Keeping a list of S&P 500 growth stocks you'd like to own is a good idea. And it might pay off sooner than you think.
Analysts say 10 stocks in the S&P 500 Pure Growth index, including industrial Generac, Signature Bank and Diamondback Energy, stand to gain 25% or more in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
If that's right, it would mean investors could score a return that's more than two-times greater than the S&P 500's typical one-year return. And that would be a welcome change for pummeled growth-stock investors. The SPDR Portfolio S&P 500 Growth ETF is still down nearly 18% this year — despite a recent rally in July.
Some think the recent positive jobs report makes a case again for growth. "A recession now looks less likely or, at a minimum, farther away. Those wages will be spent, which will keep the economy growing," said Brad McMillan, chief investment officer for Commonwealth Financial Network.
S&P 500: So Bad It's Good?
Some are hoping the S&P 500 is now finding levels that would soon put your watchlist of stocks into action.
History is optimistic for stocks. The S&P 500 dropped more than 16% during the second quarter, says Ryan Detrick, chief market strategist at Carson Group. That's one of the worst quarters ever for the S&P 500.
But he points out a silver lining to such a dismal quarter. A year following a quarterly drop of 15% or greater, the S&P 500 has subsequently rallied in the following year every time. Not once has the S&P 500 fallen in the year after a quarterly drop, he says.
And the gains are usually large. The S&P 500, on average, gained 26.1% in the year following a quarterly drop of 15% or more.
So what kinds of growth stocks in the S&P 500 do analysts like most?
S&P 500 Pure Growth Stocks Analysts Like
There aren't many pure growth stocks left in the S&P 500. Just 56 remain, as falling valuations this year pushed more S&P 500 companies into the value category.
But of those remaining growth plays, analysts like power generator firm Generac the most. Analysts think the stock, which lost a third of its value this year to 245.61 a share, is really a 356.60-a-share stock. And if that's right, it would imply upside of more than 45%.
And there's profit growth to back it up. Analysts think Generac will make $12.03 a share in 2022. That's up more than 25% from the $9.63 a share the company earned in 2021.
Another favorite growth stock is a surprising financial play. Banks are usually dividend and value stocks. But Signature Bank lands in the S&P 500 Pure Growth category. Shares are off 41% this year to 187.91. Analysts, though, think it should trade for 267.06 in 12 months. If that's right, it would be potential upside of more than 42%.
Analysts think the company's profit will jump more than 43% this year to $21.63 a share. It only yields 1.2%. That's low for a financial.
Value In S&P 50o Growth
Analysts, too, are finding energy growth plays. And that's despite a massive run in the shares already.
Two of the 10 S&P 500 Pure Growth stocks analysts like the most are in the energy sector. That includes Diamondback Energy, which is up more than 13% just this year to 122.10 a share. Analysts, though, think Diamondback's shares will gain another 40% in 12 months to 171 a share.
And talk about profit growth. The energy exploration company is seen earning an adjusted 26.52 a share in 2022. That's up more than 135% from 2021.
Could the S&P 500 growth rally run into a snag? Are analysts even right? These are legitimate questions. But one thing's for sure: even if there is a recession, but if it proves to be mild, the S&P 500 will recover. And fast, if history is any guide. And you won't want to miss out on that.
S&P 500 Growth Stocks Analysts Love
Pure growth stocks expected to rise 25%, or more, over the next 12 months
| Company | Ticker | Stock implied upside to analysts' 12-month price target | YTD % stock ch. | Sector |
|---|---|---|---|---|
| Generac Holdings | 45.2% | -30.2% | Industrials | |
| Signature Bank | 42.1 | -41.9 | Financials | |
| Diamondback Energy | 40.0 | 13.2 | Energy | |
| Fortinet | 38.2 | -28.0 | Information Technology | |
| Meta Platforms | 35.3 | -50.3 | Communication Services | |
| Devon Energy | 34.9 | 28.5 | Energy | |
| SVB Financial | 26.0 | -39.3 | Financials | |
| Qualcomm | 25.9 | -18.7 | Information Technology | |
| Nvidia | 25.6 | -36.1 | Information Technology | |
| Charles River Laboratories | 25.5 | -40.3 | Health Care |
