The Best Stocks to Buy Now
on the S&P 500 in
July 2024

Check out our analysis on the
best stocks to buy on the S&P 500 right now!

The Best Stocks to Buy Now on S&P 500 in July 2024

Check out our industry experts’ report and analysis on the best stocks to buy on the S&P 500 right now!

What is the S&P 500 Index?

The S&P 500 Index is a North American equity indice. It represents 500 of the largest publicly traded companies in the United States, on the NYSE and NASDAQ. It covers a diverse range of industries, providing a broad snapshot of the U.S. economy. The index is weighted by market capitalisation, ensuring that larger companies have a more significant impact on its performance, and also ensuring that companies can be added and deleted to the list as they become eligible.

Historically, the S&P 500 has delivered an average annual return of about 10%, making it a favoured choice for long term investing. Its inclusion of individual stocks from various sectors ensures a diversified portfolio, reducing the risk of the indice being influenced by the performance of any single company or particular sector.

Why Invest in S&P 500 Stocks in 2024

Investing in S&P 500 Stocks in 2024 represents a compelling opportunity due to several factors.

The most important reason is that these stocks are unlikely to fluctuate substantially more than the index's performance. And the performance has been robust, gaining ~25% in the 12 months to June 18, 2024. This upward trend has driven by strong performances in sectors such as technology, artificial intelligence sectors with stocks like Nvidia, Super Micro Computer and Qualcomm leading the charge.

We also observe that the performance of the indice and stocks in it tends to track the U.S. economy, which has performed very well since the pandemic. Furthermore, the index’s inherent diversification mitigates risks, making it suitable for both seasoned investors and those new to stock investing.

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Current Market Trends in US

The current stock market trends in the U.S. are shaped by several key factors. Firstly, interest rates remain a significant focus, with the Federal Reserve's policies having a profound impact on market movements. The Federal Reserve has maintained its target federal funds interest rate range between 5.25% and 5.5% since July 2023, marking the highest target range since 2001. This high-interest-rate environment aims to curb inflation but also influences borrowing costs, consumer spending, and corporate profits.

Despite the challenges posed by high inflation, U.S. stocks have performed exceptionally well, with the S&P 500 up nearly 25% in the 12 months to June 18, 2024. This robust performance can be attributed to the resilience of growth stocks, especially within the technology sector. Companies such as Apple, Microsoft, and Meta have experienced substantial appreciation, driven by strong earnings reports and continued innovation. For instance, Apple’s stock has surged due to strong iPhone sales and growth in its services division, while Microsoft has benefited from its cloud computing services and AI initiatives. But Nvidia has taken the cake, with investors seeing this company as the way to gain exposure to the growth in AI. And can you really blame investors given the company's spectacular top and bottom line growth?

The market is closely monitoring key economic indicators such as the Consumer Price Index (CPI) and employment data. In April 2024, the CPI increased by 3.4% year-over-year, down from the peak 2022 inflation levels of 9.1%, but still well above the Federal Reserve's 2% long-term target. This indicates persistent inflationary pressures, which the Fed aims to manage through its interest rate policies. Employment data also plays a crucial role; in April 2024, the U.S. economy added 175,000 jobs, which was below the economist estimates of 240,000, reflecting a softening labor market.

Global events significantly influence the stock market, affecting investor sentiment and market volatility. Geopolitical tensions, such as the ongoing conflict between Russia and Ukraine, have disrupted global supply chains and heightened market uncertainty.

Moreover, the market’s reaction to corporate earnings reports has been positive, with many companies surpassing expectations. The S&P 500 companies reported better-than-expected first-quarter earnings growth of 6% year-over-year, the best past performance since the first quarter of 2022. This growth has been particularly strong in sectors like technology and communication services, artificial intelligence sectors, while sectors such as materials, healthcare, and energy have seen declines in earnings.

10 Best S&P 500 Stocks to Buy Now in 2024


Nvidia (NDQ:NVDA)

Nvidia is a manufacturer of specific computer chips called Graphics Processing Units (GPUs). GPUs act as the 'brain' of many AI technologies including computers, robots and self-driving cars. The stock is trading around $130 post-split, making it more accessible to individual investors even though it is capped at over US$3tn.


Amazon (NDQ:AMZN)

Amazon is a diverse company, known most particularly for its online eCommerce offerings and AWS Cloud business. It isn't the highest margin business, but has seen spectacular growth in recent years, especially in Cloud Services, and has a dominant market position. It has undergone generational change with founder Jeff Bezos being succeeded by AWS pioneer Andy Jassy.



Microsoft (NDQ:MSFT)

Microsoft is one of the world's largest computing companies offering hardware and software services. It is easy to think a US$3tn company can't get bigger, but it is in a box seat to capture the continued growth in the Cloud given growing demand and the company's continued investment in it.


Apple (NDQ:AAPL)

Apple is arguably the world's most iconic brand, making technological devices and services. The Steve Jobs era is long gone, but the company has grown its market cap 10-fold since then and continues to make modest innovations such as the Apple Watch (now a bigger business than the iPod at its peak), as well as insourcing its chip supply chain.


Sherwin-Williams (NYSE:SHW)

Sherwin-Williams is a 157-year-old paint company from Cleveland, Ohio. Theoretically, a paint company should only be growing at GDP. But it has managed to deliver a heck of a lot more for its shareholders and has so many desirable traits. It sells in 120 countries, has a CEO who's been with the company for 40 years, raised its dividend for 44 straight years and has huge control over its supply chains.



Thermo Fisher (NYSE:TMO)

Thermo Fisher is a world leading health company. You name something to do with healthcare and it is more likelier than not that Thermo Fisher does that. It makes, supplies and provides lab equipment, pharmaceutical drugs, consumables for medical devices and medical software just to name a few. In the past decade, the company has delivered 14% CAGR (Compounded Annual Growth) in revenue, 17% CAGR in its EPS and 15% for FCF.


Walmart (NYSE:WMT)

Walmart is no ordinary supermarket chain. It is a chain of hypermarkets, operating outlets that offer not just groceries but household items too. Today, Walmart is the world’s largest company by revenue with over US$611bn generated in FY23, more than Apple or Amazon.


Alphabet (NDQ:GOOGL)

Alphabet is the parent company of Google. It hosts the famous search engine and apps such as Maps, Drive and YouTube, but has a growing Cloud services business, and even an entire division called 'Other Bets' hosting ideas like driverless cars and drone delivery. But the Search Engine remains its most famous and popular outlet, answering billions of queries daily without judging who's asking or what the query is.



McDonalds (NYSE:MCD)

McDonalds (NYSE:MCD) really doesn’t need an introduction. It is the world’s largest and most famous restaurant chain, with 40k restaurants worldwide, employing over 2.2m people. There are many things unique to it incuding its franchising model, and how Australia is its 4th largest markets (uncommon for such a big company).


Colgate (NYSE:CL)

In Australia, we know Colgate (NYSE:CL) primarily as a toothpaste brand. But there’s a lot more to this 217-year old company than you may think. It sells various products across personal care, home care and pet nutrition. It sells products all over the world and has been immune to inflation.


10 Best S&P 500 Stocks to Buy Now in 2024

Nvidia Corp (NVDA)

Nvidia is a manufacturer of specific computer chips called Graphics Processing Units (GPUs). GPUs act as the 'brain' of many AI technologies including computers, robots and self-driving cars.

Intel is actually a larger maker of graphic chips than NVDA because most of its CPUs ship with the company’s own integrated graphics silicon. But this goes to show that NVDA’s GPUs are very important to the world. Another client is OpenAI, which is behind Chat-GPT technology. Granted, some of these technologies are at early stages, but since NVDA has such a foothold in many of these markets, there is huge opportunity ahead.

The stock is trading around $130 post-split, making it somewhat more accessible to individual investors even though it is capped at over US$3tn. Analysts are expecting the company's revenue to grow from US$60.9bn in FY24 to US$213.8bn in FY28, and its profit from US$29.9bn to $126bn in FY28.

Amazon (NDQ:AMZN)

Amazon is a diverse company, known most particularly for its online eCommerce offerings and AWS Cloud business.

It began as an online intermediary between book readers and wholesalers. Founder Jeff Bezos quit his job working for a New York hedge fund and moved across to Seattle to capitalise on the growth of the Internet.

As the years went on it expanded into more and more products and services, delivering them faster and faster to customers as well as expanding outside North America. We think two should be singled out.

First, its membership service Amazon Prime which boasts 200 million members around the world (a figure twice as high as 5 years ago). There is so much you get for it – expedited delivery (without delivery fees), Prime Video, Prime Music and exclusive access to deals (particularly on Amazon’s annual Prime Day).

Second is Amazon Web Services (AWS), offering Cloud computing services to individuals, companies and governments. This division began as just another idea in 2006, but demand for it exploded during the pandemic. With everyone working from home, you don’t want all your data just sitting on one computer somewhere that is only accessible in person. It now accounts for over $100bn on annualised revenue and over two-thirds of operating income.

Bezos recently stood down and was replaced by CEO Andy Jassy. He’s no newcomer, having been with the company since 1997 and playing a key role in the establishment of AWS.

Amazon shares have endured a solid 12 months due to better than expected revenue growth, and successful cost-cutting efforts, it bought general and administration costs down by 10% and marketing from 5% since late 2022.

 

Microsoft Corp (MSFT)

Microsoft is one of the world's largest computing companies offering hardware and software services. We all use its products in our everyday lives; it successfully transitioned from a hardware to a software company and then to a cloud company.

Look at Microsoft’s annual report and you’ll see it has several different segments – 10 to be exact. But 61% of revenue comes from 2 segments – Server products & Cloud services and Office products & Cloud services. Another 10% comes from Windows products. LinkedIn accounts for ~7%. Since Sayta Nadella became CEO in 2014, the company has sought to become Cloud focused. Microsoft revised its mission statement to ’empower every person and every organization on the planet to achieve more’. And its cloud ambitions are a big part of that – its products serve everyone from small business to the US Department of Defence.

The company is worth over US$3.3tn today, managed a 55%+ return in 2023 and gained another 20% in the first 5.5 months of CY24. It is easy to think a US$3tn company can't get bigger, but it is in a box seat to capture the continued growth in the Cloud given growing demand and the company's continued investment in it.

 

Apple Inc (AAPL)

Apple is arguably the world's most iconic brand, making premium technological devices and services. These include the iPhone, iWatch, iPad, the Mac range as well as its iCloud storage services and software made avaliable on its devices.

The Steve Jobs era is long gone, but the company has grown its market cap 10-fold since then and continues to make modest innovations. The Apple Watch is now a bigger business than the iPod ever was at its peak. Obviously, none of these have been the gizmos that any of Jobs’ products were. Sure, there has been some talk about VR/AR headsets, but these endeavours are still in their early days. And of course, it keeps rolling out new phones, although the improvements are incremental at best.

Even though there are some threats, such as a slowdown of sales in China, it'll take some effort for any competitor to dethrone this company. One important thing that even some of Apple’s hardcore fans may have even missed is that it has moved to making its own semiconductor chips, rather than using Intel’s. These chips (Apple Silicon) combine the CPU, GPU and RAM into a single unit and are much better than Intel processors. Don’t expect to see Apple open its own factories and sell chips to other companies, although the control the company now has over its hardware and software helps the control it has over its user experience.

 

Sherwin-Williams (NYSE:SHW)

Sherwin-Williams is a 157-year-old paint company from Cleveland, Ohio. Theoretically, a paint company should only be growing at GDP. But it has managed to deliver a heck of a lot more for its shareholders and has so many desirable traits.

It sells in 120 countries, has a CEO who's been with the company for 40 years, doubled revenues in less than a decade, raised its dividend for 44 straight years and has huge control over its supply chains.

The US paint industry uses nearly 900m gallons of paint annually, the largest share being DIY painters. You name any generation and their life moves will need paint of some sort. Baby Boomers are downsizing and/or moving to assisted living facilities. Gen X and millennials are upsizing, or perhaps buying homes for the first time. And fresh paint is one of the best ways to add value to it.

Sherwin Williams is well positioned to capture more than its fair share of the new market opportunity with its constant innovation, superior stores and customer service. Investors have been concerned about supply chain issues and cost increases for construction companies, but this company has been unaffected.

Thermo Fisher (NYSE:TMO)

Thermo Fisher is a world leading health company. The company, headquartered on the outskirts of Boston but with Australian headquarters in Sydney, began in 1956 as Thermo Electron and had a modest few decades, generating US$2bn in revenue in 2004. The company it went to the next level after merging with Fisher Scientific in 2006 and now makes over US$40bn a year. The merged company has continued to grow through the popularity of its existing devices and several acquisitions made in the last decade.

You name something to do with healthcare and it is more likelier than not that Thermo Fisher does that. It makes, supplies and provides lab equipment, pharmaceutical drugs, consumables for medical devices and medical software just to name a few.

In the past decade, the company has delivered 14% CAGR (Compounded Annual Growth) in revenue, 17% CAGR in its EPS and 15% for FCF.

Thermo Fisher’s potential market size has tripled in 10 years from $80bn to $240bn, all because of all the acquisitions it has made. Among them, genetic tester Life Technologies, contract manufacturer Pantheon, and clinical research services provider PPD. These 3 cost just over $37bn between them.

In the long term, Thermo Fisher is targeting 7-9% long-term revenue growth targeted and 60-75% of capital anticipated to be deployed to M&A. Thermo Fisher has a solid ESG element, not just because it is a healthcare company but because of its emission reduction efforts. It has cut Scope 1 & 2 emissions by 25% and aims for Net Zero by 2050.

Walmart (NYSE:WMT)

Walmart is no ordinary supermarket chain. It is a chain of hypermarkets, operating outlets that offer not just groceries but household items too.

The company was founded in 1962 with the first store opened in Arkansas by Sam Walton. Prior to this, he owned a Ben Franklin store and successfully turned it around by selling products at lower prices to get higher-volume sales at a lower profit margin.

While most discount stores were in big cities and only offered discounts on small items, Walton set up shops in smaller towns. Other unique traits included that the stores were kept open longer hours than competitors, big parking lots that would be free for consumers to park at. Even getting customers to get the goods themselves and pay at the exit was an innovation at the time.

Today, Walmart is the world’s largest company by revenue with over US$611bn generated in FY23, more than Apple or Amazon.

The company employs over 2m people across the world, the bulk of whom are in North America. It has direct outlets or investments in several countries including the UK, China and several countries in Latin America.

Walmart is facing some competitive threats such as the threat of eCommerce (led by Amazon). Walmart has several advantages over its peers including its logistics and store networks, its cash reserves, the fact that it is a ‘one stop shop’ as well as the mix of goods, both essentials that are purchased regularly and bigger ticket items purchased less frequently but are higher margin for the company. And the company is undertaking initiatives such as building a marketplace of third party sellers, opening Market Fulfilment Centres and adding EV charges in the car parks of its stores.

Alpbabet (NDQ:GOOGL)

Alphabet is the parent company of Google. The original Google was founded in 1998, but the current parent company only began in 2015 as the company diversified its offerings and sought to restructure. It hosts the famous search engine and apps such as Maps, Drive and YouTube, but has a growing Cloud services business, and even an entire division called 'Other Bets' hosting ideas like driverless cars and drone delivery.

Alphabet listed on the NASDAQ in 2004 being priced at $85, now worth $30 considering the 2014 stock split. If you’d bought US$1,000 back then and held the shares, you’d have over US$30,000 today.

It is our favourite big tech stock for several reasons including its consistent bottom line growth, more reasonable multiples compared to other Big Tech firms and because the trust consumers have in it is unrivalled by any company on earth.

8.5 billion times a day (99,000 times per second) people all over the globe turn to Google to know whatever it is they want or need to. Because they know they will get an answer without a whiff of judgement on who they are, where they are or what they are asking.

Whether you want to know the Prime Minister of some remote country, where to find the best pizza, what to do if you’re coughing so much, what [insert name of your ex here] is doing now…you get the drift. We ask things we wouldn’t ask our best friends, our parents, our doctor or faith leader. Just look at your own recent Google search history. You will get honest answers – although some are paid, those are clearly noted. And the answers are a benediction in themselves: ‘Go, take your newfound knowledge and live a better life’.

As for corporate clients, they have no choice but to go to Google if they want to reach people. As if they’d extract anywhere near the same results from Microsoft’s Bing.

McDonalds (NYSE:MCD)

McDonalds (NYSE:MCD) really doesn’t need an introduction. It is the world’s largest and most famous restaurant chain, with 40k restaurants worldwide, employing over 2.2m people.

McDonalds traces its origins back to the 1950s, founded by the McDonalds brothers who ended up selling it to Ray Kroc who took it to the next level. There are many things unique to the business including its franchising model, and how Australia is its 4th largest markets (uncommon for such a big company).

You see, its franchisees pay not just royalties on sales but rent for running ‘their’ business on a property – not to mention a whopping US$1.5m upfront charge that must be financed with the franchisees own money (yes, their own – not borrowed funds). And they have to deal with all the front-line issues that they’ll have to face being a franchisee.

But while it is hard work for the franchisees, it is easy for head office. McDonalds tends to buy cheap land that will inevitably grow over a 20-year period during which their franchisees are contracted with them. And it sets up its stores with a plain, simple and consistent layout meaning minimal upfront costs for them

In the last 5 years McDonalds has grown systemwide sales by $22bn and revenue by $2bn. Free cash flow conversion is 89% and its Operating margin 44.8% vs 43.1% 5 years ago.Current CEO Chris Kempczinski is a big believer in the following quote from Ray Kroc: ‘either you’re green and you’re growing or you are ripe and you are rotting’. So, McDonalds is planning for a big future, both short and long-term. McDonalds has 100 new restaurants in the pipeline in Australia alone, one third of which will be in regional areas. There is inevitably a far larger pipeline when the rest of the world is taken into account.

Colgate (NYSE:CL)

In Australia, we know Colgate (NYSE:CL) primarily as a toothpaste brand. But there’s a lot more to this 217-year old company than you may think.

Colgate is a consumer products company, headquartered in Manhattan, New York and present all over the world. Its purpose is ‘Reimagining a healthier future for all people, their pets and our planet’. Named after its co-founder William Colgate, the company sells various products across personal care, home care and pet nutrition. It sells products all over the world and has been immune to inflation.

It is highly diversified in its revenue stream with no geography with over 22% – that title held by Latin America. It has a 55-45 revenue split between developing markets and emerging markets. While inflation has led to many consumer companies’ products falling, it as been the opposite with Colgate, even as it raised prices.

Colgate has been paying dividends to shareholders for 128 years and has raised dividends consistently for the past 60 years. It has returned US$28bn to shareholders, through dividends and stock buybacks, over the last decade. It has one of the best ESG angles of any company as it expands into more countries – reaching children worldwide in countries with poor oral health standards.

 

How to Find the Best Stocks to Buy Now on S&P 500

Finding the Best Stocks to Buy on the S&P 500 is no mean feat, requiring a combination of research and strategic analysis. Investors should look for companies with:

  1. Strong free cash flow,
  2. A reasonable P/E ratio,
  3. A solid dividend yield, and
  4. A robust economic moat including competitive advantages, high market share, brand recognition. High barriers to entry are desirable here.

How to Invest in S&P 500 Stocks

To start investing in S&P 500 stocks, you can either buy stocks individually, or invest in ETFs that track the S&P 500. Individual investors can open brokerage accounts with platforms like Stake and Superhero. Many investors may find them appealing because some offer free brokerage. We would exercise caution in choosing a broker just because of that, given brokers can make money off you in other ways, and because there are other factors to consider in choosing a broker - not all may offer features you may want or need.

For those looking for a more hands-off approach, investing in a ETF that tracks the S&P 500 can be an excellent option. You can invest using a broker and buy and sell just like any other stock. It's essential to consider your risk tolerance and time horizon when making investment decisions.

Regularly monitoring your investments and staying informed about stock market trends and company's performance will help you make better decisions and optimise your returns over the long term.

Pros and Cons of Investing in the S&P 500 Index Stock

Investing in the S&P 500 Index Stock offers several advantages. As noted above, one of the primary benefits is the diversified portfolio it provides, which reduces the risk associated with investing in individual companies. Additionally, the index has a strong track record of delivering solid returns over the long term.

However, there are also drawbacks to consider. The index can be volatile compared to other exchanges, especially during periods of economic uncertainty, requiring a high risk tolerance. Another drawback is that, investors have limited control over the specific stocks included in the index, which may not align with their personal investment preferences.

Despite these challenges, the S&P 500 remains a popular choice for individual investors seeking broad market exposure. Because, as goes without saying,  with the higher risk comes higher return potential. The ASX 200 has flatlined since the depths of the GFC in mid-March 2009, but the S&P 500 has gained 600%.

S&P 500 Vs. Other Major Indexes

When comparing the S&P 500 to other major indexes like the Dow Jones Industrial Average and the Nasdaq Composite, several differences stand out.

The S&P 500 offers a broader representation of the U.S. economy, including 500 companies across various sectors, while the Dow focuses on just 30 large-cap companies. This makes the S&P 500 a better indicator of overall stock market performance.

The Nasdaq, on the other hand, is heavily weighted towards technology and growth stocks, leading to higher volatility. Investors looking for a balanced investment approach may prefer the S&P 500 for its diversified portfolio and broad market exposure, whereas those seeking high growth potential might lean towards the Nasdaq.

As for the ASX 200, it is similarly intended to capture a share of the top companies on the exchange. However, the ASX 200 has less companies, and the indice is heavily weighted towards the Big Banks and Major Miners, whilst the S&P 500 has a far more diverse range of sectors.

FAQs on Investing in Best Stock to Buy in US

The ticker symbol for the S&P 500 Index is ^GSPC. This index is a crucial benchmark for stock trading and widely followed by analysts and firms. Monitoring its performance provides insights into the overall health of the business and economic environment.

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