Some investors prefer to buy ETFs that track the Nasdaq Composite. This approach allows investors to match market returns instead of outperforming it. While this approach can save plenty of time, you could be leaving money on the table.
It’s possible to beat established benchmarks, and you can use them to your advantage. Every benchmark, including the Nasdaq Composite, is filled with stocks that have outperformed it. Indices have many “dead money” stocks that weigh it down, but there are also a few companies that prop it up. These are some of the top Nasdaq stocks that have helped the index generate impressive long-term gains.
Meta (META)
Meta (NASDAQ:META) is the largest social media company. It boasts 3.24 billion daily active users across its platforms and has soundly outperformed the stock market. Shares are up by 34% year-to-date and have rallied by 145% over the past five years.
The company has been delivering higher profits in recent quarters which resulted in a dividend and a reasonable P/E ratio. Facebook’s parent company reported 27% YOY revenue growth and 117% YOY net income growth in the first quarter of 2024.
The best companies win our attention, and Meta has certainly done that well. The average person spends more than an hour a day on Facebook and Instagram. That type of traction allows Meta to deliver higher ad revenue growth rates even with user growth rate in the mid single-digits.
Wall Street analysts are on board with the stock. The stock is rated as a “strong buy” and has a projected 18% upside from current levels.
Costco (COST)
Costco (NASDAQ:COST) is also a fan favorite among Wall Street analysts. The average price target implies an 11% upside for the “strong buy” stock. Shares are up by 24% year-to-date and have almost tripled over the past five years, so momentum is playing a role in upbeat price targets.
However, momentum isn’t the only factor in play. Costco is a popular retailer for people who seek affordable products and services. You also have to pay an annual membership to buy goods in a Costco store. Customers are incentivized to buy more products at the retailer to make the most of their memberships.
Costco’s June sales results demonstrate that the company is still growing. Comparable sales throughout the company increased by 5.3% YOY while e-commerce sales jumped by 18.4% YOY. Net sales increased by 7.4% YOY during the retail month of June. Costco can drum up additional revenue moving forward due to a recent price hike for membership fees. The annual membership will now jump from $60 to $65 per year.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has led the Nasdaq Composite higher for many years. It’s the second largest holding in the market cap weighted index and has roughly tripled over the past five years. The tech giant is also up by 14% year-to-date and comes with a 0.71% yield.
Microsoft dominates in multiple industries. It’s gaining market share in gaming, advertising, artificial intelligence, software and other industries. However, cloud revenue remains Microsoft’s most important resource. Cloud revenue jumped by 23% YOY to reach $35.1 billion in Q3 FY24. That’s more than half of the company’s $61.9 billion that it generated in the quarter.
Overall revenue was up by 17% YOY while net income increased by 20% YOY. Rising profit margins will result in a more attractive P/E ratio, and it gives the company plenty of space for additional dividend growth hikes. Microsoft has maintained a double-digit dividend growth rate for several years.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held LONG positions in MSFT and COST.
Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.