Following a stellar 24.2% S&P 500 rally in 2023, investors debate what's next. But one thing investors agree on is this: Let your winners ride.
And 11 S&P 500 stocks like Booking Holdings, Nvidia and Amazon.com, generated the highest compound average annual growth rates since 2007, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. All 11 posted compound average annual gains of 24% or more. That's more than three-times greater than the S&P 500's 7% compound average annual gain in that time.
"History reminds us that since stocks rose in 2023, it is advisable to let your winners ride," said Sam Stovall, chief investment strategist at CFRA.
Good Years Follow Great Years
There's no question 2023's 24% return was outstanding. That's more than double a typical year's return for the S&P 500. Plus history tells us more gains are likely following a great year like that, just less so, Stovall said.
The year following an annual gain of 20% or more, the S&P 500 posted a respectable 10% rise, Stovall said. And best of all, the S&P 500 jumped 80% of the time in the year after a big monthly rise. "Good years tend to follow great years with an above-average return and frequency of gain," he said.
But here's another twist. Winning stocks tend to keep winning. Investors who rotated into or "stuck with" the top three sectors at the end of years with gains ended up beating the S&P 500. As a result, CFRA advises investors into 2023's top sectors: communication services, consumer discretionary and information technology.
Following The S&P 500 Lasting Winners
Where do the S&P 500's winners come from? Information technology.
Tech stocks, by far, are the champions with a 14.2% compound average annual growth rate from 2007, Stovall said. Consumer discretionary stocks come in second with a 9.5% average annual growth rate. Incidentally, S&P 500 growth stocks gained 9.5% annually from 2007, versus 7.4% for the S&P 500 and 4.9% for the S&P 500 value stocks.
What about individual S&P 500 stocks?
Amazingly, the No. 1 S&P 500 stock since 2007 on a compound average annual growth rate basis is Booking Holdings. Its shares gained 30% annually, topping even the No. 2 showing of 29% from AI giant Nvidia. The online travel agent's adjusted profit per share jumped more than 4,800% from 2007 to 2023.
What about Nvidia? Last year, the AI chipmaker finished first in its sub-industry with a 495% return, Stovall found. And it's a solid winner from 2007 as well, rising 29% annually on average on runaway profit growth. The company's adjusted profit per share is up more than 2,200% in that time.
And rounding out the top three S&P 500 gainers from 2007 is No. 3 Amazon.com. The online shopping juggernaut generated an average annual compound growth rate of 29%, tying with Nvidia in that time.
Seeing these huge S&P 500 stocks win year-over-year is a reminder of why top investors know to stick with their top picks. Don't let one good year think all the money's been made.
Winners Keep Winning
Top compound average annual gains from 2007-2023
| Company | Ticker | CAGR | Sector |
|---|---|---|---|
| Booking Holdings | 30% | Consumer Discretionary | |
| Nvidia | 29% | Information Technology | |
| Amazon.com | 29% | Consumer Discretionary | |
| Apple | 28% | Information Technology | |
| Old Dominion Freight Line | 27% | Industrials | |
| Monolithic Power Systems | 27% | Information Technology | |
| DexCom | 26% | Health Care | |
| Regeneron Pharmaceuticals | 25% | Health Care | |
| Mastercard | 25% | Financials | |
| Chipotle Mexican Grill | 24% | Consumer Discretionary |
