Image source: Getty Images
Global index funds can be great long-term investments. I own a few in my own portfolio and see them as ‘core’ holdings. However, investors looking to generate high returns from the stock market, individual stocks should be considered as they offer the potential for bigger gains.
Here’s a look at two S&P 500 stocks (I’m personally backing) that I predict will outperform global tracker funds over the next five years.
Driving the AI revolution
Nvidia (NASDAQ: NVDA) has had an incredible run over the last five years, rising about 1,500%. But that doesn’t mean it can’t go higher.
Thanks to its high-powered GPUs, this company is at the heart of the artificial intelligence (AI) revolution. And this is still in its early stages (one prominent Wall Street analyst recently remarked that it’s only ‘10pm’ at the AI party).
Looking ahead, we’re likely to see all kinds of exciting AI applications, from AI agents (which can perform business tasks autonomously) to robotics, to self-driving cars (physical AI). And Nvidia’s accelerated computing technology’s likely to be driving a lot of it.
If the tech company can continue to generate double-digit revenue and earnings growth in the years ahead, I expect its share price to climb higher. Personally, I wouldn’t be surprised to see gains of 10-20% a year over the next five years (on average), given current top- and bottom-line growth forecasts and the stock’s reasonable valuation today (the price-to-earnings (P/E) ratio is only 34 at present).
Of course, slowing growth’s a risk here. This could be the result of a range of scenarios, from less business spending on AI solutions to new AI chips from competitors.
All things considered however, I remain bullish. I continue to think the stock’s worth considering on short-term pullbacks (which tend to come around regularly).
The leader in mobility
Another S&P 500 stock I reckon has market-beating potential is Uber Technologies (NYSE: UBER). It’s a huge player in the rideshare and food delivery markets, with operations in over 70 countries worldwide.
There are a few reasons I’m backing this stock to beat the market over the next five years. One is that revenues are increasing at a rapid rate – currently Uber’s top line’s growing at around 15% a year.
Another is that the valuation’s quite reasonable relative to the growth. Right now, the stock’s trading at less than 25 times next year’s earnings forecast.
Add in the fact that the stock’s under-owned within the institutional investment community (many investors are still discovering the story here), and there’s plenty of potential. Again, I wouldn’t be surprised to see gains of 10-20% a year over the next five years, on average.
Now there are risks to the investment case here, of course. Fines from regulators and competition from Tesla (and its robotaxis) are two big ones worth highlighting.
I think this stock has all the right ingredients to be a long-term winner though. In my view, it’s definitely worth considering right now.
