In 2024, while Nvidia and Palantir have garnered widespread recognition, these three lesser-known stocks have been silently outperforming the S&P 500.
It's undeniable that 2024 was a standout year for the stock market. As of now, the S&P 500 has seen a remarkable increase of nearly 28% this year alone. As always, there are specific stocks that have outperformed this impressive growth.
Some of the top performers for the S&P 500 include Nvidia, which has seen a staggering increase of 180%, and Palantir Technologies, boasting a growth of more than 300%. But it's no secret that these two stocks have been triumphant this year – they've been the talk of the town.
I'd like to shed light on three other notable companies from the S&P 500, which have managed to outperform the market significantly as well.
Among the other stars of 2024, perhaps none are more unpredictable than my first pick: Walmart (WMT 0.87%).
1. Walmart
Founded over six decades ago, Walmart is renowned for its brick-and-mortar retail operations. This is not the kind of company that springs to mind when thinking about outperforming the S&P 500. Yet, Walmart stock has seen an astounding 82% increase this year.
It's crucial to point out that Walmart's stock price growth exceeds its business fundamentals, making the stock pricier from a valuation perspective. However, the firm's modest sales growth has translated into heightened profit growth, warranting a higher stock price.
The surge in Walmart's digital capabilities has been instrumental to its success. As e-commerce has come to play a more significant role in the business, the company has been able to capitalize on lucrative opportunities such as digital advertising. With its recent acquisition of smart-TV company Vizio, Walmart looks set to continue its upward trajectory.
I wouldn't bet on Walmart stock doubling its growth again next year. Nevertheless, the company seems to be on the brink of a prolonged upswing as it embodies its digital offerings more effectively. This is good news for Walmart shareholders, as they should hold on tight.
2. Deckers
Deckers Brands may not conduct groundbreaking AI research, explore space, or cure diseases. But it does sell shoes – exceptionally well, in fact. Over the past five years, its stock has seen a breathtaking increase of over 660%, including a 85% surge this year.
It's undeniable that valuation plays a part in Deckers stock performance as well. In the last five years, it's transitioned from a reasonable valuation to a lofty valuation for a shoe stock. However, the company's phenomenal growth and enhancement of its operating profit margin are equally commendable.
In the first half of its fiscal 2025 (which ended in September), Deckers boasted an operating margin above 20%. Several years ago, its margin was beneath 10%. To put it into perspective, the company is now earning twice as much profit for the same amount of sales.
The intriguing part is that Deckers doesn't just have the same amount of sales – its sales have skyrocketed in recent years. And sales are expected to grow at double-digit rates for all of its fiscal 2025, with its popular Hoka and Ugg brands driving growth.
In short, Deckers' shoes are in high demand, fueling larger sales and profits. As long as this trend remains steady, it will be challenging to bet against Deckers stock, even after its recent abundant gains.
3. GoDaddy
GoDaddy first earned widespread recognition in 2000 after airing its now-iconic Super Bowl commercial. It's understandable if investors doubted the company's future, given its slow growth in recent years. But the stock price seems to disagree, with shares soaring 95% in 2024.
GoDaddy is best known for its domain name registration services. But it also offers tools to help run an online business. The company is actively focusing on growing ancillary products, which can boost its free cash flow sustainably.
Last year, GoDaddy introduced AI-powered software that has drastically increased the adoption of its ancillary products. Management states that tasks that used to take months can now be completed in seconds. The effectiveness of its AI is driving up customer spend, thereby unlocking free-cash-flow growth.
It seems to be working. As the diagram below shows, GoDaddy's free cash flow per share is suddenly surging at an exponential rate, much faster than its revenue.
It's essential to note that GoDaddy's stock price has risen substantially in recent years, but its growth largely matches its growth in free cash flow per share. Consequently, its valuation hasn't changed significantly. It's still a worthwhile investment today, trading at 24 times its free cash flow.
Moreover, if its AI software's adoption rate continues at this pace, GoDaddy might experience another growth spurt in 2025, as it only recently launched its AI software and there are still plenty of customers who could adopt it.
In my opinion, Godaddy's shares would be my top choice among these three, thanks to its fair pricing and promising prospects for significant expansion in the upcoming year and beyond.
- Delving further into the world of finance, investing in stocks can yield substantial returns. For instance, Walmart, with its 82% increase in stock price this year, has proven to be a lucrative investment option for many.
- In the realm of money management and investing, Deckers Brands, a company known for its shoe sales, has seen a staggering 85% surge in stock price this year, suggesting that not all investments need to be in high-tech industries to yield high returns.
