Large growth stocks are dominating this year. But some investors are cashing in even faster by finding the best-of-the-best growth S&P 500 stocks.
For instance, 10 stocks in the Invesco S&P 500 Momentum ETF, including Nvidia, Meta Platforms and Ralph Lauren, are all up 16% or more just this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence, MarketSmith and Morningstar Direct. That's an impressive showing in a year when the SPDR Portfolio S&P 500 Growth ETF is up just 6.8%.
And targeting S&P 500 stocks with high momentum, or those that keep rising, is just one strategy to find better-than-average growth stocks this year. Others are using human stock pickers to isolate stocks with the best prospects while others are focusing on long-term growth, blue chip stocks and those meeting quality measures. Topping S&P 500 growth indexes is no small feat as they drive the market higher.
Go With The Mo'
When looking to enhance the returns of S&P 500 growth stocks, aiming for those with momentum is a winning strategy. The Invesco S&P 500 Momentum ETF is the No. 2 top actively traded U.S. diversified ETF this year so far. It's only topped by Invesco S&P MidCap Momentum ETF, which finds slightly smaller companies that keep outperforming the S&P 500.
"The trends from 2023 have remained investors' friend in 2024," said Todd Rosenbluth, director of research at Vetta Fi. "Momentum ETFs like MTUM and SPMO own stocks that previously demonstrated relative strength with the hope that winners will continue to climb higher."
Going for momentum is a slight twist on large growth. That's caused the ETF to load up on exactly the types of stocks doing the best. The $407 million-in-assets Invesco S&P 500 Momentum ETF puts 10.4% of its portfolio into Nvidia and another 11.7% in Facebook parent Meta. Those bets paid off handsomely with Nvidia rocketing 35.5% this year and Meta 31.5%. The ETF's Nvidia weight is more than double the S&P 500's at 4.1%. And the Meta position is more than five times larger than the S&P 500's 2.5% weight.
"While there are often similarities between a growth ETF and a momentum ETF they are constructed differently," Rosenbluth said. "In the recent past, momentum ETFs were laden with value-oriented energy and financial stocks when those were previously in favor before six months later shifting back to more growth-oriented information technology and communication services stocks."
Getting Active With S&P 500 ETFs
Another strategy with some impressive highlights is using humans to handpick the best large-cap growth stocks. Such "active" ETFs are still a sideshow in the ETF world, as most ETFs cling to indexes with preselected stocks. "Some of the better performing growth ETFs in 2024 have been actively managed ETFs," Rosenbluth said.
One example is $2.9 billion-in-assets Nuveen Growth Opportunities ETF. The ETF uses a team of two portfolio managers to identify the growth stocks they think are best. The ETF's top holding is Microsoft, accounting for more than 12% of the portfolio. It's paying off this year. The ETF is up 9.4% just this year. Albeit the ETF charges 0.55% annually, which is much higher than the 0.04% charged by SPDR Portfolio S&P 500 Growth.
And this ETF isn't alone. JPMorgan Active Growth, Harbor Long-Term Growers ETF, T. Rowe Price Blue Chip Growth and Fidelity Growth Opportunities, too, "have been showcasing security selection expertise," Rosenbluth said. "Unlike index-based S&P 500 Growth ETFs, these funds benefit from management's ability to adjust the portfolio based on company fundamentals or a stock's valuation."
Top Momentum S&P 500 Plays
Best performers this year in Invesco S&P 500 Momentum ETF
| Name | Ticker | YTD % ch. |
|---|---|---|
| Nvidia | 35.5% | |
| Meta Platforms | 31.5% | |
| Ralph Lauren | 27.4% | |
| Eli Lilly | 26.9% | |
| Netflix | 17.3% | |
| Howmet Aerospace | 17.2% | |
| Merck | 16.9% | |
| Stryker | 16.6% | |
| Applied Materials | 16.4% | |
| General Electric | 16.2% |
