The S&P 500 (^GSPC) is packed with companies that have built dominant market positions, making it a core index for investors. A select few continue to innovate and expand, setting themselves up for long-term success.
Identifying the best companies in the S&P 500 isn’t always easy, and that’s why we started StockStory. Keeping that in mind, here are three S&P 500 stocks positioned to outperform.
Microsoft (MSFT)
Market Cap: $3.84 trillion
Originally named "Micro-soft" for microcomputer software when founded in 1975, Microsoft (NASDAQ:MSFT) is a global technology company that develops software, cloud services, devices, and AI solutions for consumers, businesses, and organizations worldwide.
Why Do We Love MSFT?
- Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
- The company's elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
- Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.
Microsoft is trading at $517.15 per share, or 34.7x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Paycom (PAYC)
Market Cap: $12.67 billion
Pioneering the concept of employees doing their own payroll with its "Beti" technology, Paycom (NYSE:PAYC) provides cloud-based human capital management software that helps businesses manage the entire employment lifecycle from recruitment to retirement.
Why Does PAYC Stand Out?
- Superior software functionality and low servicing costs result in a best-in-class gross margin of 86.2%
- Well-designed software integrates seamlessly with other workflows, enabling swift payback periods on marketing expenses and customer growth at scale
- Excellent operating margin of 28.1% highlights the efficiency of its business model
Paycom’s stock price of $216 implies a valuation ratio of 5.9x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
Howmet (HWM)
Market Cap: $69.76 billion
Inventing the first forged aluminum truck wheel, Howmet (NYSE:HWM) specializes in lightweight metals engineering and manufacturing multi-material components used in vehicles.
Why Is HWM a Good Business?
- Annual revenue growth of 11.6% over the last two years was superb and indicates its market share increased during this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 41.9% to outpace its revenue gains
- Free cash flow margin jumped by 11.3 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
At $173.74 per share, Howmet trades at 45.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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