Sarah Travers
The year 2023 has been marked by substantial progress for the S&P 500, experiencing a robust rally that has propelled it to a remarkable 15% increase thus far.
Although the index still trails approximately 5% below its previous record high, this suggests that the bear market that began in early 2022 may be approaching its end.
This article delves into several growth stocks that present enticing prospects for investors aiming to capitalize on the market’s recovery. Noteworthy contenders for market-beating returns include Lululemon Athletica, Microsoft, and PepsiCo.
Lululemon Athletica: Riding High on Growth
Lululemon Athletica has stood out as an exceptional performer, avoiding the growth slump that has plagued other retailers. The company achieved a remarkable 27% surge in sales during the most recent quarter, surpassing the $2 billion milestone.
This impressive growth can be attributed to various factors, including international expansion, diversification into new product categories, and the success of its direct-to-consumer segment. Lululemon’s commitment to innovation is evident in its expanding gross profit margin, which improved from 54% to 57.5% in the past year. With an operating profit margin of 20%, the company demonstrates strong financial health.
Furthermore, Lululemon’s current valuation, just below 6 times revenue, presents investors with a relative discount compared to its pre-pandemic high of approximately 12.
Microsoft: Seizing Opportunities in Growth Trends
As a tech giant, Microsoft offers an attractive investment option due to its exposure to various growth trends. The company’s portfolio spans cybersecurity, cloud enterprise services, artificial intelligence (AI), and video game entertainment.
Microsoft’s exceptional profitability in the market is another reason why investors are drawn to the stock. The company showcases remarkable efficiency by converting 40% of its sales into operating profit. Microsoft’s commitment to enhancing shareholder value is evident through its recent 10% dividend increase, indicating a dedication to returning excess cash to investors.
Moreover, Microsoft’s strategic investments in growth initiatives such as AI and its cybersecurity platform position it to benefit from the expanding opportunities in these sectors in the years to come. By investing in Microsoft, shareholders can capitalize on multiple growth areas without the need to select individual winners.
PepsiCo: Diversified Growth Potential
While PepsiCo may have trailed the market in 2023, the company has consistently raised its sales outlook for two consecutive quarters, highlighting its growth potential. Impressively, organic sales have surged by 14% in the first half of the fiscal year, and management anticipates double-digit core growth for the entire year.
Additionally, earnings are projected to grow by 12% year over year. Although PepsiCo’s profitability may not rival that of Coca-Cola or the aforementioned growth stocks, the company offers investors a generous dividend yield of 2.7%.
This income, coupled with the stability and growth prospects associated with the investment, makes PepsiCo an enticing growth stock to consider adding to one’s portfolio this year.
Seize Opportunities with Promising Growth Stocks as Bear Market Fades
As the bear market that began in early 2022 shows signs of nearing its end, investors seeking market-beating returns should explore the potential of growth stocks.
Lululemon Athletica’s impressive sales growth, innovation-driven strategies, and attractive valuation make it an appealing choice. Microsoft’s exposure to multiple growth trends, market-leading profitability, and commitment to shareholder value further enhance its investment appeal. Additionally, PepsiCo’s consistent sales growth, dividend yield, and stability position it as an enticing growth stock.
By carefully considering these opportunities, investors can navigate the market landscape and potentially secure attractive returns in the midst of the S&P 500’s recovery.
