There’s no denying it: 2024 was a great year for the stock market. At the time of writing, the S&P500 is up almost 28% year to date. As always, there are stocks that significantly outperform this otherwise impressive return.
Among the top performers for the S&P 500 are Nvidiawhich is an increase of 180%, and Palantir Technologieswhich is an increase of more than 300%. But you probably already knew that these two stocks have been big winners this year: they’re the talk of the town.
I’d like to highlight three other components of the S&P 500 that you might be surprised to learn are also beating the market by a wide margin.
Among the other big winners of 2024, perhaps none is more surprising than my first share: Walmart(NYSE:WMT).
Walmart was founded more than 60 years ago. It is known for its physical retail activities and was already the largest retailer in the world in 2024. This isn’t the kind of company you’d expect to outperform the S&P 500. Still, Walmart stock has had a stunning rise. 82% so far.
To be clear, Walmart’s stock price has grown faster than company fundamentals, meaning the stock is more expensive from a valuation perspective. That said, the company’s modest revenue growth has translated into greater profitability growth, earning a higher share price.
The growth of Walmart’s digital capabilities has played a central role in its success. As e-commerce has become a larger part of its business, the company has been able to better leverage higher-margin opportunities to its advantage, such as in digital advertising. With the recent acquisition of smart TV company Vizio, Walmart should be able to keep the trend going.
I don’t necessarily expect Walmart stock to rise another 82% in 2025. But the company appears to be at the beginning of a multi-year tailwind as it can better monetize its business with digital offerings. That’s a good reason for Walmart shareholders to hold on tight.
It’s not about developing AI software, exploring space or curing cancer. No, Decker’s brands(NYSE: DEK) only sells shoes. But it’s admittedly a damn good shoe stock, up more than 660% over the past five years, including this year’s 85% gain.
I can’t deny that valuation is also a contributing factor for Deckers stock. Over the past five years, the valuation for a shoe stock has changed from a reasonable valuation to an expensive valuation. That said, the company’s growth has been spectacular, and the increase in operating profit margin is equally impressive.
In the first half of fiscal 2025 (which ended in September), Deckers had an operating margin of just over 20%. A few years ago the margin was less than 10%. To look at this another way, the company is now making twice as much profit for the same revenue.
This is what it’s all about: Deckers not simply have the same turnover; sales have increased dramatically in recent years. And sales are expected to grow at double-digit rates again throughout fiscal 2025, with the strength of the Hoka and Ugg brands in particular driving growth.
In short, Deckers shoes are in high demand. This leads to higher sales and higher profits. As long as this trend continues, it will be difficult to bet against Deckers stock, even after the huge gains of recent years.
It’s been almost twenty years GoDaddy(NYSE:GDDY) became a household name after the first Super Bowl commercial. Investors could be forgiven for thinking this company had seen better days. But the stock price seems to disagree, as shares rose 95% in 2024.
GoDaddy is known as a domain name buying platform. But it also offers products for running an online business. That’s actually what it wants to drive growth, because selling complementary products can grow free cash flow sustainably.
Last year, GoDaddy launched new software powered by AI that dramatically increases adoption of its complementary products. Management claims that certain things that used to take months to create now take seconds. The effectiveness of the AI naturally drives spending from the existing customer base, thereby growing free cash flow.
It seems to work. As the chart below shows, GoDaddy’s free cash flow per share suddenly skyrockets much faster than its revenues.
GDDY Free Cash Flow Per Share data per YCharts.
It’s important to note that GoDaddy stock has risen sharply in recent years, but its profits have largely matched its free cash flow per share growth. That’s why the valuation hasn’t increased much. It’s still a good value today, trading at 24 times free cash flow.
Furthermore, if it’s true that its AI software is driving adoption, GoDaddy could see strong growth again in 2025 as it launched its AI software relatively recently and there are still plenty of customers who could adopt it.
This year’s winning stocks are a surprisingly good place to look for next year’s winners; stocks are tied to companies and business trends tend to play out over several years. For this reason, looking at the best stocks of 2024 is a good use of time when looking for good investment opportunities for 2025. That’s why Walmart, Deckers and GoDaddy are three stocks to think about more deeply.
For what it’s worth, GoDaddy stock would be my pick of this trio, given its reasonable valuation and potential for strong growth over the next year or more.
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*Stock Advisor returns December 9, 2024
Jon Quast has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia, Palantir Technologies, and Walmart. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.
Everyone knows Nvidia and Palantir. But these other three stocks are also quietly crushing the S&P 500 in 2024. was originally published by The Motley Fool
