What do investors do when they can get 5% and take no risk? Find low-risk S&P 500 stocks they can make even more on — a tall order only a few can meet.
Just nine stocks in the S&P 500, including Axon Enterprise, Eli Lilly and Warren Buffett's biggest personal position Berkshire Hathaway, consistently gained in each of the past five years plus in 2023 so far, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
And we're not talking small gains. These consistently rising stocks posted an average gain in the past five years of 23.8%. That easy tops the roughly 5% CDs are paying. And it's nearly double the S&P 500's total average annual return of 12.1% during that time, says IFA.com. Keep in mind even the S&P 500 dropped two out of the past five years.
Only a tiny group of stocks meet this standard. Less than 2% of the stocks in the S&P 500 pull it off, showing just how rare such stocks that go up so consistently are.
And yet safety is in style with investors, trying to shield themselves from the Federal Reserve's moves, says Jeffrey Roach, chief economist for LPL Financial. "The uncertainty of this post-pandemic economy and the distortions created by global shutdowns call for vigilant and wise policymakers," he said. "Markets will likely have more choppiness ahead because of these complications."
Axon: The 'Can't Miss' Stock
When it comes to S&P 500 stocks that don't miss, Taser maker Axon Enterprise is at the top. Shares of the maker of nonlethal tools for law enforcement deliver year-after-year. The stock gained an average of 42.3% in the past five years and didn't fall even once.
Even in the month of August, when the S&P 500 is down nearly 4%, shares of Axon are up more than 6%. Investors like the company's fairly predictable earnings growth. Axon's adjusted profit rose every year in the past five years other than a 7% dip in 2022. Analysts think the company's profit will rise 63% in 2023 and another 7.5% in 2024.
Eli Lilly, one of the companies pushing for neurological breakthroughs, is another example of an S&P 500 stock that just doesn't want to fall. In the past five years, it gained an average of nearly 38% annually while not having a down year even once. It's really lighting it up in August, as the rest of the S&P 500 sputters, gaining more than 22%.
The drugmaker's profits are a model of consistent future growth. Profit is on pace to rise nearly 20% this year, analysts say. And after that, Wall Street is looking for 32% growth in 2024, 35% in 2025 and 23% in 2026.
Berkshire Hathaway's Nonstop Run Higher
Examining performance in the past five years is illustrative, given the ups and downs and exogenous shocks. And Buffett showed why he's the Oracle of stock picking.
Shares of his Berkshire Hathaway gained each of the past five years and year-to-date by an average of 10.9%. That's not the highest return of these consistent gainers in the S&P 500, but the volatility is lower, too. Amazingly, the five-year beta of Berkshire Hathaway is just 0.87. Anything less than 1 means the stock is less risky than the S&P 500.
No surprise, then, why Buffett is comfortable keeping so much of his wealth in this single stock. He owns 15.1% of Berkshire Hathaway's shares outstanding. That makes him the largest single holder with a stake worth $116 billion. That accounts for nearly 98% of his $119 billion in total wealth.
There's no guarantee these S&P 500 stocks will continue their five-year winning streams. But there's no denying they've been no-lose bets at least until now.
'Can't Lose' S&P 500 Stocks Rise Five-Straight Years
| Company | Symbol | Average gain past five years | Sector |
|---|---|---|---|
| Axon Enterprise | 46.7% | Industrials | |
| Eli Lilly | 35.0% | Health Care | |
| O'Reilly Automotive | 29.9% | Consumer Discretionary | |
| Arthur J. Gallagher | 24.8% | Financials | |
| Cintas | 25.3% | Industrials | |
| W.W. Grainger | 18.9% | Industrials | |
| Progressive | 18.8% | Financials | |
| TJX | 16.3% | Consumer Discretionary | |
| Berkshire Hathaway | 10.0% | Financials |
