There’s no way to deny it: 2024 was a stunning year for the stock market. As of this writing, the S&P 500 is up nearly 28% year to date. As always, there are stocks significantly outperforming this otherwise impressive return.
Among the top performers for the S&P 500 are Nvidia, which is up 180%, and Palantir Technologies, which is up more than 300%. But you likely 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 constituents of the S&P 500, which you may be surprised to learn are beating the market by a wide margin as well.
Among the other big winners of 2024, perhaps none are more surprising than my first stock: Walmart(NYSE: WMT).
Walmart was founded more than 60 years ago. It’s known for brick-and-mortar retail operations, and was already the largest retailer in the world going into 2024. This isn’t the kind of company that one would expect to outperform the S&P 500. Yet, Walmart stock is up a stunning 82% year to date.
To be clear, Walmart’s stock price has grown faster than its business fundamentals, which means the stock is more expensive from a valuation perspective. That said, the company’s modest sales growth has turned into larger growth for profitability, which merits a higher stock price.
Growth in Walmart’s digital capabilities has been central to its success. As e-commerce has become a bigger part of the business, the company has been able to better leverage higher-margin opportunities to its advantage, such as in digital advertising. With its recent acquisition of smart-TV company Vizio, Walmart should be able to keep the trend going.
I don’t necessarily expect Walmart stock to jump another 82% in 2025. But the company appears to be at the start of a multi-year tailwind as it better monetizes its business with digital offerings. That’s good reason for Walmart’s shareholders to hold on tight.
It’s not developing AI software, exploring outer space, or curing cancer. No, Deckers Brands(NYSE: DECK) just sells shoes. But it’s admittedly a darn good shoe stock, having gone up more than 660% over the last five years, including this year’s 85% jump.
I can’t deny that valuation is a contributing factor with Deckers stock as well. Over the last five years, it’s gone from a reasonable valuation to an expensive valuation for a shoe stock. That said, the company’s growth has been spectacular, and the increase of its operating profit margin is equally impressive.
In the first half of its fiscal 2025 (which ended in September), Deckers had an operating margin of just over 20%. Several years ago, its margin was below 10%. To think about this another way, the company is now earning twice as much profit for the same amount of sales.
Here’s the thing: Deckers doesn’t just have the same amount of sales — its sales are up dramatically in recent years. And sales are expected to grow at a double-digit rate again for all of its fiscal 2025, with particular strength in its Hoka and Ugg brands driving growth.
In short, Deckers’ shoes are in high demand. This is leading to higher sales and higher profits. As long as this trend continues, it will be hard to bet against Deckers stock even after its massive gains in recent years.
It’s been nearly 20 years since GoDaddy(NYSE: GDDY) became a household name after running its first Super Bowl commercial. Investors could be forgiven if they thought this business had seen better days. But the stock price seems to disagree, since shares soared 95% in 2024.
GoDaddy is known as a platform for buying domain names. But it also offers products for running an online business. That’s really what it wants to drive growth, because selling ancillary products can help its free cash flow grow sustainably.
Last year, GoDaddy launched new software powered by AI that’s drastically increasing the adoption of its ancillary products. Management claims that certain things that used to take months to create now take seconds. The effectiveness of its AI is naturally driving spend from its existing customer base, unlocking free-cash-flow growth.
It appears to be working. As the chart below shows, GoDaddy’s free cash flow per share is suddenly skyrocketing much faster than revenue.
It’s important to note that GoDaddy stock is up big in recent years, but its gains largely match its growth in free cash flow per share. Therefore, its valuation hasn’t increased by much. It’s arguably still a good value today, trading at 24 times its free cash flow.
Moreover, if it’s true that its AI software is driving adoption, GoDaddy could be poised for strong growth again in 2025, since it launched its AI software relatively recently and there are still plenty of customers that could adopt it.
This year’s winning stocks are a surprisingly good place to look for next year’s winners — stocks are tied to businesses, and business trends tend to play out over multiple years. For this reason, looking at the best stocks from 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 consider in more depth.
For what it’s worth, GoDaddy stock would be my pick of this trio, given its reasonable valuation and its potential for strong growth in the coming year or more.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies, and Walmart. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy.
