growth or value is not a straightforward matter.

Russell assigns a growth and value weight based on its valuation criteria, which is how so many stocks find themselves represented in both benchmark indexes.

As FTSE Russell notes, what started out as a way for active managers to benchmark their performance based on their investment styles became a tool for professionals to make "unbalanced allocations based on their strategic or tactical views."

In other words, the benchmark growth and value indexes are not pure plays, and haven't been for decades.

"Pre-conceived notions of 'growth' and 'value' aren't always reflected in indexes labeled growth and value," writes Liz Ann Sonders, chief investment strategist at Charles Schwab. "That has been both exacerbated and emphasized in the post-pandemic era, especially for a sector like technology, which is traditionally thought of as dominating the growth sphere but now has a hefty weight in some value indexes."

Is value investing dead?

"Value investing is based on the premise that paying less for a set of future cash flows is associated with a higher expected return," writes the equity investing team at Dimensional Fund Advisors. "That's one of the most fundamental tenets of investing."

Over the long haul, value stocks have indeed outperformed growth stocks in the U.S., often by wide margins.

"Data covering nearly a century backs up the notion that value stocks — those with lower relative prices — have higher expected returns," Dimensional adds. "While disappointing periods emerge from time to time, the principle that lower relative prices lead to higher expected returns remains the same."

Given that mean reversion is a thing in both life and investing, value investors may be forgiven for expecting their stylistic preference to come back vs growth.

But it hasn't happened yet.

Have a look at the chart below to see the performance of the iShares Russell 1000 Value ETF (IWD) vs the iShares Russell 1000 Growth ETF (IWF) over the past decade to see how far the gap has widened on a total return basis (price change plus dividends).

Using these benchmark ETFs as proxies, we can see that growth returned more than 360% over the past 10 years vs less than 140% for value. That bucks historical trends in a big way. Since 1927, value stocks outperformed growth stocks by 4.4% annually in the U.S.

This doesn't mean value investing is dead. However, it might suggest that value investing via a broad index like the Russell 1000 Value Index isn't the best way to find value stocks. It isn't necessarily a good proxy for retail investors looking for cheap diversification to true value names.

Finding true value stocks is hard – just ask Warren Buffett. That said, value investors do have history on their side.

As Hartford Funds notes, "the performance of growth stocks and value stocks has been cyclical. This cyclical behavior highlights the benefits of having both types of investments in a portfolio."

Getting the balance and timing of such tactical allocations is generally best left to the pros.

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Berkshire Hathaway (BRK.B) is in a class by itself when it comes to really long-term outperformance. It's not for nothing that Warren Buffett, who will retire as CEO at the end of 2025, is known as the greatest long-term investor of all time.

BRK.B stock has been a market beater over the past 20 years, too, but all the millionaires Berkshire minted had skin in the game long before the turn of the century.

That's how compounding and the law of large numbers work.

But first, a quick recap of Berkshire Hathaway's history. The company was a struggling textile firm when Buffett took control in 1965. Over the ensuing years, Buffett converted it into a holding company, or a company that buys other companies.

Buffett's first target was an insurance company, and the insurance business continues to be at the core of Berkshire's operations today.

Insurance was especially attractive to Buffett because of float, or the money insurance companies hold between collecting premiums and paying out claims. Thanks to the float from Berkshire's insurance companies, Buffett had ample sources of capital to buy up or invest in other enterprises.

Today, Berkshire Hathaway comprises more than 60 wholly owned subsidiaries, including BNSF Railway, Geico insurance, industrial titan Precision Castparts and fast food chain Dairy Queen.

Meanwhile, the Berkshire Hathaway equity portfolio, with a market value of about $250 billion, includes major stakes in Apple (AAPL), Bank of America (BAC) and American Express (AXP), to name just a few.

Berkshire Hathaway has always been a long-term bet on the dynamism of the U.S. economy. It's also a low-beta stock, which means it tends to underperform in up markets and outperform in down markets.

And what that has added up to over the past 60 years is nothing less than astonishing. Since 1965, Berkshire stock has generated a compound annual growth rate of almost 20% vs 10% for the S&P 500.

What does that look like on a brokerage statement? Well, if you put $1,000 into Berkshire stock 60 years ago, it would be worth about $33 million today. The same sum invested in the S&P 500 would today be worth about $336,000.

Warren Buffett and his late partner Charlie Munger really did mint many a millionaire over the course of their long careers.

However, BRK.B's returns over the past 20 years, while good, have naturally been more modest.

After all, there's nothing like getting in on the ground floor.

The bottom line on Berkshire stock?

Although BRK.B stock outperformed the broader market by a wide margin over the past five years, it actually lagged the returns of the S&P 500 over the past one-, three-, 10- and 15-year periods.

If you go back 20 years, BRK.B, which doesn't pay a dividend, generated an annualized return of 11.2%.

That's not too shabby, but it leads the S&P 500, with dividends reinvested, by less than a percentage point. An active fund manager might be happy with such results, but it hardly means BRK.B stock was a path to riches in the 21st century.

Have a look at the above chart to get a sense of what BRK.B's returns would mean to your brokerage statement over the past couple of decades. They're just OK.

Indeed, if you put $1,000 into Berkshire stock 20 years ago, today it would be worth about $8,300. The same amount invested in the S&P 500 would theoretically be worth about $8,200 today.

With Warren Buffett set to step down at the end of 2025, some folks fear that Berkshire stock's best days are behind it. The reality is that Berkshire is now so big that it's unreasonable to expect anyone to repeat Buffett's historic run.

True, that doesn't mean BRK.B can't continue to be a market beater going forward. Wall Street is mostly bullish on the name, giving it a consensus recommendation of Buy, according to data from S&P Global Market Intelligence.

Nevertheless, BRK.B's era of generating truly outstanding returns would appear to be behind it – and that was true even before Buffett announced his retirement.

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Procter & Gamble (PG) is about as blue as a blue chip stock can be. Sadly for long-term shareholders, this battleship of a defensive dividend-paying name has delivered underwhelming returns vs the broader market for a very long time.

Founded in the first half of the 19th century, P&G has grown into the world's largest consumer products company by market value, boasting a vast portfolio of billion-dollar brands. From Tide laundry detergent to Crest toothpaste to Pampers diapers, today, P&G sells its wares in more than 150 countries.

Yet even as Procter & Gamble expanded its dominance in the U.S. and spread around the globe, it never wavered in its commitment to returning cash to shareholders through dividends. P&G has paid uninterrupted dividends since 1891.

Even more impressively, P&G has increased its payout every year for nearly seven decades. As a member of the S&P 500 Dividend Aristocrats, Procter & Gamble has more than earned its reputation as one of the best dividend stocks to buy for dependable dividend growth.

Between its dividend increases and the fundamental nature of its business — sales of toothpaste and diapers tend to hold up in tough times — P&G stock is considered a classic defensive name.

This Buy-rated Dow Jones stock has been a component of the blue-chip benchmark since 1932.

There's no questioning the company's illustrious history. P&G stock's past performance, however, isn't quite as distinguished.

The bottom line on PG stock?

There's no way around it: P&G stock has been a market laggard for ages.

To be fair, over its lifetime as a publicly traded company, P&G has delivered market-matching results. With a total return (price change plus dividends) of 10.8%, it's essentially tied with the S&P 500 over the same span.

The problem is that if you look at time frames more relevant to shareholders alive today, Procter & Gamble stock is a bust.

It lags the broader market on an annualized total return basis in the past one-, three-, five-, 10-, 15- and 20-year periods – and by painfully wide margins, too.

To get a sense of what this underperformance looks like on a brokerage statement, have a look at the above chart. It shows that if you put $1,000 into P&G stock 20 years ago, it would today be worth about $4,400. That's an annualized return of 7.8%.

The same thousand bucks invested in the S&P 500 would today be worth about $8,000 — or an annualized return of 10.9%.

Past performance is not a guarantee of future results, and Wall Street does mostly like P&G stock at current levels. Of the 24 analysts covering P&G surveyed by S&P Global Market Intelligence, 10 call it a Strong Buy, four rate it at Buy and 10 say Hold. That works out to a consensus recommendation of Buy — albeit with somewhat mixed conviction.

Speaking for the bulls, Argus Research analyst Taylor Conrad recommends buying shares on weakness.

"Despite higher raw material and distribution costs, the company continues to manage its margins with productivity initiatives," Conrad writes in a note to clients. "We also like P&G’s record of dividend growth and note that management’s 5% dividend hike in April showed confidence in future performance."

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Dividend growth continues to slow amid uncertainty over U.S. trade policy. Happily, income investors can still count on select S&P 500 stocks to deliver sizable and reliable hikes to their payouts.

U.S. dividend payers collectively raised their payouts by $14 billion in the third quarter, according to the latest data from S&P Dow Jones Indices. While that represents a 43% increase vs Q2, on a year-over-year basis, dividend hikes fell by 0.7%.

A look at dividend growth for the 12 months ending September 2025 is even more dispiriting, with increases falling 23% on a comparable basis.

"Dividend growth continued to be slow in Q3 2025, as concern over forward cash commitment was inhabited by the uncertainty over the evolving tariff polices," writes Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Although companies continue to raise their dividends, they are doing so with smaller increases, Silverblatt says, reflecting caution over the impact of tariffs on sales, costs and the general economy.

If there's a bright side to the latest figures, it's that Q3 dividend cuts fell by 25% vs the year-ago period. And for the 12 months ending in September, dividend decreases plunged by more than 36% vs the same period last year.

Long-term income investors know the importance of rising dividends. Shares in companies that raise their dividend payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with.

That's partly because regular dividend increases lift the yield on an investor's original cost basis. Stick around long enough, and the modest yield you received on your initial investment can hit double digits one day.

The S&P 500 Dividend Aristocrats, which are among the best dividend stocks to buy for reliable dividend growth, are a good place to start if you're interested in sussing out such dividend stalwarts. But that doesn't mean you can't find other index components bucking the trend of slower dividend growth. These three stocks are great examples of that.

Stocks with fast-rising dividend payouts

For example, in the more economically sensitive consumer discretionary sector, Royal Caribbean Group (RCL) in September hiked its quarterly dividend by a hefty 33% to $1 from 75 cents per share.

The global cruise ship operator resumed paying quarterly dividends in the third quarter of 2024 – thanks to the ongoing post-pandemic recovery – and has been hiking them ever since.

"We expect bookings to increase and prices to rise, driven by pent-up demand and an affluent clientele," writes Argus Research analyst John Staszak, who rates the consumer discretionary stock at Buy. "We also anticipate fewer cancellations as the cruise industry continues to recover and consumers opt for experiences over products."

The analyst adds that management's efforts to increase total returns should boost RCL's 2026 annual dividend to $4.25 a share, up from a prior forecast of $2.60.

In the really big leagues, there's Microsoft (MSFT). MSFT stock has been killing it on the price charts for ages, but the tech giant also does very well by shareholders when it comes to returning cash through dividends.

In September, Microsoft increased its quarterly payout by 10% to 91 cents per share. The dividend is payable on December 11 to shareholders of record on November 20, which is also the ex-dividend date.

Anyone who put $1,000 into Microsoft stock 20 years ago would be thrilled with the results today. And while its price appreciation has been outstanding, the income component of MSFT stock has been a massive contributor to total returns too.

Have a look at the chart below and you'll see that over the past two decades, MSFT gained 1,780% on a price basis alone. Add in the dividends, and MSFT's total return comes to a whopping 2,600%.

For context, the S&P 500 gained 718%, including dividends, over the same span.

Lastly, in the category of sin stocks, Philip Morris International (PMI) continues to be a reliable dividend grower. The tobacco company in September raised its quarterly dividend by 8.9% to $1.47 per share.

Mature companies with steady free cash flow are often a good place to look for equity income, and PMI has been no exception. The company has increased its annual dividend every year since 2008 – good for a compound annual growth rate of 7.1%.

S&P's Silverblatt notes that current tax and write-off benefits from the 'One Big Beautiful Bill' have added to corporate earnings. That bodes well for more dividend hikes, at least in the shorter term.

"Working with a base case for a higher-level resolution of economic related issues, lower interest rates, and continued U.S. consumer and equity support, Q4 dividends appear in place to set to a new quarterly record," Silverblatt says.

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While many pundits suggested President Donald Trump’s real-world trade policies wouldn’t be as bad as his campaign rhetoric was last year, the stock market got a rude awakening in April. Executive orders from the White House sent the S&P 500 into free-fall thanks to what many saw as overly invasive tariffs, with the index down an ugly 13% since January 1.

Among other ignominious milestones caused by Trump’s tariffs, we’ve seen the worst short-term performance for stocks under any sitting president in modern history, per CNN, and the worst single-day decline since the realities of COVID-19 hit investors in 2020.

While some hold out hope that Trump is simply making an opening bid in a longer-term negotiation on global trade, a prolonged trade war would have serious consequences for portfolios as tariffs impact the stock market beyond the immediate volatility we’ve seen in early 2025. Exposure to select sectors could mitigate these risks, however, as certain companies are more susceptible to the negative influence of tariffs than others.

The following investment themes and the exchange-traded funds that express them could help protect risk-averse investors in the years ahead.

All of these ETFs are well-established, with more than $500 million in assets. They're also affordable, with annual expense ratios of less than 0.35%.

China's technology stocks

A bitter truth of the current Trump trade war is that while the U.S. stock market has struggled, other regions – most notably China – have seen outperformance in 2025. In particular, China’s tech sector has been doing quite well thanks to home-grown hardware and an increasingly sophisticated workforce with experience in software and IT services.

At the top of the list of investments capitalizing on this theme is a nearly $8 billion exchange-traded fund, the KraneShares CSI China Internet ETF (KWEB). This technology-focused China ETF has managed to post a gain since January 1 even as the rest of Wall Street – and in particular, large cap tech stocks like Nvidia Corp. (NVDA) – have melted down dramatically. That’s thanks to top KWEB holdings including Alibaba Group Holdings (BABA), which is actually up more than 20% since January 1 while the Nasdaq 100 is down almost 18% in the same period.

The story is similar with Invesco China Technology ETF (CQQQ). This technology-focused ETF is only down slightly from January 1 through Monday, April 4. Many individual holdings in this China technology ETF have done well, including familiar leaders in the nation like Tencent Holdings (TCHEY) that has eked out a small gain YTD even as the S&P 500 has suffered.

In short, the “America first” approach seems to be hurting U.S. technology stocks (Wall Street is worried about Apple, for example) more than their international peers. That’s particularly true considering the domestic reliance on China hardware, while competitors in Asia avoid similar reliance – and now have a surplus of local goods to make the most of in the age of a trade war.

European banks

Another regional investment theme that has done quite well in 2025 is a focus on Europe – specifically, in EU financial institutions. And in many ways, that groundwork for that success predates Trump’s trade war by several years.

After the U.K.’s “Brexit” vote in 2016 and its official exit from the EU in 2020, policymakers focused on a capital markets union that was self-sufficient – from London, but also from New York and anywhere else. More recently, price shocks after the 2022 invasion of Ukraine by Russian aggressors sparked a sense of urgency to shore up energy supplies and manufacturing to make the region self-sufficient.

The result has been what policymakers call “strategic autonomy” for the collective of European Union member states, built on local banking that serves local needs. And the timing couldn’t be better for this approach, as EU banks increasingly boast better profitability and a more inward-focused business model.

As proof of the success, check out the iShares MSCI Europe Financials ETF (EUFN) that is up about 8% year-to-date as U.S. stocks have stumbled. Meanwhile, the leading Financial Select Sector SPDR Fund (XLF) of domestic banks has lost 8% in the same period.

Utilities

Turning back to U.S. investments, utilities are one of the most reliable investments on Wall Street and have a history of providing safe havens in troubled times. Electricity is a necessity for homes and businesses in the 21st century, so there's always strong baseline demand.

What's more, while there may be volatility in the energy products used to generate power, these costs are almost always passed through to end-users who don’t have much choice. The sector is highly regulated and very expensive to operate, meaning utility stocks tend to be regional monopolies that don't face true competitive forces.

As a result, domestic utility stocks and the Utilities Select Sector SPDR Fund (XLU) will likely provide a smoother ride than more risky parts of Wall Street. In fact, the ETF is trading just a bit under flat on the year to make it “less bad” than most other sector ETFs. Top holdings in this fund include leaders in the sector such as NextEra Energy (NEE), Southern Company (SO) and Duke Energy (DUK) that are collectively valued at more than $240 billion and aren’t going anywhere regardless of short-term trade wars.

Investment-grade bonds

If you were hoping for an interest rate cut in 2025, perhaps the largest bit of good news out of this tariff mess is the increasing odds of Federal Reserve action as a result of weak business sentiment. Inflationary pressures have been a consistent concern lately, but now the central bank can comfortably blame a supply-driven trade war instead of demand-driven pressures from an overheating economy.

If you're particularly interested in safety, bonds are a logical choice because they are far less volatile than stocks generally. Furthermore, they offer nearly guaranteed yield so you can still generate income in retirement without worrying about selling assets into a downtrend.

And lastly, the face value of bonds have an inverse relationship with interest rates – so if rates do get cut, the principal value of related assets actually goes up because these older and higher-yielding securities are more attractive.

Investment-grade bonds – a category that includes debt of government entities as well as blue-chip powerhouses with strong balance sheets – are the top-tier of the debt markets and are particularly attractive right now as a result of these factors. These are the opposite of junk bonds, which are riskier and speculative in nature.

Of course, buying individual bonds requires much more savvy than buying individual stocks. That's why a bond exchange-traded fund like the Vanguard Total Bond Market ETF (BND) is a good choice.

With more than $127 billion in assets under management and a portfolio of some 18,000 different bonds, the fund yields about 4.5%. It's also full of rock-solid investments such as U.S. Treasury bonds. What’s more, BND is actually up slightly on the year from a share price perspective to provide a sweetener on top of that income stream.

Gold and gold miners

Looking beyond stocks and bonds to alternative assets, gold is often seen as the ultimate safe-haven investment during times of uncertainty. And with a 13% gain since January 1 as most stocks have suffered big-time in 2025, it’s hard to argue with that logic.

As an uncorrelated asset, the precious metal has the ability to hang tough or even move higher even when the stock market is melting down. Gold is also a hedge against inflation that is expected to occur if global supply chains are disrupted by trade policies.

Whether you're looking for a hedge against rising prices or diversification beyond the typical asset classes, the iShares Gold Trust (IAU) is one of the more affordable ways to get direct exposure to gold prices

IAU charges just 0.25% in annual fees, or $25 on $10,000 invested, which is much less than investors might pay to store, insure or transact with physical gold bullion.

It’s worth noting that gold miners can also be a good bet thanks to what’s called “operational leverage.” In short, many mining companies can easily ramp up production without significantly adding to cost – meaning they win both on the price of their gold brought to market as well as increased volume.

For this reason, the $93 billion VanEck Gold Miners ETF (GDX) has surged 24% since January 1, and some of its top holdings like Agnico Eagle Mines Limited (AEM) have fared even better than that. Just keep in mind leverage works both ways, so the volatility may be just as dramatic if and when the momentum moves away from gold miners in the months ahead.

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Financial stocks are in a sweet spot. Lower short-term interest rates, an expanding economy and some spectacular third-quarter results all helped to buoy shares in businesses that provide financial products or services in late 2024. The outcome of the U.S. presidential election boosted the shares even more; Wall Street has high hopes that the Trump administration will be bank-friendly.

All told, over the past 12 months, financial shares surged 31%. That beat the 25% return in the S&P 500 index, as well as the gains in every other sector except communications services (up 40%) and information technology (up 37%). When the final results of 2024 are in, if analysts are on target, the financial sector will have posted a nearly 15% jump in earnings from 2023, more than the 10% hop in earnings expected for the S&P 500.

Will the party continue in 2025? Analysts expect financial companies to post 7% to 9% growth in earnings in 2025 compared with 2024. That’s “still supportive growth for financials,” says Matthew Bartolini, head of Americas ETF research at State Street Global Advisors, especially when you consider that the sector currently trades at a bigger discount to the broad market than it typically does.

The financial sector’s price-to-book ratio (book value is assets minus liabilities) — one measure of the value of these kinds of firms — is currently at a 52% discount to the S&P 500 price-to-book ratio, says Bartolini; the typical discount is 44%.

Financials have some big-picture pluses in their corner, too. The economy has likely avoided a recession, and that’s good for banks, a prominent chunk of the overall sector. Also, short-term rates are moving lower, and longer-dated rates are inching up, which means the yield curve — the plotted line of interest rates of Treasuries with varying maturities — is now less inverted than it has been in recent years.

If the Federal Reserve cuts short-term rates another 0.50 percentage point in 2025, as expected, the yield curve could steepen further, a profitable setup for banks, which typically borrow at short-term rates and lend at long-term rates, says Bartolini.

How to invest in financial stocks

The financials sector is broad and includes investment managers, banks, brokers, exchanges, fund companies and insurers, among others. But due to specific catalysts, certain industries, such as asset managers, investment banks, property and casualty insurers, and regional banks, boast better near-term prospects than other financials.

To see why we like these corners of the financial sector and to explore ways to cash in, read on. All returns and data are through December 31, unless otherwise noted.

Asset managers

Strong stock returns and healthy inflows of new cash have fueled this category recently, lifting total assets under management. More growth is ahead as an increasing number of investors nearing retirement opt to get professional help to achieve their financial goals. Industrywide, assets under management are expected to grow 34% a year until 2032, according to PwC, an accounting and professional services company. Firms that have a good handle on technology and a solid footprint in the expanding markets of alternative assets and private equity and debt will have an edge in the money grab.

That’s where BlackRock (BLK, $1,025) fits in. Its popular exchange-traded funds, used widely by retail and institutional investors, are driving growth in assets under management, which hit $11.5 trillion at the end of the third quarter.

On top of that, BlackRock has Aladdin, a technology platform that financial firms around the world use to analyze risk, manage portfolios and make investment decisions. It “widens the moat around BlackRock, provides a diversified revenue stream and gives the firm a competitive edge over other plain-vanilla asset managers,” says CFRA Research analyst Catherine Seifert.

Meanwhile, BlackRock has been buying other businesses to beef up its share of private markets and alternative assets. Recently, it announced an acquisition of HPS Investment Partners, a leading private-credit shop, and closed on its purchase of Global Infrastructure Partners, an alternative assets fund.

As the world’s largest asset manager, BlackRock could trade at a hefty premium to the typical investment management firm stock. But it doesn’t. At $1,025, the stock’s price-earnings ratio of 21 is just a tad above the P/E of 18 of the typical asset management firm.

Investment banks

Lower interest rates will spur initial public offerings in the stock market and mergers and acquisitions among corporations, transactions that have been in a bit of holding pattern of late. Some market gurus think the Trump administration may end certain regulations that helped slow the pace of deal closings in recent years.

But it’s tricky to peg investment decisions on what a new administration might do, which is why we still like Goldman Sachs (GS, $573), a stock we've previously recommended in Best Stocks to Buy Now. Its business is already humming. The firm crushed analysts’ expectations in 2024’s third quarter, with double-digit revenue growth in nearly all of its business segments, including a 46% jump in debt underwriting and 20% growth in investment banking fees. At $573, Goldman shares trade at 13 times expected earnings for the year ahead, basically in line with the average investment banking company P/E of nearly 14. Meanwhile, analysts expect 18% annualized earnings growth over each of the next three years.

Property and casualty insurers

Demand for property and casualty insurance is rising. Natural disasters are increasingly destructive — the 2024 hurricane season may have been among the costliest ever. Businesses of all kinds face a heightened need to protect against threats to intellectual property and cybersecurity. And jury awards of $10 million or more, called “nuclear verdicts” in the industry, have become commonplace, boosting demand for protection against them.

Catastrophes and losses are, on the whole, good for insurers’ bottom line. Though claim payouts tend to trim profits, insurers can simply raise premiums. In the property-casualty insurance industry, this price-hiking scenario is called a “hard cycle” because it’s hard for consumers and businesses to find insurance at attractive prices. But for investors, it means the insurance business is on the upswing.

W.R. Berkley (WRB, $59) is led by founder William R. Berkley, which we view as a big plus. The company offers a variety of insurance products for construction companies, financial institutions, hospitals and retailers, among others. Analysts expect 8% revenue growth and 7% earnings growth in 2025. Though shares have climbed 27% over the past 12 months, the stock trades at 14 times earnings, below its five-year median P/E of 17. That’s a discount compared with peers, too, which trade at a P/E of 27.

Argus Research analyst Kevin Heal says W.R. Berkley’s strong position in the property-casualty market is reflected in revenues and earnings that are growing faster than at peer insurers.

Another way to play the upturn in the property-casualty insurance cycle is through insurance brokerage firm Willis Towers Watson (WTW, $313). Since its planned merger with Aon was aborted in 2021, the company has struggled to be competitive in its core insurance brokerage business (41% of revenues), and total revenue growth was anemic in 2022.

But there are signs that the company’s cost-cutting and restructuring efforts are starting to have an effect, and that could lift shares higher. Though Truist Securities analyst Mark Hughes expects a slight tick down in overall revenues in 2025 compared with 2024, profit margins are expanding, and the company could deliver a 5% jump in earnings. Emerging interest in cybersecurity coverage could provide another boost to the business’s results.

In December, Hughes set a $380 price target on shares, a 21% increase from recent levels. The stock trades at a P/E of 17, a discount to the multiple of the typical insurance-broker stock.

Regional banks

Regional bank stocks tanked in 2023 after Silicon Valley Bank, among others, failed. But things are looking better. Lower interest rates have helped; regional banks tend to depend on net interest margin — the difference between how much the bank earns on the loans it issues and how much it pays on customer deposits — to drive earnings.

A healthy economy and low unemployment are also boosters. “The number-one driver of bank performance is low unemployment,” says CFRA Research analyst Alexander Yokum. Finally, regional banks are better capitalized these days. After Silicon Valley Bank collapsed, many regional banks built up their cash reserves, fearing that capital requirements — the amount of cash that regulators require a bank to have on hand — might increase.

Shares in Bank OZK (OZK, $43), formerly Bank of the Ozarks, are downright cheap. (The Ozarks encompass Missouri, Arkansas, Oklahoma and a small patch of Kansas). The stock trades at less than seven times earnings, a 36% discount to peers. “We think its discount to peers is too big,” says John Buckingham, editor of The Prudent Speculator.

The stock, down 7% over the past 12 months, has lagged its peers partly because investors are worried about the bank’s commercial real estate exposure given the work-from-home trend — regional banks tend to be loaded with such loans, so it’s a primary concern in this sub-industry. But workers are starting to return to the office, and besides, Bank OZK tends to be conservative, says Buckingham. It partners with strong developers and incorporates defensive loan structures, among other things, to embed a measure of safety into its loans.

PNC Financial Services (PNC, $193) is the biggest regional bank, serving some fast-growing states, including the Carolinas and Texas, among others. Its heft makes it a more stable stock than other regional banks. What’s more, PNC is ably managed. “Bill Demchak, the CEO, tends to make the right decision every time,” says Yokum.

PNC wasn’t loaded up on long-term bonds in 2022, for instance, when they lost value after the Federal Reserve raised rates (bond prices and yields move in opposite directions), a strategy that led to the failure of Silicon Valley Bank and caused trouble for a few others. PNC also trimmed its commercial office real estate exposure by 16% over the past year, to just 2.2% of total loans.

A big minus is that PNC’s shares soared in 2024. But a late-year breather now puts the stock up 29% over the past 12 months. The stock currently trades at 13 times earnings, in line with the P/E of the average regional bank stock.

Financial picks for fund investors

If you want to beef up exposure to the broad finan­cial sector, consider an index-based diversified financials exchange-traded fund, such as iShares U.S. Financials ETF (IYF, $111) or Financial Select Sector SPDR ETF (XLF, $48). Or you could go with an ac­tively-managed mutual fund, such as Fidelity Select Financials Port­folio (FIDSX) or T. Rowe Price Financial Services (PRISX).

Certain industry ETFs, however, allow you to home in on the more promising sections of the financial sector.

Invesco KBW Property & Casualty Insurance ETF (KBWP, $116), for instance, tracks an index of 24 stocks, including the Travelers Companies, Allstate and Chubb. Its five-year 12.7% annua­lized record beat 80% of its financial-fund peers.

For regional banks, we like iShares U.S. Regional Banks (IAT, $50). It holds 34 stocks weighted by market value. PNC Financial Services, U.S. Bancorp and Truist Financial are top holdings. Over the past 12 months, the fund has gained 24%.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Since 1993, I have offered an annual list of 10 stocks with the potential to beat the market in the 12 months ahead. My 2024 selections notched the highest return ever: an average of 48.9%. I beat the S&P 500 index by 10.8 percentage points, and every one of my stocks was up — six by more than 30%.

The past decade has been exceptional. Just remember that reversion to the mean is a powerful force, so don’t count on either the huge returns or my winning margin to continue. Still, there’s nothing wrong with a little celebration.

Following tradition, I have chosen nine stocks for 2025 from the broader choices of experts I trust, and I include one of my own. A theme for several selections is artificial intelligence (AI), which is in its infancy but will lead to enormous gains in efficiency and innovation. (Stocks I like are in bold; prices and other data are through October 31).

1. Cellebrite DI

The best 2024 performer, up 131.2%, was Blue Bird (BLBD), a bus manufacturer that is benefiting as school districts switch to electric vehicles. The stock, which still looks attractive at a forward price-earnings ratio of just 12, based on analysts’ consensus projections for 2025, remains a top holding of Oberweis Micro-Cap (OBMCX), a mutual fund that has far outpaced its competitors in the small-company growth stock fund category.

In 2024, Oberweis made a large investment in Cellebrite DI (CLBT), an Israeli company that uses digital tools, some based on AI, to help investigators in law enforcement, the military and corporations.

For example, Indiana police recently credited the company’s software, which investigators used to recover vital information from cell phones and computers, with cracking a drug ring after a string of overdoses. Cellebrite’s revenues rose 25% in the most recent quarter, compared with the same period last year. The company, which went public in 2021, is risky, but the upside is substantial.

2. Heico

Another big winner among our picks was NVR (NVR), which Warren Buffett added to the Berkshire Hathaway portfolio in 2023. So far in 2024, Buffett has been doing a lot of selling (Apple, Chevron and others), but he also bought Heico (HEI), which provides replacement parts for the aerospace industry and is benefiting from both the rise in global defense spending and the travel boom.

The stock has doubled in four years, but the price is still modest for a company growing so fast. The Value Line Investment Survey projects Heico’s earnings will rise by an average 17% for the next five years.

3. MGM Resorts International

Speaking of Value Line, last year I chose Brown & Brown (BRO), an insurer, from the stocks that Value Line rated 1 (tops for price appreciation), and it returned a hefty 51.3%.

I am tempted to stick with the stock even though Value Line has cut its appreciation rating to a middling 3, but to be consistent, I am picking another company recently promoted to the top rank: MGM Resorts International (MGM). Its share price has been stagnant for years, but MGM is in three accelerating businesses — casinos, hotels and online betting — and the valuation is attractive.

4. Zeta Global Holdings

Terry Tillman, who analyzes software companies for Truist Securities, has had a stellar record. He recently reiterated his “buy” rating for Zeta Global Holdings (ZETA), which uses AI to examine billions of data points to help its clients predict consumer preferences.

Zeta recently completed its acquisition of LiveIntent, which helps retailers monetize their e-mail lists — a wise acquisition. Zeta stock has nearly tripled in five years, but for a booming AI company, the potential for greater growth in value is evident.

5. iShares MSCI Malaysia

The U.S. economy is “the envy of the world,” says a recent cover story in The Economist. That it is — but Malaysia looks awfully good, too, with GDP growth of 5.1%, inflation of 2% and unemployment of 3.2%.

Malaysia has never managed to gain “Asian Tiger” status, but it’s getting there, thanks to its recent success attracting semiconductor makers. The best way to buy the market is through iShares MSCI Malaysia (EWM). After declining in five of the preceding six calendar years, the exchange-traded fund has returned 23.5%.

6. Adobe

Morningstar, the fund researcher, also analyzes stocks. The firm recently assembled a list of seven undervalued companies with “wide moats” — firms with strong defenses against competition through patents and other protections.

The one that caught my eye was Adobe (ADBE), a powerful force in software. Adobe could be a big winner by helping customers become more at ease with AI applications. The company is highly profitable, with both revenues and earnings rising at double digits.

7. Whirlpool

Our longtime small-cap value guru, Daniel Abramowitz of Hillson Financial Management, in Rockville, Md., likes Whirlpool (WHR), an appliance manufacturer that also owns such iconic brands as KitchenAid, JennAir and Maytag. Sales and earnings are well off their 2021 peak, and the stock has had a choppy past 12 months.

But Abramowitz sees strong prospects as the brands emphasized higher-margin small appliances, such as blenders and espresso machines. Lower interest rates and signs of life in the housing market will help, too. Plus, the stock is cheap, trading at a P/E, based on 2025 consensus forecasts, of just 9 and carrying a dividend yield of 6.8%.

8. Shopify

Despite its rock-bottom rating by Morningstar for its erratic returns, ARK Innovation ETF (ARKK) is a great source for ideas. Here’s one: Shopify (SHOP), the e-commerce check-out platform whose revenues have risen 20% annually for the past five years. Despite this impressive growth, the stock has dropped by half since late 2021, offering an enticing opportunity.

9. UnitedHealth Group

Once again, Parnassus Value Equity (PARWX), one of my favorite mutual funds, had a winning selection for 2024: Bank of America, returning 62.5%. The only new stock among the portfolio’s top 25 holdings this year is UnitedHealth Group (UNH), the insurance behemoth.

Earnings have risen in what I call a “beautiful line,” increasing every year since 2008, and I expect double-digit growth through this decade. The stock lagged far behind the market in the past year, returning just 6.9%.

10. Constellation Energy

My own 2024 choice of ONEOK (OKE), the Oklahoma-based natural gas pipeline company, returned 53.1%. This time, I am going with Constellation Energy (CEG), which generates and distributes electricity in states from Maryland to Texas.

Demand for electricity is booming thanks to AI data centers and electric vehicles, among other things, and Constellation is the most innovative provider. Its advantage is no secret. The stock has more than doubled over the past 12 months, but I think it has a chance to become a giant on the order of a big tech company.

As of October 31, 2024. *Based on estimated earnings for 2025. N/A not applicable.

SOURCE: Morningstar Direct, Yahoo Finance

Warning label

I believe these stocks will beat the market in the coming 12 months, but I don’t advise buying shares unless you intend to hold them for at least five years. Supplement my brief descriptions with your own research, and please diversify. Happy hunting!

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. He owns none of the investments recommended here. You can reach him at JKGlassman@gmail.com.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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It's no secret the market looks pricey by historical measures, but that doesn't mean there are no Buy-rated bargain stocks to buy.

We're all more than aware that the S&P 500 is trading at lofty valuations by a number of measures. How often have we been told that the market's forward price-to-earnings ratio (P/E) – the S&P 500 currently trades at 22 times next-12-months earnings – is perilously close to its historical high?

Indeed, as Savita Subramanian, head of U.S. equity strategy and U.S. quantitative strategy at BofA Global Research, notes: "On 19 of 20 metrics, the S&P 500 is trading at statistically expensive levels."

But that doesn't mean there are no bargains to be found. After all, as the cliche goes, it's not a stock market; it's a market of stocks.

To that end, we screened the S&P 500 for the best bargain stocks to buy, according to industry analysts. We sussed out high-quality names with cheap share prices on a relative valuation basis. We further limited ourselves to stocks scoring a rare consensus Strong Buy recommendation, according to data from S&P Global Market Intelligence.

We then dug into analyst research and recent returns to find three of the most promising names, which might surprise you. Tech and communication services stocks may get all the attention, but there's value to be found in the consumer discretionary, energy and materials sectors.

Hasbro

• Market cap: $11.6 billion
• Dividend yield: 3.4%
• Forward P/E: 15.8

Hasbro (HAS) has become something of a poster company for weathering trade shocks. The toymaker not only manufactures a significant portion of its products in China, but the Middle Kingdom is also a major market. Indeed, Hasbro recorded more than $1 billion in non-cash goodwill impairment charges this year due to the impact of tariffs.

And yet, shares have shaken off the shock, gaining more than 50% so far in 2025. Even better, analysts say Hasbro's valuation remains compelling, suggesting even more upside ahead.

"The company has consistently delivered on earnings and has topped estimates for the past seven quarters," notes Argus Research analyst Christine Dooley, who rates HAS stock at Buy. "It delivered again this quarter despite retailers delaying orders due to tariffs and economic uncertainty. The business is on track and fundamentals are good."

HAS stock goes for less than 16 times expected earnings – below its own five-year average P/E, and at a roughly 30% discount to the broader market, according to LSEG Stock Reports Plus. In addition to looking like a bargain, HAS offers an attractive dividend with an implied yield of 3.4%.

Of the 14 analysts covering the stock surveyed by S&P Global Market Intelligence, 10 rate it at Strong Buy, two call it a Buy and two have it at Hold. That works out to a consensus recommendation of Strong Buy.

SLB

• Market cap: $53.3 billion
• Dividend yield: 3.2%
• Forward P/E: 12.5

Bulls say SLB (SLB), the oilfield services giant formerly known as Schlumberger, has a unique ability to ride out subdued industrywide demand. True, shares are off about 5% so far this year, but that only makes the valuation more compelling.

Thanks to its $7.8 billion acquisition of ChampionX in July, and its diversification into offering digital services and data centers, SLB should be able to "navigate the environment until spending ramps back up," writes Susquehanna analyst Charles Minervino, who rates shares at Positive (the equivalent of Buy).

Accelerating international markets and pricing momentum provide upcoming catalysts to the energy stock, the analyst notes.

Meanwhile, SLB's price appears to be right. With a forward P/E of 12, SLB trades at a 25% discount to its own five-year average, as well as a discount of almost 50% to the broader market.

By price-to-sales, SLB trades at even steeper discounts to those benchmarks.

Then there's all the cash SLB is returning to shareholders. The company reaffirmed its plan to spend $4 billion on share repurchases and dividends in 2025, up from $3.27 billion in 2024.

Of the 30 analysts covering SLB, 19 call it a Strong Buy, nine say Buy and two have it at Hold. That translates to a consensus recommendation of Strong Buy.

Smurfit WestRock

• Market cap: $18.7 billion
• Dividend yield: 4.8%
• Forward P/E: 10.7

Smurfit WestRock (SW) shares have lost about a third of their value so far this year, but bulls argue that this leaves them trading at bargain-basement prices. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We rate SW at Buy given its leading industry position in North American containerboard, allowing it to capitalize on the improving containerboard cycle, which we believe is entering a 'golden age' driven by balanced supply and demand," writes Truist Securities analyst Michael Roxland.

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 11, SW trades at an 11% discount to its own five-year average, according to LSEG Stock Reports Plus. That valuation also represents a discount of 50% to the broader market. The dividend yield, at 4.8%, is pretty spicy compared to the S&P 500's yield of 1.2%.

Of the 16 analysts covering the materials stock, 11 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

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To help you understand what's happening in world economies and global investing, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

If you do business or invest overseas take note of the transformation in Japan that is unfolding right now. After years of struggling with little growth and the threat of deflation, Japan is transitioning to a higher-inflation environment, which brings new challenges but also opportunities.

Inflation doesn’t sound like a hopeful thing. But for Japan, it is something of a relief. Before prices started perking up recently, its economy had suffered through close to three lost decades. Japan’s postwar boom came to a halt in the early ’90s. Growth, prices and the stock market started dropping.

The central bank eventually pushed interest rates below 0% in a radical bid to revive the growth engine. That did little in the near term, but gradually, the yen weakened enough to help Japan’s prolific exports. Japan emerged from the pandemic growing, not at a breakneck pace, but faster than it had grown in a very long time. Prices rose and the central bank was finally able to raise interest rates above 0%. Savers no longer get punished for putting away cash. Workers are seeing pay rises. The stock market is up.

Still, this is just an opening to reboot the economy, not a guaranteed trend. Japan faces immense demographic challenges. Its population is shrinking by about 0.5% per year and is set to fall from 124 million now to 100 million by 2050. Japan has been offsetting this decline by bringing more women into the workforce and keeping people working for longer, plus allowing some immigration — long a taboo.

The declining workforce makes productivity gains an absolute must. Here, Japan is seeing some early success. But it will need to invest a lot in areas like robots and AI if it hopes to offset its demographic woes with a far more productive economy.

Funds to consider if you want to invest in Japan

Some funds to consider if you want to invest in Japan, from the editors of Kiplinger Personal Finance: Fidelity Japan (FJPNX). T. Rowe Price Japan (PRJPX). WisdomTree Japan Hedged Equity (DXJ) and Japan Hedged SmallCap Equity (DXJS).

Japan’s economic fate matters a great deal to the U.S. Among trade partners, it’s America’s fourth-largest export market. It’s also a key source of outside capital for the U.S., as both a buyer of Treasury debt and an investor in American business. Four decades ago, that seemed like a threat. Now, with the rise of China, it’s critical for us to have friendly creditors and investors, not to mention amicable trade partners.

Japan should be able to get along with President-elect Donald Trump. He is promising sweeping tariffs, but he had good relations with Tokyo in his first term. However, look for Trump to press Japan on defense spending. He will want to bolster ties with friends in the Pacific to counter China, but he also probably wants to see Japan contribute more money, taking some of the burden off U.S. taxpayers.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Analysts have been busy updating their discounted cash flow models and price targets for Nvidia (NVDA) after the most important AI company in the world failed to give the sort of blow-out revenue guidance Wall Street has come to expect.

Indeed, shares in NVDA, the world's second most valuable publicly traded company with a market cap in excess of $3 trillion, actually stumbled after posting Q3 results.

But then these sorts of things can happen when a stock is said to be priced for perfection.

Either way, it seemed like a good time to take a look at a few of the ways in which analysts' expectations have changed for NVDA stock in light of the company's latest guidance.

First, let's have a look at NVDA's price target. Although these targets are of limited utility, they do form the basis for declaring whether a stock is a Buy, Hold or Sell.

As of now, NVDA's average price target stands at about $170, up roughly 6% from the pre-earnings release target of about $160, according to data from S&P Global Market Intelligence.

NVDA's new average price target gives shares implied upside of about 20% over the next 12 months. The old price target – based off NVDA's previous level – gave the stock implied upside of about 13%.

It's hard to believe Nvidia has become a $3 trillion company because of its potential for 13% or 20% price upside over the next year or so. Heck, the stock nearly tripled over the past 52 weeks.

Price targets. Go figure.

Perhaps relative valuation can be more helpful.

Nvidia is cheap, relatively speaking

First, a caveat about valuation. While absolutely critical, valuation tends to play out on its own time frame. This time frame can be much longer than investors expect. Keep this in mind when looking at Nvidia, as the stock usually looks expensive and yet it keeps going up.

That said, NVDA's relative valuation does look increasingly compelling by some measures these days.

For one thing, while it's true that Nvidia changes hands at nearly 35 times analysts' average next-12-months earnings per share (EPS) estimate, this multiple represents a 20% discount to its own five-year average, according to data from LSEG Stock Reports Plus.

Perhaps more importantly, after updating their models, analysts' average long-term growth forecast now stands at more than 62%, per LSEG.

These revisions make NVDA look attractively priced once you consider how fast the stock is rising relative to its growth prospects. Indeed, by at least one metric – the price/earnings-to-growth (PEG) ratio – Nvidia stock looks very cheap on a relative valuation basis.

Here's why: since NVDA stock is trading at 35 times expected earnings and has a LTG forecast of more than 62, its forward PEG is 0.6. To put that in perspective, the S&P 500 trades at a PEG of 2.1.

By this measure, NVDA trades at a 70% discount to the broader market. That's not bad, but then Nvidia and the broader market are sort of apples and oranges.

That's why we want to look at Nvidia's PEG relative to its peers and itself. This gives us an idea of what sort of premium the market has been willing to pay for Nvidia's growth prospects in the past.

And what do we find? Bulls will be happy to know that with a PEG ratio of 0.6, Nvidia stock trades at a 70% discount to the semiconductor industry average.

Even more intriguing, however, is that NVDA stock also trades at a steep discount to its own five-year average. Indeed, per LSEG Stock Reports Plus, if Nvidia's PEG "returned to historical form," the stock would trade at $349.04.

That's not a price target, mind you, it's just some modeling. But it does give NVDA stock implied price upside of about 150% from current levels.

As for Wall Street's collective wisdom on this top-rated Dow Jones stock, of the 63 analysts issuing opinions on NVDA surveyed by S&P Global Market Intelligence, 47 call it a Strong Buy, 12 have it a Buy and four say it's a Hold.

That works out to a consensus recommendation of Strong Buy, making Nvidia one of the Street's top S&P 500 stocks to buy too.

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Tesla (TSLA) stock soared on the outcome of the 60th U.S. presidential election, helped in no small part by CEO Elon Musk's ardent support of Donald Trump, now the 45th and the 47th man to win the White House.

Few things have greater allure for investors than the sight of rising prices, which leads to the question: should you buy Tesla stock?

To answer this question, it helps to look around one's physical environment. Are you reading these words at a desk with, say, six monitors displaying changes in asset prices across the globe in real time? Are these numbers fluctuating between the colors of red and green?

If the answer is “no,” then no, you should not buy Tesla stock based on the outcome of the election. After all, the idea is to buy low.

Besides, retail investors who own diversified funds that track the S&P 500, the Nasdaq Composite and the Nasdaq-100 probably have enough exposure to TSLA already. The electric vehicle maker's market cap of more than $920 billion gives it ample weight in these benchmarks.

TSLA stock: The Street weighs in

But let's say you are a stockpicker. Is Tesla a buy at current levels?

Certainly industry experts who cover the stock intensely should know. The problem here is that Wall Street is heavily split on the name.

Of the 52 analysts covering TSLA stock surveyed by S&P Global Market Intelligence, 12 rate it at Strong Buy, six say Buy and 19 have it at Hold. Furthermore, four call TSLA a Sell and seven say it's a Strong Sell.

This works out to a consensus recommendation of Hold. Meanwhile, the Street's average price target of $222.96 gives Tesla stock implied downside of more than 20% from current levels.

Part of the bear case on Tesla stock has always been its valuation, but that hasn't really worked out so far. The stock always looks expensive. Indeed, TSLA trades at 115 times expected earnings per share. And it has always been volatile. It sports a five-year beta of 2.3 and suffered a maximum all-time drawdown of 73%.

Volatility is a proxy for risk because it increases the odds of buying high and selling low.

And yet, despite these issues, Tesla stock has been a massive market-beater over the longer term. True, TSLA lags the S&P 500 badly over the past one- and three-year periods, but beyond that it has generated outstanding outperformance. Heck, over the past five years, TSLA beats the broader market by about 50 percentage points on an annualized total return basis.

On the other hand, as every prospectus says, past performance is not a guarantee of future returns.

If you were a Tesla bull before Tuesday night, hey, don't let the dream die. But adding exposure to Tesla stock when it's popping on knee-jerk trading action is generally not part of a sound investment process. At least not if you're not a professional.

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Whether your preferred cliche is "talk about buying high" or "better late than never," Nvidia (NVDA) will at long last replace Intel (INTC) in the Dow Jones Industrial Average.

Oh, and by the way, Dow (DOW) is getting the boot too. It will be swapped out of the venerable blue-chip average for Sherwin-Williams (SHW). The NVDA and SHW changes will take place before the market opens on November 8.

As much interest as such events generate, being tapped for the Dow is more symbolic than material. After all, the S&P 500 is the main benchmark for U.S. equity performance. That's why many trillions of dollars are invested in products that track the index.

For example, the largest exchange-traded fund (ETF) in the world, the SPDR S&P 500 ETF Trust (SPY), has more than $590 billion in assets under management alone. A comparable product for the DJIA, the SPDR Dow Jones Industrial Average ETF Trust (DIA), holds less than $39 billion in assets under management.

Also know that, unlike the S&P 500 or the Nasdaq Composite, the Dow is weighted by price rather than by market cap. Although Nvidia has an outsized influence on the movements of the cap-weighted benchmarks, at current prices NVDA stock will be as important to the DJIA as, roughly, 3M (MMM).

There's also the fact that it would have been nice if the keepers of the Dow had made this move sooner rather than later. Once Nvidia split its stock last spring, it became a good fit for the Dow.

Intel, on the other hand, has been dead weight on the Dow for decades.

Indeed, NVDA lapped INTC a long time ago as a credible representative of the semiconductor sector in a concentrated portfolio. (Recall that the Dow comprises just 30 stocks.)

True, NVDA's share price pre-split made it essentially ineligible for Dow membership, but it's impossible not to look back at the charts and wonder what could have been. The bottom line is that the Dow would be higher today had NVDA been a component rather than INTC.

Nvidia for the long run

As we have noted, anyone who put $1,000 into Intel stock 20 years ago has endured a destruction of their capital. Nvidia, on the other hand, has been among the greatest wealth creators of the past several decades. Have a look at what $1,000 invested in Nvidia stock 20 years ago would be worth today. If you wish you had a time machine, you are not alone.

Suffice to say the DJIA's performance would have been better with Nvidia in it. But that wasn't possible. So, is this better late than never?

That's harder to say. Ordinarily, one wants to buy low. Nvidia is up 178% so far this year on a price basis. Heck, shares have gained nearly 30% over the past three months. There's another Wall Street cliche about the easy money already having been made. And it is always true that past performance is not a guarantee of future results.

Either way, the DJIA is certainly more representative of whatever it's supposed to represent with NVDA in it rather than INTC. But apart from having the imprimatur of the editors of the Dow, nothing fundamental has changed.

This fact by itself should be of enormous comfort to Nvidia bulls, of which there are legions on the Street. Of the 62 analysts issuing opinions on NVDA stock surveyed by S&P Global Market Intelligence, 48 rate it at Strong Buy, 10 say Buy and four call it a Hold. That works out to a rare consensus recommendation of Strong Buy. Indeed, Nvidia routinely makes the list of analysts' top S&P 500 stocks to buy.

As to whether you should add to your exposure to Nvidia stock based on its inclusion in the Dow, the answer is no. If you own diversified funds or ETFs tracking, for example, the S&P 500, Nasdaq Composite or Nasdaq-100, you already own Nvidia – and it's probably enough.

As exciting and enviable as Nvidia's position in artificial intelligence (AI) may be, it is ultimately a chip maker. The chip industry is cyclical, and no stock has ever gone up in a straight line.

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In 1997, I coined the phrase “faith-based investing.” It has nothing to do with religion or with picking stocks at random. The idea is that a company with a great brand, attractive products, a history of success and a solid balance sheet will find a way to prosper even if it makes mistakes or otherwise experiences tough times.

The “faith” part is that you may not know exactly how such a company will get back on track, but you have blind confidence that it will.

Faith-based investing (let’s call it FBI) should not be confused with “buying the dips,” the practice of purchasing shares of a stock when it temporarily falls in price, often because the whole market is down. Instead, FBI focuses on companies that are perceived as having a great past but a miserable future.

Consider Starbucks( SBUX). The 53-year-old company has been a consistent winner for decades, planting 40,000 coffeehouses around the world. Shares, however, have been flat for the past five years while the S&P 500 index, the large-stock benchmark, has more than doubled.

Starbucks shares languished because profits stalled amid management failures. As a Harvard Business Review piece in June put it: “Starbucks is struggling. It has strayed from its successful strategy of offering customers exceptional experiences and, in the process, has commoditized itself.”

Worst of all, the chain was losing what former CEO Howard Schultz called its “soul.”

Still, Starbucks remains the largest global restaurant chain by far, and it has increased its dividend for the past 13 years in a row. How to fix the company? I really don’t know. What I do know is that this is the classic FBI stock, and it will find a way.

Challenge accepted

As I was writing these words, Starbucks surprised investors the way an FBI stock should by hiring a new CEO, Brian Niccol, the man who turned Chipotle around.

Starbucks stock shot up 25% in a single day, but it’s still cheaper than in the summer of 2019, and it’s a solid FBI buy.

FBI can produce big winners. A quarter-century ago, I encouraged investors to put their faith in what was then called Apple Computer. It was relatively new as FBI companies go, but it had innovative technology and a brilliant brand.

The first Mac, introduced in 1984, was a huge technology breakthrough, but by the ’90s, sales had fallen by one-third, and the company was a mess. In 1997, the board called Steve Jobs back as CEO.

No one knew whether Apple would even survive, but Jobs immediately set to work destroying the silos — the compartmentalized business-unit structure — that were stifling creativity and making the company tough to manage. Since then, the stock has risen by a factor of more than 600.

In 2012, I recommended that readers “consider Netflix, the firm that utterly disrupted the movie-rental business.” Shares had dropped by four-fifths in just four months after Netflix introduced a new pricing scheme that infuriated customers.

Again, I didn’t know how Netflix would recover, but I had faith that it would. And it did. An investment of $10,000 at the time would be worth hundreds of thousands today.

Another FBI stock from the same era was Merck, the pharmaceutical giant that had fallen from a high of $89 a share in 2000 to $39 in mid-2012. I pointed out then that Merck is “one of the strongest consumer brands in the world,” and although some of its best medicines were losing patent protection, I had faith the stock would come back.

With many FBI stocks, investors can collect a nice dividend while they wait for a revival. If you had bought Merck at $39, you’d have seen its annual payout nearly double, with the annual dividend yield on that initial investment rising to about 8%. The stock, meanwhile, now trades at $118.

Stocks for the faithful

Like Apple and Netflix, Merck can’t be called an FBI stock today. It’s doing too well. But look at Johnson & Johnson (JNJ). Over the past five years, its average annual return has been about half that of the S&P 500.

The company has suffered financial and reputational harm from health risks tied to its iconic brand of talc-based baby powder, and Stelara, its blockbuster immunology drug (accounting for 13% of revenues last year), is facing stiff competition from clones.

Wall Street seems to believe J&J has lost its shine, but I see a company that has raised its dividend for 62 straight years, weathered the Tylenol poisoning scandal in the 1980s and will get its mojo back — somehow.

The most obvious FBI stock today is Boeing (BA). Just to type the word makes me queasy.

In the past five years, two of the company’s 737 Max jets crashed, and a door blew off another in flight. More recently, doubts about the safety of Boeing’s Starliner are forcing two astronauts to spend an extra six months waiting to come down from space. Boeing has serious quality-control problems with its system of outsourcing the design, engineering, and manufacturing of most of its planes.

Shares are down by more than half over the past five years as each year the company sustained losses. Boeing last paid a dividend in the first quarter of 2020. For the first half of 2024, Boeing delivered 175 aircraft — 138 fewer than rival Airbus.

Amid these horrors, Boeing named a respected new CEO in August, but how will he fix a company with what seems like a sick culture? I don’t know the answer, but the FBI strategy holds that Boeing will thrive again. The business, more than a century old and vital to U.S. national interests, is too important not to.

Here are a few more FBI stocks I find attractive: 40-year-old Cisco Systems (CSCO), maker of internet networking products and trading below 2018 levels; McDonald’s (MCD), trying to find its bearings during one of its occasional periods of slow growth; and Walt Disney, with its stock flat for a decade and making mistakes such as losing 11 billion on its streaming venture but still owning one of the 10 most recognized brands in the world — plus the most famous mouse.

Finally, there’s my longtime favorite, Lululemon Athletica (LULU), buffeted by competition from new yoga-wear retailers and from a new-product flop (leggings) but unmatched in service and innovation. Unlike most FBI stocks, it’s showing powerful earnings gains (17.5% in the latest quarter compared with the same period in 2023).

Of course, the FBI strategy can’t guarantee winners. General Electric, now GE Aerospace, which I recommended in 2013, has risen less than 60% (cumulatively) over the past decade and trades 100 points below its 2000 high. Another recommendation at the time, DuPont, has returned just over 20% over the past 10 years.

There will be disappointments, even big losers. But the FBI strategy has paid off — big — in the past. Keep the faith.

James K. Glassman chairs Glassman Advisory, a public affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. Of the securities mentioned here, he owns Lululemon. You can contact him at JKGlassman@gmail.com.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Whether you like it or not, members of Congress are allowed to buy and sell stocks. True, federal law prohibits them from using "nonpublic information derived from their official positions for personal benefit," and they're required to disclose their trades.

That said, it's understandable if folks don't quite trust politicians to be on the up and up when their personal fortunes might appear to be in tension with their duties as elected representatives.

Perhaps this is unfair; even cynical. But to modify a famous quote from Upton Sinclair, it's difficult to get a person to understand something when that person's salary depends upon the person not understanding it.

Take, for instance, the uproar around President Donald Trump, who said shortly before announcing a reversal on reciprocal tariffs that it "is a great time to buy stocks."

The reversal sparked a historic stock market rally and has some high-profile Democrats questioning if anyone in the Trump administration profited off the announcement.

Disclosure rules are supposed to help mitigate this problem. Thanks to these requirements, the public can follow what members of the House and Senate are doing with their investments.

Before we go further, please note that this activity shouldn't be used for trading purposes.

After all, insider buying and selling at publicly traded companies is voluminously disclosed and analyzed, but it doesn't really tell us much. That's because insiders – the executives and board members who know what's going on – can sell for any number of legitimate reasons, from paying tuition to portfolio diversification.

When it comes to stocks, insider buying is actually a more useful piece of information. And even then, it's not exactly a screaming buy signal.

Using insider activity among members of Congress as the basis for some kind of trading system is not a rigorous idea.

With those caveats out of the way, it is indeed interesting to see which stocks, bonds and private investments are most popular with members of the House and Senate. Perhaps more interesting is how certain pols churn their portfolios, which is to be avoided if you're a retail investor.

Have a look at the below table to see which politicians were the most active traders by volume over the past 90 days, according to data from Capitol Trades.

Stocks politicians are buying and selling

Look past the municipal debt and investments in limited liability companies, and you can see that pols are pretty normal when it comes to their buys. Top-rated Dow Jones stocks, mega-cap tech names and reliable and rising dividend-payers routinely make the list of our representatives favorite names.

Both sides of the aisle like many of the hottest stocks, including Apple (AAPL), Amazon.com (AMZN), Oracle (ORCL) and Broadcom (AVGO) these days – but then so does pretty much everyone else.

Interestingly, as much as Representative Ro Khanna (D-Calif.) is associated with tech investing, a number of his most recent biggest buys were stalwart blue chips such as JPMorgan Chase (JPM), the nation's biggest bank by assets, and Warren Buffett's Berkshire Hathaway (BRK.B).

Meanwhile, in addition to buying shares in speculative artificial intelligence (AI) firm BigBear.ai Holdings (BBAI), Representative Lisa McClain (R.-Mich.) also picked up Air Products and Chemicals (APD), which happens to be one the best dividend stocks for reliable dividend growth.

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Microsoft (MSFT) knows how to keep long-term investors happy. The tech giant is returning another $60 billion in cash to shareholders through a new stock buyback plan and raised its dividend by more than 10%.

Microsoft's share repurchase program, which has no expiration date, replaces its previous $60 billion authorization announced four years ago. Meanwhile, investors also cheered the news that shareholders of record as of Nov. 21 will receive a quarterly dividend of 83 cents per share, up from the current 75 cents a share.

Microsoft disbursed nearly $22 billion in dividends over the past 12 months and still had levered free cash flow of $56.7 billion. Even better for long-time dividend-growth investors, Microsoft has hiked its payout every year for more than two decades. If it can keep its streak alive, Microsoft will be eligible for inclusion in the S&P 500 Dividend Aristocrats, which are some of the best dividend stocks for reliable and rising payouts.

Please note that although the share repurchase program matches Microsoft's largest-ever authorization, $60 billion represents only about 1.8% of its massive $3.22 trillion market cap.

Shares in Microsoft, the world's second most valuable publicly traded company after Apple (AAPL), were actually lagging the broader market by about 3 percentage points on a price basis for the year-to-date through September 17. 

But as a long-term holding, MSFT stock is hard to beat. Indeed, anyone who put $1,000 into Microsoft 20 years ago would be very pleased with their returns today.

Wall Street loves MSFT stock

Wall Street analysts were already plenty bullish on the Magnificent 7 stock before it announced its plans to return more cash to shareholders. Only three Dow Jones stocks garner Strong Buy consensus recommendations, according to data from S&P Global Market Intelligence. 

Of the 56 analysts issuing opinions on Microsoft stock, 40 call it a Strong Buy, 14 have it at Buy and two rate it at Hold. Only UnitedHealth Group (UNH) gets a higher rating from industry analysts than MSFT.

Meanwhile, with an average target price of $502, the Street gives MSFT stock implied price upside of 16% over the next 12 months or so. 

Analysts' bullishness on Microsoft stems largely from its enviable position in generative artificial intelligence (AI). 

As the "leading generative AI enabling provider," Microsoft offers the most "comprehensive end-to-end AI tooling stack and cutting-edge front-end generative AI applications across its entire portfolio of products," notes the software team at Truist Securities, which rates shares at Buy.

"Microsoft is expected to be a leading benefactor of AI workloads across each layer of the generative AI value chain," says Truist. "From increased data storage and high-performance compute to additive workloads across their PaaS portfolio. Additionally, their Copilot products are expected to add fuel to expansions and upsells across their application portfolio."

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Americans are well aware that many investors don't have enough saved for the retirement of their dreams. But that doesn't mean they're not doing anything about it. Participants in retirement savings plans socked money away at historic rates in 2023, according to Vanguard. The majority of those contributions – 64% – went into target-date funds. 

These set-it-and-forget-it funds are mainstays of retirement savings plans, whether you invest through a workplace plan, such as a 401(k) or 403(b), or independently.

You make a single decision – pick the fund with the target year that's closest to the time you plan to retire – and investment experts handle everything else. 

They decide how much to invest in stocks, bonds and other assets; which funds to buy; and whether you need to beef up your exposure to emerging markets stocks or shrink your government bond holdings.

And with every passing year, they adjust the holdings to a more conservative mix as you age. In other words, target-date strategies aim to make investing easy. 

Are target-date funds a good idea?

The knock on target-date funds is that only your age is factored into the equation. Other considerations, such as your tolerance for risk, how much you've saved already and whether you have a pension, get no attention. 

"People with different goals and different financial situations may not need the same allocation just because they are retiring in the same year," says David Edmisten, an adviser at Next Phase Financial Planning in Prescott, Arizona. 

Even so, if you're struggling with how to invest your retirement savings, target-date funds are an easy and solid option.

"It’s better than not investing at all or trying to do it yourself if it's not your passion or your area of expertise," says Eric Figueroa, an adviser at Hesperian Wealth in Folsom, California. 

And fees remain fairly low. U.S. target-date mutual funds have an average expense ratio of 0.68%. By contrast, U.S. stock funds have an average expense ratio of 1.04%; taxable bond funds, 0.83%. 

Meanwhile, diversification along the target-date "glide path" – the shift in the mix of assets in each fund over time – continues to evolve.

In 2022, to give one example, BlackRock LifePath Index funds ditched a long-standing strategy of holding a single U.S. aggregate bond index fund to represent its fixed-income allocation in favor of holding a handful of bond sector funds. 

The move enables managers to fine-tune the portfolio's interest rate sensitivity and credit quality across the series' glide path, says Nick Nefouse, BlackRock's head of retirement solutions. "We're constantly incorporating the findings of our new research into the portfolio." 

New types of target-date fund are emerging, too, including one that incorporates an annuity into the asset mix at some point along the glide path in order to offer steady income in retirement. Several fund firms have launched a target-date fund with the option of guaranteed income, according to Morningstar.

To help you understand your workplace offering, or to help you choose a fund on your own, we took a closer look at the six most popular target-date series, measured by net inflows (the sum of money going in minus the money going out). We've included our pros and cons for each strategy below.  

Most target-date funds have several share classes (aimed at different types of investors), with varying expenses. The data we cite for each target-date series is for the oldest mutual fund share class, which is often but not always the biggest in terms of assets. 

American Funds Target Date Retirement

Capital Group's target-date funds have posted the best returns, relative to their peers in each vintage, of any of the other target-date fund families highlighted here. For example, over each of the past 11 calendar years since 2013, the 2035 Target Date Retirement fund has outpaced its typical peer. 

Pros: Over the past decade, each vintage of American Funds' target-date retirement funds has been less volatile than its respective peer, too. Actively managed American funds fill the target-date portfolios, and many of the underlying funds earn high marks from Morningstar. 

Expense ratios hover at an average of 0.39% for the oldest share class of these target-date funds. Although that’s more than a target-date series made up entirely of index funds charges, it's dirt cheap for active managers. 

Cons: Although we are fans of some of the underlying holdings in this series, such as New Perspective and American Balanced, we're cool about others, including Growth Fund of America and AMCAP, which have posted middling returns relative to peers in recent years.

Blackrock Lifepath Index

Research drives the investment decisions at LifePath Index. The glide path is aggressive, with a nearly all-stock allocation (96%) at the start.

But the shift in the asset mix ends in the target year with roughly 40% in stocks. Says BlackRock's Nefouse, "Our research shows that the best way to maximize spending power is to maintain a fixed asset allocation in retirement." 

Pros: These funds are cheap. The average annual fee for the oldest share class is 0.09%. 

Cons: LifePath Index funds are strong out of the gate at the start of the glide path, relative to peers, thanks to a weighty exposure to U.S. stocks. But as the funds near their target years, they tend to lag peer funds. 

An above-average measure of international stocks relative to peers hasn't helped longer-term returns, as those markets have not done as well as U.S. stocks for several years. The second-biggest holding in the LifePath Index 2030 fund is a 17% stake in the iShares Core MSCI Total International Stock ETF. However, foreign shares have done well in recent months.

Fidelity Freedom Index

Fidelity has been proactive about making changes to its target-date funds over the years.

In 2021, the firm beefed up its exposure to inflation-protected bonds, for example, and made a number of other shifts in its asset allocation.

But the jury is out on whether tinkering with its strategy is paying off. Over the past three years, most of the Freedom Index funds sport annualized returns that rank below the average for their peer group. 

Pros: Freedom Index funds sport low cash positions, especially at the start of the glide path, which we view positively. We also like the healthy stock allocation relative to peers across the entire glide path. 

Cons: The funds hold an above-average exposure to foreign shares, which has been a drag on longer-term returns. A nearly 10% bond allocation in the 2065 funds for investors with 40-plus years to go before retirement hasn't helped, either. 

State Street Target Retirement

Funds in the State Street target-date series, which hold low-cost index funds, tend to be middling to below-average performers relative to their respective peer funds, depending on the target-year fund you're comparing.

Pros: The fund series boasts a low, 0.09% average net expense ratio. 

Cons: State Street's funds have trailed relative to their peers, especially the longer-dated portfolios. The 2060 fund, for instance, has a 5.7% one-year annualized record, which falls behind 55% of its peers. Tilts to certain types of stocks may be the reason. 

State Street’s target-date glide path has a bigger stake in small- and midsize-company U.S. stocks and in foreign stocks than the typical target-date fund, and those markets have struggled.

A nearly 10% starting allocation to bonds at the glide path's start has also hurt performance in State Street’s longer-dated funds.

Still, over the longer term, the 2060 fund's returns have picked up the pace. The five-year annualized return of 12.8% has outpaced 97% of its peers. 

T. Rowe Price Retirement

Investors don't save enough, but Price's Retirement target-date funds have an aggressive glide path to make up for that.

The portfolios have the heftiest stock allocations of all the target-date series reviewed here, starting at 97% in the 2065 fund and ending at 40% for the 2005 fund. That can make for a bumpier ride, particularly in rough markets. 

But interestingly, Price's Retirement funds, which hold mostly actively managed funds, have been less volatile over the past five years than the all-indexed State Street Target Retirement and BlackRock LifePath Index funds. 

Pros: Over the past decade, nearly all vintages of Price's Retirement, the firm's flagship target-date series, rank among the top 11% or better of its respective peer group (vintages 2010 through 2025 rank among the top 1%). 

Much of the boost comes from the funds' big tilt to U.S. stocks – and smaller stake in foreign shares – across their glide paths, relative to target-date funds from other firms. 

Lowlights: Fees are an average 0.59% – higher than the index-based target funds, but still below average relative to all target-date mutual funds. 

Vanguard Target Retirement

This target-date series is the biggest in the land. Its simplicity is a selling point – for nearly the entire glide path, the underlying holdings include just four Vanguard index funds: Total Stock Market Index, Total Bond Market Index, Total International Stock Index and Total International Bond Index. 

Pros: No surprise, this is the lowest-cost series, with a 0.08% average expense ratio. 

Cons: Only a little bit better than average is how we would describe the long-term annualized returns of Vanguard's target-date funds, relative to peers.

A decade ago, these funds enjoyed a big advantage in low fees. That's no longer the case.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Investors are always urged to diversify, but choosing how and where to place those bets can be challenging. For example, international stocks in general have lagged significantly behind their U.S. counterparts for years. And these days, investing in a broad basket of international stocks might mean buying stakes in companies based in areas threatened by war or in countries with little investor protection.

Luckily, there’s a foreign region that offers investors reduced geopolitical risks, well-regulated markets and attractive opportunities: The Nordics. This collection of five northern European countries — Denmark, Finland, Iceland, Norway and Sweden — account for only about 2% of the world’s economy and investable market, but the region has been punching far above its weight. 

The MSCI Nordic Countries index has returned 25.0% over the past 12 months, roughly double the returns of indexes tracking the developed international world in general, Europe as a whole, and emerging markets. For context, the S&P 500 has returned 24.6% over the same period. (Except where otherwise noted, data are through June 30.) 

That strong performance is part of a long-term trend, according to a December 2023 McKinsey & Company report. It found that in the 20 years through 2022, Nordic companies “have outperformed their global peers on value creation, delivering an average annual total shareholder return of 11.6%, surpassing the global average of 9.4%.” 

These small, comparatively stable countries “are places you can buy a stock and sleep at night,” says Patrick Rien, a portfolio manager of the EuroPac International Dividend Income Fund, which has 8% of its global portfolio invested in Nordic companies. 

Among the key differences between the Nordics and other European economies: Four of the five Nordic countries — Finland is the exception — have their own currencies and independent central banks. That gives them more flexibility to respond to economic changes than countries using the euro and under the purview of the European Central Bank. 

In addition, the Nordic countries generally have less national debt, as a percentage of gross domestic product, than bigger neighbors such as France, Italy and Spain. Although the Nordics, like much of the rest of the global economy, are currently struggling with inflation and slow growth, Moody’s economist Ross Cioffi says the Nordic region “has a better long-term outlook than the rest of Europe.” 

A long-term view in Nordic investing

Nordic companies can often afford to shrug off short-term blips and invest in long-term growth because their ownership tends to be dominated by investors with long-term mind-sets — families concerned about legacies, for example, or public agencies such as Norway’s $1.4 trillion sovereign wealth fund. 

McKinsey reports that about 80% of top Nordic companies have long-term ownership; the figure is about 60% for comparable companies in other parts of Europe and about 20% in the U.S. That long-term orientation “fosters stability, sustainable practices and investments in innovation,” according to the consultant. It noted that about 80% of Nordic companies spend above-average amounts on research and development.  

The region also offers investors some geopolitical advantages. Although two of the Nordic countries — Norway and Finland — share land borders with Russia, those lines mostly run across unpopulated areas in the Arctic. Meanwhile, companies developing the Nordic area’s abundance of oil, gas, hydroelectric power and minerals have benefited from other European countries’ efforts to stop relying on Russia and China for such necessities, says Moody’s Cioffi.

Even characteristics that some investors may see as disadvantages over the short term are turning into long-term benefits in some cases. For example, the region’s small domestic markets have forced ambitious Nordic companies to pursue global sales strategies. 

“When you have no home-country advantage, you have to pay attention to everywhere else,” says Haicheng Li, a portfolio manager of the Baird Chautauqua International Growth Fund, which has invested 12% of its portfolio in Danish companies. 

The Nordic countries’ comparatively strict business regulations offer similar trade-offs. The countries tend to have heavy environmental, labor and corporate governance regulations that can raise costs but also offer some long-term benefits to investors. David Wheeler, a senior research analyst for Alliance Bernstein’s sustainable thematic investment strategies, notes that some of the countries have laws requiring the majority of corporate board members be independent. “Boards in the Nordic countries provide especially strong oversight of management, which can mean reduced governance risks,” he says.

How to invest in Nordic companies

One way to give your portfolio a little extra weighting in the homelands of the ancient Vikings is through one of the handful of funds that specialize in the region. 

The standout option in this group is Fidelity Nordic Fund (FNORX), which is perennially one of the best-performing regional mutual funds. It has returned 24.9% over the past year and an annualized 12.1% over the past 15 years. Those results slightly outpace the S&P 500’s one-year return of 24.6% but lag its 15-year return of 14.8%. The fund’s long-term record handily beats many major foreign regional indexes. MSCI’s Europe index returned an annual average of 7% over the past 15 years, for example. 

The managers screen for factors such as strong free cash flow (cash left over after spending to run and invest in the business). The fund holds a selection of 45 stocks of all sizes, but its largest holding is the Danish pharmaceutical firm Novo Nordisk. The maker of Wegovy, a popular new anti-obesity drug, accounted for more than one-fourth of the fund’s portfolio as of the latest report. Thanks to booming demand for Wegovy, Novo Nordisk is expected to generate more than $9 billion in free cash flow in 2024. 

Analysts expect that to double by 2027, according to S&P Global Market Intelligence. The stock has shot up more than 78% in the past year and has posted an average annual return of 42% over the past five years. It has quickly grown into Europe’s largest company, as measured by its stock market value, and thus accounts for a good slug of many European fund portfolios. (Novo Nordisk is also one of the Kiplinger ESG 20, our list of environmental, social or governance standouts, and Kiplinger has previously reported on the future of weight loss drugs for investors.)

Fidelity Nordic gets a nod of approval from Jack Bowers, chief executive officer of Independent Fidelity Investors, publisher of the Fidelity Monitor & Insight newsletter. He’s generally more bullish on U.S. funds, but Fidelity Nordic is a good option for diversifiers, he says, calling it “a better bet than most foreign funds.” Its large stake in booming healthcare stocks gives it the potential to outperform more-diversified regional funds, he adds. The fund’s expense ratio is 0.94%.

Alternatively, investors looking to make more-targeted bets can consider a country-specific index fund. iShares offers an array of choices. Its iShares MSCI Denmark (EDEN, $126) exchange-traded fund, with an expense ratio of 0.53%, has returned 19.2% over the past 12 months and an annualized 16.4% over the past five years, thanks especially to its investments in Novo Nordisk and other Danish healthcare firms. 

iShares MSCI Sweden (EWD, $40) has returned 18% over the past 12 months. Industrial and financial firms make up almost 75% of its portfolio. Top holding Atlas Copco, a major producer of compressed-air tools and other industrial supplies, has returned nearly 30% over the past 12 months. The Sweden fund’s expense ratio is 0.54%.

Investors interested in individual stocks can consider the following recommendations from fund managers and analysts. All three companies’ shares trade on U.S. exchanges, two of them as American depositary receipts.

Autoliv (ALV, $107) This Stockholm-based company is the world’s biggest manufacturer of airbags, seatbelts and other auto safety equipment. It recently traded at a price-earnings ratio of about 10.5 times expected earnings for the next 12 months. Analysts see those earnings increasing by nearly 16% annualized over the next three to five years. 

Alliance Bernstein likes the way Autoliv is expanding market share and developing new safety products for inclusion in cars of the future; the stock was the second-largest holding in the AB Sustainable International Thematic Fund at last report. “It’s a really high-quality, very well-run company offering persistent, strong growth,” Wheeler says.  

Genmab (GMAB, $25) Denmark’s pharmaceutical industry offers opportunities beyond Novo Nordisk, says Chautauqua’s Li. She says the country’s long-term orientation and culture of teamwork are reasons Copenhagen-based Genmab is one of just 30 companies in the portfolio of Baird Chautauqua International Growth fund. 

Genmab’s long-term investments in drugs based on antibodies appear to be finally paying off, she says. Sales of the company’s antibody-based treatments for multiple myeloma and lymphoma helped push 2024’s first-quarter revenues up 46% over the same period a year earlier. Analysts see the ADR trading at $40 over the next 12 to 18 months, which implies a 60% gain from its recent close. 

Norsk Hydro (NHYDY, $6) This Norwegian company will benefit from Europe’s shift to resource suppliers outside of Russia and China, says EuroPac’s Rien. Despite the com-pany’s name, the bulk of its business is producing aluminum, which makes it susceptible to commodity cycles, Rien notes, but he believes that patient investors will be rewarded. 

“They are not trying to make the next quarter. They are trying to hand something down to next generation,” he says. The ADR yields a healthy 3.8%. The 12-to-18-month price target from a consensus of analysts is just over $9 a share, implying a 50% potential gain. 

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Amazon Prime Day might have offered a flurry of deals and discounts on all manner of goods, but analysts say the biggest bargain of all looks to be Amazon.com (AMZN) stock.  

That might sound counterintuitive at first. Amazon stock gained about 30% on a price basis through the first half of 2024 – vs 19% for the tech-heavy Nasdaq Composite – to trade at record levels.

Ordinarily, the idea is to buy low.

But a sum-of-the-parts analysis of the company's underlying businesses suggests AMZN stock has much further to run, analysts say. Indeed, as a services company with rapidly expanding profit margins, upside from generative artificial intelligence (AI) and a track record of building large businesses from scratch, Amazon is really tough to beat.

"AMZN should be valued as a services company rather than a products company," writes Needham analyst Laura Martin, who rates shares at Buy. "Services revenue and margins (including advertising, subscriptions and cloud) are far larger and growing faster than AMZN's core e-commerce business. Services growth implies valuation multiple expansion owing to its high margins."

Multiple expansion, which is when folks are willing to pay a higher price today for expected earnings in the future, makes stock prices go up. Now you might think AMZN stock is already richly valued, seeing as it currently changes hands at more than 33 times the Street's 2025 earnings per share (EPS) estimate. But Amazon is forecast to generate average annual EPS growth of more than 23% over the next three to five years. 

AMZN stock is cheap

In today's market, these are far from unusual valuations. According to data from LSEG Stock Reports Plus, Amazon is actually cheaper than the broader market when you look at how fast its stock price is rising compared to its growth prospects. Furthermore, Amazon stock trades at steep discounts to its own five-year average on both a forward and trailing price-to-earnings (P/E) basis. As for AMZN stock's price-to-sales (P/S) ratio, it trades essentially in line with its own long-term average.

Moreover, Amazon's valuation looks especially compelling when its already impressive potential for revenue growth and margin expansion is set to be turbocharged by artificial intelligence, experts note.

"We believe investors are underestimating AMZN's positioning to win its fair share of AI workloads and believe its platform approach will be a winning strategy over the long term," writes BMO Capital Markets analyst Brian Pitz, who rates AMZN at Outperform (the equivalent of Buy).

If nothing else, Pitz and Needham's Martin have a lot of company. Of the 61 analysts issuing opinions on Amazon surveyed by S&P Global Market Intelligence, 44 call it a Strong Buy, 15 say it's a Buy and two have it at Hold.

That works out to a rare consensus recommendation of Strong Buy for Amazon stock, and with high conviction to boot. Here's how Argus Research analyst Jim Kelleher (Buy) explains the Street's collective bullish outlook: "AMZN appears inexpensive amid the AI-driven rally."

This is kind of important because plenty of investors have avoided Amazon stock in the past based on concerns its valuation is too rich, and it looks to have been a mistake.

Amazon stock for the long run 

Amazon, which began life as a modest website for book buyers, went public in 1997, and has since generated truly outsized wealth for shareholders. An analysis by Hendrik Bessembinder, finance professor at the W.P. Carey School of Business at Arizona State University, found that Amazon was one of the best stocks in the world over three decades. 

After all, anyone who put $1,000 into Amazon stock 20 years ago has enjoyed truly market-crushing returns. For its entire life as a publicly traded company, AMZN has generated an annualized total return of more than 32%. The S&P 500, by comparison, returned not-quite 11% annualized, according to data from YCharts.

Put another way, since it debuted, Amazon stock has pretty much tripled the performance of the S&P 500. 

Little wonder then that Amazon, which was added to the Dow Jones Industrial Average in February, is now the highest-rated name among all 30 Dow Jones stocks. Or check out analysts' top S&P 500 stocks to buy now, and you'll find Amazon is high on that list. 

The bottom line on Amazon stock

Analysts say the company has a history of execution and is particularly well suited to cash in on AI.

"Given its indisputable franchise leadership, ability to leverage its vendor relationships in the retail space, and market dominance and superior growth in infrastructure-as-a-service, we believe that AMZN warrants long-term accumulation in most equity accounts," Argus Research's Kelleher writes. 

Investors should initiate new positions or dollar-cost-average into existing Amazon positions on share price weakness, the analyst adds. 

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Buying a stock is, essentially, buying a share of a company’s earnings, and growth in those earnings is ultimately what drives the stock market. But at any given time, for various reasons, investors are willing to pay more or less for each dollar of corporate earnings, as reflected in the price-earnings ratio, the popular valuation measure for stocks.

Lately, investors have been willing to pay ever-higher prices for their slice of corporate profits, pushing P/Es beyond their historical norms. Based on estimated earnings for the 12 months ahead, the P/E for the S&P 500 was recently 20.3, according to FactSet Research Systems, a financial data firm. That’s greater than both the five-year average of 19.2 and the 10-year average of 17.8. 

“In the last year, the rise in stock prices was essentially all due to multiple expansion,” says LizAnn Sonders, chief investment strategist at Charles Schwab. “The market is expensive. No doubt about it,” Sonders says.

If history is any guide, stock prices will fall — or corporate earnings will rise — enough to bring P/Es back into their traditional ranges. Further expansion of P/E multiples could be constrained in coming months, say strategists, as a delay in interest rate cuts from the Federal Reserve and economic uncertainties weigh on stocks. That makes earnings growth all the more important. 

Given the market’s crosscurrents, it’s time for long-term investors to make sure their portfolios are buttressed with companies that thrive even in difficult environments.

Growth at a reasonable price

The companies best positioned to deliver gains to long-term investors will be reasonably priced stocks that have proved they can deliver steady, compounding earnings growth and are on track to do so even if the economy softens. “We are now at a point, due to rich valuations, when you want to look for both growth and value, for high-quality companies with stability and the ability to grow earnings,” Sonders says. She notes that many analysts have dubbed this strategy “GARP,” or growth at a reasonable price.

Analysts at Goldman Sachs recently sorted stocks into baskets that included companies that the firm deems “stable growers,” as well as those considered “high quality.” “Earnings drive stocks ... and stocks with stable growth typically perform best alongside decelerating economic growth,” Goldman Sachs chief U.S. equity strategist David Kostin said in a recent note to clients. 

We used Goldman’s baskets as a starting point and spoke with other analysts and portfolio managers to find stocks with a good chance of delivering earnings and stock gains. The stocks below have records of steady profit growth, as well as healthy balance sheets or a niche that insulates them in uncertain times. Prices and other data are as of May 31, unless otherwise noted.

American Water Works (AWK, $131). The country’s largest publicly traded water utility has more than doubled its earnings per share since 2017 and is favored by analysts as a steady earner. Kristina Ruggeri, a water and utility analyst for stock research firm Argus, expects American Water Works to continue increasing its annual earnings per share by 7% to 9% for the foreseeable future, thanks to utility rate hikes, federal infrastructure spending and growing demand from artificial intelligence companies for water to cool their data centers.

At 24 times expected earnings, the stock is trading near the bottom of its historical range over the past five years, Ruggeri notes. In addition, the company recently raised its dividend by 8%. The stock’s yield is an attractive 2.3%. 

Water utilities have generally been viewed as long-term holdings because it can take years to recoup outlays for capital improvements and to apply for rate hikes from local regulators. Ruggeri has set a 12-month target price for the stock of $150 per share, suggesting a gain of as much as 20% from its recent close. As one of the largest companies selling a life necessity, American Water “is in a really good position,” she says.

AutoZone (AZO, $2,770). This auto parts retailer has reported consistently increasing earnings per share for the past decade: from $31.57 in 2014 to $132.36 in fiscal 2023 (which ends in August). Analysts covering the stock expect the company’s earnings to increase at an average annual rate of nearly 15% over the next three to five years, according to S&P Global Market Intelligence. Their average target price for the stock is $3,203, indicating room for a 16% gain over the next 12 to 18 months.

Robert Klaber, a portfolio manager of the Parnassus Mid Cap Growth Fund, says auto parts companies are generally a safe bet no matter what happens to the economy because in good times and bad, people need to repair their cars. The demand for parts will continue to grow because the average U.S. vehicle age this year hit a record high of 12.6 years.

Klaber is optimistic about AutoZone’s expansion plans, including new stores in the U.S., Mexico and Brazil. And he says the stock price has been buoyed because the company has bought back so much stock that its share count has fallen in half over the past 18 years. AutoZone trades at what he considers to be a reasonable P/E of 17. “AutoZone is a defensive earnings compounder with pricing power that is selling necessities,” he says (instead of selling discretionary goods that people can easily forgo).

CDW (CDW, $224). This technology middleman avoids many of the swings of the tech boom-and-bust cycle because it focuses on selling bundles of computers and software made by other companies to government agencies and businesses. In the 10 years ending in December 2022, its earnings rose steadily, from $1.83 a share to $9.88. But last year’s earnings were essentially flat, in part because a threat of a federal shutdown delayed orders; the company was still in catch-up mode in early 2024.

Still, seven out of the 11 Wall Street analysts following the company are bullish on the stock, and Samik Chatterjee, an analyst at J.P. Morgan, calls CDW “historically a favorite, given its resilience in a volatile backdrop.” He projects earnings per share to rise by 4% in 2024 and nearly 12% in 2025. Noting that the stock is trading at a reasonable P/E of 21, Chatterjee has set a target of $265 for the stock in 2024, implying a potential 18% gain from the stock’s recent close.

ResMed (RMD, $206). The world’s largest manufacturer of breathing devices for people with conditions such as sleep apnea has reported increasing earnings over the past six years, except for a blip in 2021 due in part to COVID-related computer chip shortages and shipping delays. Earnings per share rose from $3.53 in 2018 to $6.44 in 2023. Ten out of the 15 analysts who follow the company are bullish, according to S&P. Zacks Investment Research classifies the stock as an outperformer and expects earnings per share to rise by about 13% in 2024 and by that much again in 2025.

Shane Ponraj, who follows ResMed for the research firm Morningstar, considers the stock a good bet because its continuous positive airway pressure (CPAP) devices help reduce health emergencies for people who have trouble breathing while asleep, thus reducing medical costs in the long run. Ponraj estimates that up to 15% of the developed world’s population could benefit from CPAPs, but only 3% use them. That “indicates a long runway for growth,” he says. Adding to the company’s strength: Its main competitor, Phillips, had to recall millions of CPAPs in 2021 because of problems with insulation inside their devices.

Although ResMed was recently trading at nearly 25 times next year’s earnings, Ponraj and other analysts expect the earnings growth to push the stock price ahead. Ponraj estimates the company would be fairly valued at $264, implying a 28% potential gain.

Waste Management (WM, $211). There are only 26 stocks in Jensen Quality Growth fund, and Waste Management is one of them. Comanager Allen Bond thinks the nation’s largest waste hauler can profit in any kind of economy. No matter what happens, people need to get rid of their garbage. And the company’s investments in improvements such as automated sorting at recycling facilities are strengthening its revenues and profits, he says.

Since 2020, Waste Management has increased earnings per share by a cumulative total of 54%. Deutsche Bank analyst Faiza Alwy expects the firm to log double-digit annual earnings growth at least through 2025.

Waste Management stock has posted healthy annualized returns of nearly 16% over the past five years. It recently traded at 28 times expected earnings for the next 12 months. That makes the stock higher priced than the broad market, as measured by the S&P 500. But because of its track record of resilience during downturns and its outlook for growth, Waste

Management meets the Jensen fund’s criteria for growth at a reasonable (not necessarily a bargain) price. “We are not looking for deep values. We are looking for quality at a reasonable price,” Bond says. One quality he especially likes: The company’s return on equity of 35% is about double that of the broader market. Return on equity is a profitability yardstick that measures how well a company generates profits from shareholders’ investments — which is, after all, the name of the game.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Retail investors are heavily invested in financial services, technology and energy stocks, but the most popular investment, according to a recent survey, can be a missed opportunity. 

The asset the most American retail investors hold onto is cash, according to a survey of 10,000 retail investors released recently by eToro. About 76% of American retail investors hold cash assets, well ahead of the 49% of respondents holding domestically listed stocks and nearly double the 40% of respondents holding domestic bonds.

More investors may be "leaning into cash assets for a solid risk-free return" because interest rates have been so high for so long, eToro U.S. investment analyst Bret Kenwell said in a statement. High interest rates present opportunities in safe investments like high-yield savings accounts, certificate of deposit (CD) accounts or Treasury bills, which have been offering yields above 5%. But, depending on a person's needs, investors holding onto more cash could be missing out.

Even the high rates you can currently earn in the various types of savings accounts or fixed income investments cannot compare to the more than 16% gain on the S&P 500 index year-to-date in 2024, not including dividends, which investors can gain access to through low-cost exchange-traded funds (ETFs). This has been an especially strong year so far, but even historically, the stock market has an average annual return of about 10%. 

Many people may have been scared off of investing in the stock market in recent years due to volatility during the pandemic era and fears of a recession. However, thus far, that fear has not been realized, and signs indicate there is still room for optimism. 

So while people have been playing it safe and getting decent returns in cash in recent times (hopefully, if they're using tools like CDs and high-yield savings accounts, rather than just parking it in a checking account), they could have been getting even bigger returns in the stock market. Plus, it doesn't take active day trading or smart stock picks to succeed: You could easily use ETFs to see big returns, and you don't need a lot of extra money to begin investing. 

How much of your investments should be in cash?

Keeping savings or investments in cash is wise for a few reasons, but it should be done thoughtfully. 

If you're trying to figure out how much cash you need, you should consider your more immediate needs as well as your emergency fund. Emergency funds should generally be kept in cash for ease of access; it can be held in a high-yield savings account, for example, where you can withdraw any amount at any time, so you can use it penalty-free when an emergency comes up. Experts generally recommend keeping three to six months' of basic living expenses in an emergency fund. 

Cash is also king if you have expected expenses coming up in the next 12 months. Say, for example, you're planning to take a big vacation in eight months. In that case, much like with an emergency fund, you want to have your money in an accessible place. In this example, you could invest in a three-month Treasury bill or CD, so it can make a good return before you need it for that trip. 

If, instead, you put that money into the stock market and needed to use it within a year, you would be subject to higher capital gains taxes. Because the stock market has more volatility than cash investments, you could also risk having to sell a position at a lower point if you are in need of cash to pay for something. 

Get started investing with ETFs

As mentioned, ETFs are an easy way to garner stock market returns. 

ETFs "hold a collection of stocks and bonds in a single fund," Kiplinger contributing writer Will Ashworth explains in a piece about how to invest in ETFs. “Unlike mutual funds, they are bought and sold on stock exchanges, can be traded anytime the exchange is open, and you can start your ETF investing even if all you have to invest is $50.”

ETFs also generally carry lower expense ratios than mutual funds. All of these reasons make ETFs a great option for beginner investors just getting started or those looking to move out of cash and into equities.

The most popular ETFs include S&P 500 ETFs, such as the ultra-popular SPDR S&P 500 ETF Trust (SPY) – the largest exchange-traded fund in the market. It tracks the Standard & Poor's 500 Index, which consists of 500 large, predominantly U.S-domiciled companies that trade on the major American exchanges. By owning this ETF, you effectively own the S&P 500's performance, so if it rises, your investment will also rise. 

SPY is currently trading around $550, but with plenty of brokerages selling commission-free fractional shares, you don't necessarily need that much to get started. Besides, there are plenty of ETFs on the market, including many at much lower costs. You can see Kiplinger's best ETFs to buy for some more options. 

If you're looking for the best returns, especially over a longer timeframe, historically, stocks should be in your portfolio. Keep in mind, though, that there are some times when you should avoid putting too many eggs in that basket, like if you will need money within a short timeframe for a large purpose or for retirement purposes and can't risk potential short-term volatility. 

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Last year, the U.S. set a record for hugely expensive weather- and climate-related disasters: a hurricane in Florida, floods in California, a wildfire in Hawaii, a winter storm in the Northeast, tornados all over. The nation was hit by 28 catastrophes with total damages of more than $1 billion. Over the past seven years, reports the National Oceanic and Atmospheric Administration, 137 separate billion-dollar disasters, including five Category 4 or 5 hurricanes, have caused more than $1 trillion in devastation.

“It is important to keep in mind that these estimates do not reflect the total cost of U.S. weather and climate disasters, only those associated with events [with] more than $1 billion in damages,” said a NOAA report earlier this year. “That means they are a conservative estimate of how much extreme weather costs the United States each year” (boldface NOAA’s).

The property and casualty insurance industry picks up much of the tab for these catastrophes. As a result, the sector recorded a total of $50 billion in underwriting losses — that is, the gap between claims and premiums — in 2022 and 2023.

P&C companies also pick up the tab for traffic accidents. The single largest share of premiums in the industry — one-third — is paid by owners of private passenger vehicles. Fatal accidents have leveled off lately, but the figure is still very high — more than 40,000 deaths per year — and about 25% higher than it was 10 years ago. Nearly 4 million crashes per year cause property damage.

In an era of safety features including air bags, blind-spot sensors, rearview cameras and automatic braking, why are there so many accidents? Americans are distracted by smartphones, prefer heavy SUVs that cause more damage and make it harder to see pedestrians, and use their car to vent anger. Insurers have to contend with the persistence of speeding, drunk driving and stupidity (half the people killed on the road weren’t wearing seat belts).

Insurer stocks. So how are P&C insurers’ stocks doing? One gauge is iShares U.S. Insurance (IAK), the largest exchange-traded fund for the sector. Over the 12 months ending May 31, the fund has returned 44.0%, more than 15 points better than the S&P 500 index, the large-cap benchmark. In other words, while America is burning or being blown away, while drunk and enraged drivers are causing millions of accidents, insurance companies are doing just fine, thank you. 

The largest P&C insurer in the world, State Farm, is owned by its policyholders; so is Liberty Mutual, ranked sixth. The third largest is a group of firms, including GEICO, under the umbrella of Warren Buffett’s Berkshire Hathaway (BRK-A). That leaves four U.S.-based, listed P&C insurers among the top 20 in the world.

Progressive (PGR), the biggest listed P&C insurer in terms of both premium revenue and market capitalization (shares outstanding times price), has returned an annual average of 22.6% over the past five years — more than six percentage points better than the S&P 500. Allstate (ALL), the second biggest, has returned 58.6% over the past 12 months. The next-largest, American International Group (AIG), which has a substantial life insurance business, has returned 51.9% in the past year; Travelers Companies (TRV), with a focus on midsize commercial businesses, is up 29.8%.

How can these insurers pay enormous claims and still see their stocks rise? They are in a great business. Customers pay monthly premiums, and the company doesn’t have to cough up any money unless there’s a valid claim. As Buffett said in his 2022 annual report, this is “money we hold and can invest but that does not belong to us.” The money — in effect, an interest-free loan — is called a float, and for Berkshire it amounted at the end of 2023 to $167 billion.

A key metric for insurers is the combined ratio, the annual sum of incurred losses and expenses divided by premiums. The lower the combined ratio, the better. In 2023,  because of all those disaster claims, it was 103% — that is, companies paid out more than they took in. But the combined ratio does not include investment earnings, so even if an insurer’s combined ratio exceeds 100%, the firm can still be profitable.

Insurers have something else going for them: Most of their customers have to buy their products. States require drivers to have auto insurance. Mortgage lenders require homeowners to insure their property. Landlords demand renters carry insurance. With litigation a growth business, any company without liability insurance is asking for trouble.

The downside is that insurance is such a good business that competitors abound. Also, in recent years, higher inflation has increased the cost of replacing damaged automobiles and houses. But inflation has been accompanied by higher interest rates, which allow insurers to earn more when they invest their float in safe vehicles like Treasury bonds.

What about all those disasters? As risks rise, insurance companies respond by raising their rates. Auto insurance premiums have jumped 22% in the past 12 months. Homeowners’ insurance has increased by 23% — and in some states by much more. In Louisiana, where flood risk is high, rates are up 63%; in Arizona (wildfires), they’re up 40%. 

State regulators can limit rates, but if they are too restrictive, companies will simply leave. In California, State Farm, Allstate and other insurers announced this year that they won’t issue new policies for thousands of homeowners because of wildfire risk. The situation is so bad in Florida that 11 insurance companies have been liquidated since 2017, and dozens have left the state.

In a world in which catastrophic events are increasing, the real danger for insurance firms is underwriting — evaluating a risk and properly pricing it. Every large insurer is investing in artificial intelligence, which can analyze vast amounts of claims data and make weather predictions. Expect AI to help the industry become even more profitable.

Where to invest? I would stick with the big companies like Allstate, AIG and Travelers. My favorites are Progressive and Chubb (CB), which is headquartered in Switzerland — though Chubb focuses on high-income U.S. customers. Buffett has been buying the stock since last year and now owns about 7% of the firm, whose $110 billion market cap is slightly behind Progressive’s. Chubb’s price-earnings ratio, based estimated earnings for 2025, is just 12.

As for funds: The iShares ETF is weighted heavily toward P&C companies, with 28% of its assets in Progressive and Chubb, but it also owns life insurers, which I find less attractive. Another good choice is Invesco KBW Property & Casualty Insurance (KBWP), an ETF with an expense ratio of 0.35%. Its portfolio is less top-heavy. It includes some excellent smaller P&C carriers, such as Everest Group (EG), which has a large re-insurance segment (backing up other insurers), and The Hartford Financial Services Group (HIG), with strong commercial and homeowners lines.

For most Americans, insurance companies have been a curse the past few years, as they have crushed household budgets with higher premiums. But if you buy their shares, you have a chance to turn insurers into a blessing.

James K. Glassman chairs Glassman Advisory, a public-affairs consulting firm. He does not write about his clients. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence. He owns none of the investments mentioned here. You can reach him at JKGlassman@gmail.com.

 Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here. 

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If you needed more evidence that being added to the S&P 500 is what Wall Street likes to call a positive catalyst, witness what happened to shares in CrowdStrike (CRWD), KKR (KKR) and GoDaddy (GDDY) at the start of trading this week.

Shares in all three companies popped on the news that they will be added to the main benchmark for U.S. equity performance. KKR, CrowdStrike and GoDaddy will replace Robert Half (RHI), Comerica (CMA) and Illumina (ILMN) in the S&P 500 on June 24, S&P Dow Jones Indices said in a statement Monday. 

Stocks tend to get a lift from inclusion in the S&P 500 because many trillions of passive dollars are held in products that track the index. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has more than half-a-trillion dollars in assets under management all by itself. The bottom line is that loads and loads of passive funds and ETFs now have to pick up shares in CRWD, KKR and GDDY.

As for the reason for the shakeup, S&P said that the changes "ensure each index is more representative of its market capitalization range. The companies being added to the S&P 500 are more representative of the large-cap market space."

Analysts' takes on CRWD, KKR and GDDY

As a reminder, being tapped for the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones moved down into the mid- and small-cap indexes. 

As for CrowdStrike, shares gained nearly 50% for the year to date through early June, pushing the cybersecurity company's market cap up to $93 billion, or roughly the same size as current S&P 500 stock Starbucks (SBUX). Meanwhile, the Street likes CRWD's prospects going forward. Of the 51 analysts issuing opinions on CrowdStrike stock surveyed by S&P Global Market Intelligence, 34 call it a Strong Buy, 13 say Buy and four have it at Hold. That works out to a consensus recommendation of Strong Buy.

Analysts are bullish on KKR, too, although with slightly less conviction than they have for CRWD. Shares in the private equity firm added more than 30% for the year to date through early June, giving it a market cap of nearly $97 billion. That's a sum roughly equivalent to current S&P 500 constituent Palo Alto Networks (PANW). Analysts give KKR a consensus recommendation of Buy.

Web hosting company GoDaddy is another stock having a terrific 2024. Shares gained more than a third for the year to date through early June, pushing GDDY's market cap up to $20 billion. That's bigger than S&P 500 member Alexandria Real Estate Equities (ARE), which happens to be one of analysts' top S&P 500 stocks to buy now. The Street is bullish on GDDY, too, mind you, assigning it a consensus recommendation of Buy with strong conviction. 

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Nvidia (NVDA) has been posting blowout quarterly earnings reports for a year now, but its most recent print came with some ice cream and a cherry on top. Not only did the market's favorite pure-play bet on all things AI hike its dividend, NVDA split its stock.

Although returning more cash to shareholders and making NVDA stock more "accessible" are what Wall Street would call positive catalysts, they are not sufficient reasons in and of themselves to commit fresh capital to any name at any level.

That is not to say that you should not buy more Nvidia stock when it's trading at record highs. Rather, if you want to initiate or add to a position in Nvidia stock these days, the fact that it's effecting a stock split is immaterial.

First let's make clear that stock splits aren't nearly as important for retail investors as they were back in the days before folks could open a smartphone app and buy fractional shares for free. Nvidia is splitting its stock for pretty much the same reason Walmart split its stock, which was more for its own employees.

Secondly, let's stipulate that stock splits are like making change. In this case, shareholders received 10 shares for every one share held. This is essentially the same thing as breaking a $10 bill into 10 one-dollar bills. The fundamentals and technicals don't change – only the arithmetic does. 

Which brings us to Nvidia's dividend hike. The forward yield on NVDA's dividend comes to about 0.03%. The stock's three-year average dividend yield is 0.06%, while the current yield on the S&P 500 stands at 1.36%. Given those facts, it's probably fair to assume that few folks buy Nvidia for the income. 

Nvidia stock is everywhere 

It's also worth mentioning that you probably already have healthy exposure to Nvidia stock.

Nearly 70% of actively managed mutual funds own Nvidia, according to the team at BofA Securities data analytics. And it's not like it's hard to own Nvidia on the passive side, either. As the world's third-most-valuable publicly traded company, Nvidia is in loads of indexes tracked by passive mutual funds and ETFs. 

Take the main benchmark for U.S. equity performance. Thanks to a market cap of nearly $3 trillion, Nvidia's weight in the S&P 500, as represented by the SPDR S&P 500 ETF Trust (SPY), stands at about 6.6%. 

That's actually quite a lot. Think about it like this: if the S&P 500 were, say, an actively managed large-cap balanced fund, the portfolio managers might have to cut their NVDA position by something like half?

Nvidia is also ably represented in the Nasdaq Composite and Nasdaq-100. As for the latter, Nvidia's weight in the growth index – most popularly tracked by the Invesco QQQ Trust (QQQ) – hovers around 8.1%

The bottom line is there's a universe of products offering exposure to the Magnificent 7 stock. No one is complaining about how hard it is to find a good ETF with Nvidia in it.

The Street loves Nvidia for lots of reasons

As we have noted, Nvidia has generated market-crushing returns for a long time. It's trading at record levels because no one knows how big this whole AI thing is going to get. They just know they don't want to miss out.

Will Nvidia keep beating the market? 

Sure, probably, why not? But stocks never go up in a straight line. Markets are cyclical. Chipmakers are highly cyclical. The good news is that Nvidia is trading on some combination of incredible fundamentals and forecasts, and not just hype.

The bad news? Stocks go down, too. There's a bull case and a bear case for everything. Ever notice how share prices fluctuate all session long? Please remember that high-beta stocks such as Nvidia, which have a history of outperforming the broader market when it's going up, also tend to underperform the broader market when it's selling off. 

On a brighter note, Wall Street makes a brawny bull case for Nvidia stock. Analysts, as a group, give NVDA an elite rating of Strong Buy (with high conviction), according to data from S&P Global Market Intelligence.

Instead of trying to summarize these analysts' investment theses in the space provided here, let's just say that of all the really good reasons to be bullish on Nvidia, the stock split isn't very high on the list.

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Venerable General Electric (GE), once the longest-serving member of the Dow Jones Industrial Average, will officially split into two companies at the start of next month.

And the old GE name is going away. 

GE will spin off GE Vernova on April 2, which will then start trading on the New York Stock Exchange (NYSE) under the ticker GEV. Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of March 19.

Importantly, GE shareholders will continue to hold their shares of GE common stock – but now with the company name GE Aerospace, GE said in a press release. Meanwhile, GE Aerospace will continue GE's listing on the NYSE under the ticker symbol GE.

GE Vernova houses the former conglomerate's gas power and renewable energy business. GE spun off GE HealthCare Technologies (GEHC) in January 2023. 

GE first announced its decision to split into three companies focusing on aviation, healthcare and energy, respectively, in 2021.

Better times for GE stock?

GE stock is a long-time market laggard, but it has clobbered the broader market over the past year – and especially since its board set the GE Vernova spinoff date.

If you go back two decades, GE sports an annualized total return (price change plus dividends) of just 2%. The S&P 500 generated an annualized total return of more than 10% over the same period. Over the past 10 years, GE lagged the broader market by about 11 percentage points.

But GE's decision to split up helped change sentiment on the name. Its price performance is much more encouraging since it decided to split, with upside accelerating as the spinoffs came to fruition. GE's annualized total return easily tops the S&P 500 over the past five years, and doubles the broader market's returns for the trailing three-year period. 

Cut to today, and GE has been clobbering the broader market. Shares are up 85% on a price basis over the past 52 weeks, vs 26% for the S&P 500. For the year-to-date, GE is sitting on a 25% price gain, vs the broader market's 7%.

Even better, Wall Street likes the "new" GE's prospects as GE Aerospace going forward.

Of the 17 analysts covering the stock surveyed by S&P Global Market Intelligence, five call it a Strong Buy, two say Buy, six have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Buy, with solid conviction. 

Bulls argue that GE Aerospace has significant advantages over rivals, among other reasons to be constructive on the stock. 

"Comparing its engine business vs its closest peers, we continue to see GE outperforming in the coming years," writes Morgan Stanley analyst Matt Akers, who rates the stock at Overweight (the equivalent of Buy). "GE's commercial engine fleet is approximately three times larger than its competitor's, giving it a bigger base to spread costs."

The analyst adds that GE's commercial engine fleet stands out vs peers due to better demographics. "Nearly two-thirds are mid-life engines in their prime aftermarket period," Akers notes. 

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Being tapped to join the S&P 500 is kind of a big deal. Witness what happened to shares in Super Micro Computer (SMCI) and Deckers Outdoor (DECK) on Monday.

Super Micro stock added more than 25% at one point during the session on news the AI server, software and infrastructure company will replace Whirlpool (WHR) in the S&P 500 on March 18. 

Not that SMCI needed another catalyst – shares have nearly quadrupled in 2024 alone – but the price action is a good (if exaggerated) example of the importance of being added to the main benchmark for U.S. equity performance.

Many trillions of passive dollars are invested in products that track the S&P 500. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has $500 billion in assets under management all by itself. Hundreds of funds and ETFs now have to pick up shares in SMCI and DECK.

Meanwhile, over at DECK, the footwear and apparel company probably best known for the Uggs and Teva brands will replace Zions Bancorporation (ZION) in the S&P 500 on March 18. DECK stock enjoyed a more modest pop of 2.6% on the announcement, but then such is the difference in sentiment between the growth prospects for general AI and shoes.

SMCI and DECK became eligible for inclusion to the S&P 500 in part because of their respective soaring market capitalizations. In addition to a bunch of other criteria, a stock must have a minimum market value of $14.6 billion to join the benchmark index. 

By that metric, SMCI has been eligible for inclusion for some time, but the stock didn't definitively vault past the $15 billion mark until mid-January. Cut to today and Super Micro sports a market value in excess of $64 billion – larger than fellow S&P 500 stock PayPal (PYPL).

Deckers Outdoor stock, which has more than doubled over the past 52 weeks, crossed the $15 billion mark back in October. DECK's current market value is more than $23 billion. 

As for Whirlpool and Zion Bancorporation, they will replace Super Micro Computer and Deckers Outdoor in the S&P MidCap 400, respectively, said S&P Dow Jones Indices.

Analysts' takes on SMCI and DECK

Being included in the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones kicked down into the midcap index.

So let's see what industry analysts have to say about these soon-to-be S&P 500 names.

Of the 15 analysts issuing opinions on Super Micro stock surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, three say Buy, four have it at Hold and one calls it a Strong Sell. That works out to a consensus recommendation of Buy, albeit with mixed conviction.

Goldman Sachs initiated coverage of SMCI on Monday with a Neutral rating (the equivalent of Hold) and a price target of $941. Wall Street's average price target stands at $795.04, giving Super Micro stock implied price downside of about 30% in the next 12 months or so. 

"SMCI is very well positioned to serve demand from AI [cloud service providers] over the next few years, but serving enterprise AI infrastructure demand in the years after likely will be more competitive, particularly given more enterprise-focused IT hardware suppliers such as Dell (DELL) and Cisco Systems (CSCO)," analyst Michael Ng wrote in a note to clients. 

Analysts are actually more bullish on the far more boring Deckers Outdoor. Of the 21 analysts covering DECK, 12 rate it at Strong Buy, seven say Buy and two call it a Hold. That works out to a consensus recommendation of Buy, with high conviction. 

That said, the Street's average target price on DECK gives the stock essentially no implied price upside in the next year or so. 

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Shopping for stocks when markets are struggling with a June swoon might not seem like the best idea. Between rising bubble anxiety and mounting uncertainty over the direction of monetary policy, it's understandable if investors are reluctant to put cash to work these days.

On the other hand, markets rarely top out at this time of year. As Ryan Detrick, chief market strategist at Carson Group notes, the most recent all-time high for the S&P 500 was on June 2.

"Stocks soared for the two months off the late March lows, so some weakness in June isn't a big surprise," he writes. "June is the only month in history that hasn't seen the ultimate peak for the year. We don't think this year will be the first one to peak in June."

At the same time, not only has a strong corporate earnings season lifted sentiment, but forward earnings estimates are marching higher. In turn, rising expected operating profits have helped make valuations more attractive.

Besides, every market features select names that are set to outperform.

Although the Magnificent 7 stocks have done much of the bull market's heavy lifting, that hardly means these names are doomed to underperform from here. Indeed, many of them are in pronounced drawdowns. At the same time, a rotation out of these stocks has capital flowing to other, sometimes sleepier, sectors.

As we'll see below, five of Wall Street's top-rated S&P 500 stocks to buy hail from the Magnificent 7. Companies from the financial, healthcare and industrials sectors are ably represented, too.

How we found analysts' top-rated S&P 500 stocks

It's well known that industry analysts are reluctant to slap Sell ratings on the names they cover. There are several reasons for this, some more defensible than others.

What's less commonly understood is that Strong Buy recommendations, while not nearly as rare as Sell calls, are in somewhat short supply, too.

If you run a screen of the S&P 500 using data from S&P Global Market Intelligence, you'll see that analysts assign a consensus Sell recommendation to only one stock.

At the other end of the ratings spectrum stands the Street's highest recommendation of Strong Buy. A total of 52 stocks made the cut there as bullish sentiment soars.

First, a note on our methodology: S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, in which 1.0 equals Strong Buy and 5.0 means Strong Sell.

Any score below 2.5 means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call.

In other words, lower scores are better than higher scores.

Have a look at the chart below to see the 52 stocks in the S&P 500 that score an elite Strong Buy recommendation from industry analysts. Investors who fear it's too late to buy Amazon.com (AMZN), Microsoft (MSFT) or Nvidia (NVDA) will be happy to see they easily made the list.

As much as artificial intelligence (AI) is driving capital spending and market sentiment, analysts see plenty of reasons to be bullish on names across multiple sectors. Here we highlight what Wall Street has to say about three less sexy stocks on the list this month.

GE Aerospace

GE Aerospace (GE), which retained the classic GE ticker following the 2024 spinoff of GE Vernova (GEV), has seen its shares take off as the company establishes itself as a high-margin, pure-play aerospace leader with significant competitive moats.

In a report titled "No sign of stopping the growth engine; reiterate Buy," BofA Securities analyst Ronald Epstein said the company's "robust demand and best-in-class execution support double-digit growth in 2026."

The analyst likes the stock over the longer haul, too, noting that GE Aerospace is well-positioned to benefit from the ongoing ramp-up in commercial aircraft production and sustained aftermarket demand. "Following the spin-off of GE Vernova, we see the company as leaner and focused on execution and safety," Epstein added.

Meanwhile, the company's robust free cash flow – which exceeded $5.7 billion last year – allows GE to aggressively fund R&D and investments in manufacturing infrastructure, all while continuing to return cash to shareholders. GE boosted its dividend by nearly 30% last year. At the same time, it repurchased more than $7 billion in stock.

Shares have delivered only market matching returns so far in 2026 (after adding more than 86% last year), but that just has the stock priced for outperformance, Wall Street says. Of the 22 analysts covering GE, 16 rate it at Strong Buy, three say Buy and two call it a Hold. A lone analyst has a sell recommendation on the name. Nevertheless, that works out to a consensus recommendation of Strong Buy.

Smurfit WestRock

After losing about a quarter of their value in 2025, Smurfit WestRock (SW) shares are beating the broader market by about 4 percentage points this year, and bulls say they are just getting started. After all, the company is still finding its feet.

SW was formed by the 2024 merger of Smurfit Kappa and WestRock Company, creating the world's largest paper packaging company. Smurfit WestRock's operations in 40 countries make it the revenue leader in the world of corrugated cardboard, containerboard, consumer packaging and more.

"We see long-term upside potential and expect earnings growth congruent with growth in e-commerce and growth in demand for sustainable paper and packaging goods," writes Argus Research analyst Alexandra Yates, who rates shares at Buy. "We also expect to see margin growth with operational efficiency improvements in the coming quarters."

Moreover, SW expects $400 million in synergies (also known as cost cuts) as a result of the merger.

With a forward P/E of less than 14, SW trades at 36% discount to the broader market. The dividend yield, at 4.2%, is pretty spicy compared to the S&P 500's yield of less than 1.1%.

Of the 15 analysts covering the materials stock, 10 rate it at Strong Buy and five have it at Buy. That works out to a consensus recommendation of Strong Buy.

Visa

Warren Buffett was a long-time admirer of Visa (V), so it was something of a surprise to see CEO Greg Abel boot it from the Berkshire Hathaway equity portfolio in early 2026.

Happily for continuing shareholders, Wall Street remains bullish on the nation's largest payments processor. Shares are off about 6% over the past year – vs a 26% gain for the broader market – but that just has Visa priced for outperformance amid the relentless war on cash, bulls say.

"Visa remains well positioned to benefit from the ongoing shift to electronic payments and remains one of our top ideas," writes Oppenheimer analyst Rayna Kumar, who rates shares at Outperform (Buy).

The company is enjoying massive growth in value-added services, such as fraud protection, consulting and data analytics. Not only are these high-margin services; they create higher switching costs for banks and merchants. This stickiness helps Visa hold a dominant position in the business-to-business space.

Interestingly, the Street hasn't been this collectively bullish on the name in 16 years. Of the 39 analysts covering Visa, 29 rate it at Strong Buy, seven say Buy and three have it at Hold.

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The S&P 500 Dividend Aristocrats index looks only a little different as we head into the second half of the year. 

Widely regarded as some of the best dividend stocks for dependable dividend growth, the S&P 500 Dividend Aristocrats is an index of S&P 500 companies that have raised their dividends for at least 25 consecutive years.

That's kind of a big deal if you are a long-term equity income investor. Regular dividend hikes not only increase the yield on an investor's original cost basis over time, often quite dramatically; they also help investors sleep better at night.

After all, any company that manages to raise its dividend year after year – through recession, war, market crashes and more – is demonstrating both its financial resilience and its commitment to returning cash to shareholders.

S&P Dow Jones Indices, which rebalances the index quarterly, ditched Walgreens Boots Alliance (WBA) at the beginning of 2024 after the pharmacy chain slashed its dividend by almost half.

Walgreens had increased its dividend every year for nearly half a century before the cut. Analysts, who regularly give WBA one of the lowest rankings of all 30 Dow Jones stocks, applauded the decision to take cash earmarked for shareholders and invest it back into the business. 

Perhaps most interesting is what will happen to long-time member 3M (MMM). The Dow stock is on the Aristocrats chopping block after slashing its dividend as part of its Solventum (SOLV) spin off. 3M is expected to be cut from the list of dependable dividend payers when S&P Dow Jones next rebalances the index.

Dividend Aristocrats Fastenal and Kenvue

The Dividend Aristocrats membership list remains at 67 stocks, however, as Fastenal (FAST) was added to the index in the first quarter of 2024. The industrial supplier has raised its dividend for 25 consecutive years, making it available for inclusion in the index. 

Most recently, Fastenal declared a quarterly cash dividend of 39 cents per share to be paid on February 29 to shareholders of record as of February 1. The company generated more than $1 billion in levered free cash flow in fiscal 2023, and that was after paying out more than a billion dollars in dividends. 

Fastenal stock sports a dividend yield of 2.4%, which is fairly generous for an Aristocrat. The exchange-traded fund that tracks the index, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), has a dividend yield of 2.1%. 

Other changes to the Dividend Aristocrats over the past year include the removal of VF Corp. (VFC) and the addition of Kenvue (KVUE), which was spun off from fellow Aristocrat Johnson & Johnson (JNJ). 

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No one likes the akshually guy, but the bull market isn't really two years old. Although the S&P 500 notched its bear-market bottom on October 12, 2022, a bull market doesn't begin until the market regains its previous peak. By that definition, our current bull market was confirmed in January. Until that point, it was still underwater.

With that technicality of technical analysis out of the way, let's just agree that – what the heck – the bull market is two years old. After all, a bull market isn't defined by a chart; it's made by people. When the macroeconomic backdrop appears favorable for corporate earnings, when those earnings are forecast to grow at an attractive or accelerating rate, and when market participants are willing to pay higher and higher premiums for those expected earnings? Yeah, that's a bull market.

The S&P 500 generated a total return (price change plus dividends) of 67% from the bear-market bottom through late October, driven mostly by the Magnificent 7 stocks. And while it's true Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT) and other mega-cap AI plays generated an outsized role in the bull market's gains, that cliché about a rising tide lifting all boats is mostly true when it comes to equities.

Best stocks: buy, sell or hold?

To that end, we screened the S&P 500 for the stocks with the highest total returns since the bear-market bottom to see how industry analysts viewed them at current levels. After all, the names below have more than doubled or even quadrupled and then some. Valuations tend to get stretched after such hot runs, leading to lower future returns.

Below please find the S&P 500 stocks generating the highest total returns from the bear-market bottom through October 23. We also delved into what industry analysts think of these stocks' prospects going forward, using data from S&P Global Market Intelligence. You can see Wall Street's consensus recommendations and scores in the table below.

A note on the scoring system: S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, where 1.0 equals Strong Buy and 5.0 means Strong Sell. Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call.

In other words, lower scores are better than higher scores.

Below please find the best S&P 500 stocks of the bull market and how the Street rates them now.

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It's easy to forget about the importance of dividends when the market is notching new all-time highs. And while no old saw is a substitute for a comprehensive wealth management plan, there really is something to the cliche about high-quality dividend stocks never going out of style.

Dividends really do matter. Although such regular payouts to shareholders have become much less popular over the decades, dividends still account for a critical share of the market's total return (price change plus dividends). 

Since 1960, 69% of the total return of the S&P 500 can be attributed to reinvested dividends and compounding, according to a study by Hartford Funds. And while companies may not pay dividends like they used to, dividends have still fueled nearly a quarter of the S&P 500's annualized total returns so far this decade.

Interestingly, the case for dividends actually gets more compelling when the market is making new highs and valuations are getting stretched.

"Dividends have historically played a significant role in total return," the Hartford Funds report notes, "particularly when average annual equity returns were lower than 10% during a decade."

Sadly, average annual equity returns are indeed looking to be pretty poor over the next 10 years, at least by one highly regarded measure. The S&P 500 Shiller cyclically adjusted price/earnings ratio (CAPE) has a solid track record of forecasting long-term annualized returns. At its current level, Shiller CAPE gives the broader market an implied annualized total return of 3.9% over the next 10 years.

That's pretty crummy considering the S&P 500 delivered an annualized total return of more than 12% over the past decade. It also suggests that dividend stocks as an asset class could be very helpful to buy and hold these days.

Wall Street's top S&P 500 dividend stocks

In order to find Wall Street's top dividend stocks to buy now, we used S&P Global Market Intelligence to screen the S&P 500 index for analysts' highest rated names yielding at least 3% as of January 19. 

A note on the ratings system: S&P Global Market Intelligence surveys analysts' stock recommendations and scores them on a five-point scale, where 1.0 equals Strong Buy and 5.0 means Strong Sell. Any score of 2.5 or lower means that analysts, on average, rate the stock a Buy. The closer the score gets to 1.0, the stronger the Buy call. In other words, lower scores are better than higher scores.

We used a 3% yield as our lower bound because that's essentially twice the S&P 500's yield of 1.49%.

If you're looking to add Buy-rated dividend stocks to your portfolio, the names listed below are the best the S&P 500 has to offer, according to industry analysts. 

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Apple (AAPL) and Microsoft (MSFT) find themselves in a tight race over bragging rights to the title of world's most valuable publicly traded company after AAPL stock popped following a big analyst upgrade.

A poor start to the year already had some bulls saying it's time to buy the dip in Apple stock. But when one of Wall Street's largest broker-dealers joined the chorus before Thursday's opening bell, it helped Apple recover billions in market value.

BofA Securities lifted its recommendation on AAPL stock to Buy from Neutral (the equivalent of Hold), citing the iPhone maker's investments in generative artificial intelligence (AI) and the launch of its Vision Pro mixed reality headset, among other impending catalysts. 

With a new price target of $225 – up from $208 – BofA Securities gives AAPL stock implied upside of about 20% over the next 12 months or so. The Street's average target price stands at $199.40, according to data from S&P Global Market Intelligence, good for implied upside of only 6% in the next year. 

Importantly, while some analysts have cited weaker iPhone sales in China as reasons to become more cautious on AAPL stock, the BofA Securities team led by analyst Wamsi Mohan argued as part of its upgrade that Apple's "China weakness is largely offset by strength in other countries."

Although Apple routinely makes the list of Wall Street's top-ranked Dow Jones stocks, worries over demand in China have AAPL off to a rough start in 2024. Apple stock is up about 38% over the past 52 weeks, but shares have spent all of January in the red on a year-to-date basis, hurt partly by downgrades.

Piper Sandler analyst Harsh Kumar cut his recommendation on the stock in early January to Neutral (the equivalent of Hold) from Overweight (Buy), citing a weak macroeconomic backdrop in China. Kumar's downgrade followed a more bearish downgrade by Barclays analyst Tim Long – to Underweight from Neutral – two days earlier. Long also cited weaker revenue in China as a concern.

Apple has seen iPhone sales soften in China amid an economic slowdown and other factors. Consumers are holding onto their pricey iPhones longer between refresh cycles, analysts note, while a new 5G phone from rival Huawei is also chipping away at iPhone demand. 

Microsoft and Apple run neck and neck

While Apple stock has traded essentially sideways for six months on worries that growth has peaked, fellow Magnificent 7 stock Microsoft overtook it as the global leader in market capitalization thanks to exuberance over generative AI. 

Microsoft, which enjoys a sort of first-mover advantage in AI via its partnership with OpenAI, had already been an outstanding long-term holding thanks to its dominance in cloud services. 

Not only was MSFT one of the 30 best stocks in the world for three decades, anyone who put $1,000 into Microsoft stock 20 years ago would have clobbered  the broader market. 

Check out the stocks billionaires are buying or hedge funds' top blue chip stocks and you'll see that much of the putative smart money agrees with the Street's view, which gives MSFT a rare consensus recommendation of Strong Buy. 

"Microsoft continues to pursue long-term growth through its AI and cloud investments, and may just hold the premier position in business technology," writes Argus Research analyst Joseph Bonner, who rates shares at Buy. "It also has a large and loyal customer base, a large cash cushion and a rock-solid balance sheet."

Have a look at the above chart and you'll see how bullishness like Bonner's helped Microsoft stock return nearly 65% over the past 52 weeks, allowing it to surpass Apple in market capitalization. 

As of Thursday's close, the two tech giants were separated by less than $10 billion in market cap: $2.927 trillion for MSFT vs $2.917 trillion for AAPL, or essentially tied.

Whether the companies' market values diverge from here is the big question. Happily for investors in both names, the Street very much expects AAPL stock and MSFT stock to continue to beat the broader market in the year ahead.

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A couple of analyst downgrades might have Apple (AAPL) stock reeling to start the new year, but much of Wall Street sees the AAPL selloff as a chance to pick up shares in the iPhone maker on the cheap.

Apple is routinely one of Wall Street's top-ranked Dow Jones stocks, but concerns over demand in China have some analysts becoming increasingly cautious on the name. Piper Sandler analyst Harsh Kumar cut his recommendation on the stock last week to Neutral (the equivalent of Hold) from Overweight (Buy), citing a weak macroeconomic backdrop in China. 

"We are concerned about handset inventories," Kumar wrote in a note to clients. "Growth rates have peaked for unit sales." 

Piper Sandler's downgrade followed a more bearish downgrade by Barclays analyst Tim Long – to Underweight from Neutral – two days earlier. Long also cited weaker revenue in China as a concern.

Apple has seen iPhone sales soften in China amid an economic slowdown and other factors. Consumers are holding onto their pricey iPhones longer between refresh cycles, analysts note, while a new 5G phone from rival Huawei is also chipping away at iPhone demand. 

The bottom line is that although AAPL stock is still up more than 40% on a price basis over the past 52 weeks, it's down more than 4% to start the year. The world's most valuable publicly traded company has lost more than $135 billion in market capitalization in 2024 alone – or roughly the entire market value of General Electric (GE). Pull the chart back to AAPL stock's peak in mid-December, and the company has lost an astonishing $225 billion in market cap since then. 

The Street says buy Apple stock

Morgan Stanley analyst Erik Woodring speaks for the bulls when he notes that Wall Street sentiment towards Apple – as approximated through its mix of Buy, Hold and Sell ratings – is at its lowest point since September 2020. That's a contrarian buy signal, in the analysts' view, and he advises clients to buy Apple stock on weakness. 

Woodring contends Apple's fundamentals are on the path to recovery, albeit with some near-term unevenness. More importantly, 2024 will be the year when Apple's artificial intelligence (AI) efforts likely come to fruition, the analyst adds. 

If you look at the Street's recommendations, it has indeed become the most uncertain about Apple stock since 2020. That said, it does remain collectively bullish on the name. Of the 45 analysts covering AAPL surveyed by S&P Global Market Intelligence, 20 rate it at Strong Buy, seven say Buy, 14 have it at Hold, three say it's a Sell and one calls it a Strong Sell. That works out to a consensus recommendation of Buy, with mixed conviction.

Meanwhile, analysts' average target price of $198.81 gives Apple stock implied price upside of more than 8% in the next 12 months. Wall Street strategists give the S&P 500 average implied upside of about 5% in the year ahead. 

As for buy-and-hold Apple investors, well, they can pretty much ignore its latest gyrations in share price. After all, Apple has been a dream of a long-term holding. It was the best stock in the world for the 30 years ended 2020. And anyone who put $1,000 into Apple stock two decades ago would be very happy with the results today too. 

That's partly why billionaire investors are big fans of Apple stock. Apple is hard to top when it comes to hedge funds' top blue chip stocks, as well. And, of course, there is no bigger fan of Apple – or of buying on weakness – than Warren Buffett.

The iPhone maker accounts for about half of Berkshire Hathaway's (BRK.B) equity portfolio, but AAPL's red-hot run – along with the rest of the Magnificent 7 stocks – means Buffett hasn't added to it in some time.

Don't be surprised to learn from regulatory filings a few months from now that the smart money was buying Apple stock in bunches during this January swoon. 

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Walgreens Boots Alliance (WBA) stock tumbled Thursday after the pharmacy chain slashed its dividend by almost half. The move puts the company at risk of being removed from the S&P 500 Dividend Aristocrats, an index of S&P 500 companies that have raised their dividends for at least 25 consecutive years. 

At its old dividend level, Walgreens was one of the stocks with the highest dividend yields in the S&P 500. But that's about to change.

The company announced a quarterly dividend of 25 cents a share on Thursday, down from the prior quarter's payout of 48 cents a share. The dividend is payable on March 12 to stockholders of record as of February 20, Walgreens said in a news release. 

"This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and healthcare businesses, which we believe will ultimately improve shareholder value," Walgreen CEO Tim Wentworth said in a statement. 

At 48 cents per share per quarter, the forward yield on WBA stock comes to more than 7.5%. However, at the new rate of 25 cents per share per quarter, the forward yield on WBA stock falls to about 4.1%. That's still generous, but well below WBA's own three-year average dividend yield of 5.1%.

Analysts, who already give WBA one of the lowest rankings of all 30 Dow Jones stocks, applauded the decision to take cash earmarked for shareholders and invest it back into the business. 

CFRA Research analyst Arun Sundaram, for one, reiterated his Hold recommendation on WBA, noting the company is "on pace toward $1 billion of cost savings this fiscal year, in addition to about $600 million of lower capital expenditures and $500 million in working capital benefits."

Industry analysts have assigned WBA stock a consensus recommendation of Hold for more than five years, according to data from S&P Global Market Intelligence. Of the 18 analysts covering WBA today, two rate it at Strong Buy, one says Buy, 12 have it at Hold, two say Sell and one ranks it at Strong Sell. 

With an average target price of $26.67, Wall Street gives WBA stock implied price upside of about 12% in the next 12 months or so. Add in the dividend yield, and WBA's implied total return comes to about 16% in the next year or so. 

Walgreens earnings beat estimates

Walgreens also on Thursday posted better-than-expected fiscal first-quarter earnings. On an adjusted basis, which is what industry analysts care about, Walgreens earned 66 cents a share, easily topping Wall Street's average forecast of 62 cents a share. Sales of $36.7 billion also beat analysts' estimate. 

"WBA delivered fiscal first quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop," said CEO Wentworth in Walgreens' earnings release. "We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities."

WBA stock is a long-time market laggard. Over the past 20 years, shares generated a total return (price change plus dividends) of less than 1%. That lags the S&P 500's total return over the same period by about 10 percentage points. 

And the performance only gets worse from there. WBA stock delivered negative total returns over the past one-, three-, five- and 10-year periods. As wonderful as Walgreens' annual dividend increases have been, they have been more than offset by relentless share-price depreciation. 

Walgreens Boots Alliance stock is one of the top-weighted names in the Dividend Aristocrats and – by extension – the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) that tracks the Aristocrats. Needless to say, WBA stock hasn't been doing investors in NOBL any favors. 

WBA may lose its status as a Dividend Aristocrat, but if these new capital plans can kick start its moribund stock price, long-suffering equity income investors will almost certainly come to forgive it. 

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Wall Street's top strategists collectively forecast another year of gains for the S&P 500, albeit a much more muted one. That's to be expected after the benchmark index gained more than fifth on a price basis in 2023.

Wall Street's average target on the index gives the S&P 500 implied upside of about 5% from current levels. At the high end, Capital Economics forecasts the benchmark index to hit 5,500 by the end of 2024, giving the S&P 500 implied price upside of about 15% next year. At the low end, JPMorgan Chase expects the index to retreat 12% to 4,200 in 2024. 

Passive investors will go along for the ride no matter where it takes them. Stock pickers, on the other hand, seek to beat their benchmarks, and that's where Wall Street's S&P 500 stocks with the most upside come in. 

Analysts base their Buy, Hold or Sell recommendations on how they expect a stock to perform relative to the S&P 500 over the next 12 months or so. To do so, they plug numbers into discounted cash flow models. These models spit out price targets, which tell them where the stock should be trading in a year. The difference between the stock's current price and its target is called its implied, or potential, upside. Analysts' average price targets tell you how the Street collectively expects a stock to perform.

While you can hardly base a stock-picking strategy on the sole criterion of price targets, it can be helpful to know which S&P 500 stocks are expected to deliver the biggest returns in the year ahead. To that end, we used S&P Global Market Intelligence to screen the S&P 500 for the index members with the highest implied upside for 2024 and beyond. 

Have a look at the table below to see the 10 S&P 500 stocks analysts expect to put up the biggest price gains in 2024. (Price targets and other data are as of December 22.)

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The Dogs of the Dow is an investing strategy where income investors essentially bet on beaten-down blue chip dividend stocks in the Dow Jones Industrial Average. 

First popularized in the early 1990s, the Dogs of the Dow is supposed to deliver superior risk-adjusted returns vs the DJIA. Although the Dogs of the Dow has a mixed track record in that regard, at least it's dead simple to follow: buy the 10 Dow stocks with the highest dividend yields in the average at the end of December, and then hold them for one year.

The idea behind the Dogs of the Dow is that investors are using the highest dividend yields as proxies for valuation. Recall that a dividend stock's yield rises as its price falls. The Dow Jones stocks with the highest dividend yields should theoretically be bargains, what with their depressed share prices and all. 

With the end of the year approaching, it's time for followers of the Dogs of the Dow strategy to rebalance their portfolios. Below please find the 10 Dogs of the Dow for 2024, listed by dividend yield as of December 22. 

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In what appears to be a case of "buy the rumor, sell the news," Uber Technologies (UBER) stock languished in its Monday debut as a component of the S&P 500 even as the market enjoyed broad-based gains.

Fair enough. UBER stock is up about 7% since S&P Dow Jones Indices said on December 1 the ridesharing company would replace Alaska Air Group (ALK) in the most commonly used benchmark for U.S. equity performance. That beat the broader market by four percentage points. 

Also note that Uber was already on a roll when it was tapped for the S&P 500. Shares added more than 50% between the market's October nadir and mid-December – a period in which the broader market rose 15%. 

That Uber stock should take a breather on the day it actually became a member of the S&P 500 is no big deal. The pop UBER stock got from being picked for the benchmark index may have run its course, but being a member of the S&P 500 also helps in the long term. 

That's because the S&P 500 is the most widely tracked index in the world. Indeed, more than $11.4 trillion in assets are indexed or benchmarked to the S&P 500, according to S&P Dow Jones Indices. The market's three largest exchange-traded funds – SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV) and Vanguard 500 Index Fund (VOO) – collectively command more than a trillion dollars in assets under management. Anytime a company is included in the S&P 500, every investment vehicle following the index has to buy its stock.

Wall Street is Uber bullish 

The Uber-in-the-S&P 500 trade is over, but Wall Street analysts remain uber bullish on Uber stock as a longer term holding, too.

Of the 48 analysts issuing opinions on Uber stock surveyed by S&P Global Market Intelligence, 32 rate it at Strong Buy, 14 say Buy and two call it a Hold. That works out to a rare consensus recommendation of Strong Buy. The Street is particularly excited about Uber's growth prospects. Analysts forecast Uber to generate average annual earnings per share (EPS) growth of 68% over the next three to five years.

Such an outsized growth rate makes Uber stock, trading at 54 times the Street's 2024 EPS forecast, a screaming bargain at current levels, bulls say.

"Uber is the largest company in the ridesharing industry, and the second-largest player in food delivery," writes Argus Research analyst Bill Selesky, who rates UBER at Buy. "We expect both businesses to perform strongly in Q4 2023 and in 2024, as ridership has now rebounded to pre-pandemic levels."

Selesky adds that Uber reported 21% growth in gross bookings in its most recent quarter, while trip frequency rose by 25%. Uber also posted "solid" free cash flow of $905 million, the analyst notes. 

Uber stock added 150% for the year-to-date through December 18, vs a gain of 24% for the broader market. However, as you can see in the chart below, shares still lag the S&P 500 by a wide margin since Uber went public in 2019.  

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The earnings recession that started a year ago looks to be over.

With more than 98% of S&P 500 companies having reported quarterly results, it's fair to say the numbers are in and they're good. The S&P 500 is set to post year-over-year earnings growth for the first time since the third quarter of 2022.

Indeed, the S&P 500's Q3 earnings growth state stands at 4.8%, according to FactSet. That's remarkable considering that as of September 30, analysts forecast the S&P 500 to post a 0.3% decline in year-over-year third-quarter earnings. 

And make no mistake: this was a better-than-expected earnings season that delivered on a number of fronts.

Drilling down, 82% of S&P 500 companies exceeded analysts' average earnings per share (EPS) estimate vs a five-year average of 77% and a 10-year average of 74%. Looked at another way, the S&P 500's EPS beat rate hasn't been this high in two years. 

Moreover, companies beat Wall Street EPS estimates by an average of 7.2%. Although that's below the five-year average of 8.5%, it easily tops the 10-year mean of 6.6%.

"Positive earnings surprises reported by companies in the information technology, financials and consumer discretionary sectors, partially offset by downward revisions to EPS estimates and negative earnings surprises reported by companies in the healthcare sector, have been the largest contributors to the increase in the earnings for the index," writes John Butters, senior earnings analyst at FactSet. 

The consumer discretionary sector more than pulled its upside-surprise weight during Q3 earnings season, with Airbnb (ABNB), Amazon.com (AMZN) and Nike (NKE), a highly rated Dow Jones stock, delivering some of the biggest EPS beats.

In the tech sector, Nvidia (NVDA) – NVDA stock has tripled this year – Intel (INTC) and Intuit (INTU) all exceeded Street EPS forecasts by wide margins. The communications services sector was boosted by better-than-expected earnings from Meta Platforms (META) and Paramount Global (PARA), among other names.

Street slashing Q4 earnings estimates

The Street was too downbeat coming into Q3 and it's not much more optimistic about Q4. Concerns about a possible economic slowdown or recession have analysts lowering their Q4 EPS estimates by more than usual, per FactSet.

"During the months of October and November, analysts lowered EPS estimates for the fourth quarter by a larger margin than average," Butters notes. "The Q4 bottom-up EPS estimate decreased by 5% from September 30 to November 30."

For context, the average decline in the bottom-up EPS estimate during the first two months of a quarter is 2.9% over the past five years, and 2.7% over the past decade.

It's important to note analysts are taking cues from the companies they follow – and there's increasing pessimism to be found in the C-suite, too. The percentage of companies issuing negative earnings guidance for the fourth quarter stands comfortably above both its five- and 10-year averages. 

Of course, there's nothing wrong with talking down expectations. The more the Street lowers its expectations, the easier it is for companies to beat them.

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Walt Disney (DIS) reinstated its dividend after a three-year suspension, a move that's good news for income investors and could help bolster the media and entertainment giant's beleaguered share price.

Disney's board on Thursday declared a cash dividend of 30 cents per share, payable on January 10 to shareholders of record at the close of business on December 11, 2023. 

"This has been a year of important progress for The Walt Disney Company, defined by a strategic restructuring and a renewed focus on long-term growth," said Disney Chairman Mark Parker in a news release. "As Disney moves forward with its key strategic objectives, we are pleased to declare a dividend for our shareholders while we continue to invest in the company's future and prioritize meaningful value creation."

Disney suspended its dividend in the spring of 2020 in order to conserve cash amid the COVID-19 pandemic. 

Also on Thursday, Disney said that Morgan Stanley (MS) CEO James Gorman and former Sky TV chief Jeremy Darroch will join its board early next year. The move comes as Disney faces a proxy fight with activist investor Nelson Peltz, who is reportedly seeking at least two board seats. 

Better times ahead for DIS stock?

Disney shareholders can be forgiven if they wish the company were celebrating its 100th anniversary against a happier backdrop. Like the rest of the industry, Disney is grappling with slower advertising spending, the decline of linear TV and steep losses in its streaming business. 

Shares in DIS now lag the broader market on an annualized total return basis over pretty much every standardized period you care to measure. That's a big come down for a name that was once one of the 30 best stocks of the past 30 years. 

Indeed, if you'd put $1,000 into Disney stock 20 years ago, you would be very disappointed with the results today. 

As painful a period as this has been for long-term DIS shareholders, Wall Street thinks better times are ahead. Disney is one of analysts' top Dow Jones stocks, for one thing. Of the 32 analysts issuing opinions on Disney stock surveyed by S&P Global Market Intelligence, 19 rate it at Strong Buy, five call it a Buy, six have it at Hold and two rate it at Strong Sell. That works out to a consensus recommendation of Buy, with high conviction. 

Meanwhile, with an average target price of $103.71, the Street gives DIS stock implied price upside of about 13% over the next year or so. 

"Disney remains Netflix's (NFLX) one true competitor in long-form video streaming, and is taking giant steps toward profitability in its direct-to-consumer businesses," says Argus Research analyst Joseph Bonner, who rates DIS at Buy. "With the return of Bob Iger as CEO, Disney is working to lower investment in its direct-to-consumer business and to focus on the most profitable content."

The market's so-called smart money increasingly likes Disney stock too. Although it may have fallen off the list of hedge funds' favorite blue chip stocks in the third quarter, hedge funds still increased their net ownership of Disney stock by more than 12%, or 23 million shares, during the period.

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