We recently published a list of 15 Stocks That Outperform the S&P 500 Every Year For the Last 3 Years. In this article, we are going to take a look at where Archrock, Inc. (NYSE:AROC) stands against other stocks that outperform the broader market.
Imagine choosing a group of stocks that not only weathered the market’s storm but also outpaced its peers. Clearly, a win. Such is the case of these 15 stocks that delivered returns greater than what the market had to offer over the last three years. Before we get down to those top-tier winners, let’s discuss what the broader market index actually is.
This may not be something new to seasoned investors. As one of the most widely known benchmarks of the United States, the S&P Index is considered the best gauge of notable American equities’ performance and the health of the economy, in general. Covering around 80% of market capitalization, the S&P is a float-weighted index, which means that the market capitalizations of all the companies included are adjusted by the volume of shares available for trading publicly. Since it’s an index, you can’t just invest in it directly, but rather you can invest in one of the many funds that use it as a benchmark and measure the overall performance.
As a research report by Alex Frino and David R. Gallagher stated:
“Over long horizons, index funds tracking the index consistently outperform the majority of actively managed funds, reflecting the efficiency of broad-market exposure.”
This highlights that S&P index funds generally deliver better results than most actively managed funds.
If we look at the 5-year trend for the broader market, the index witnessed a growth of around 105%. While this may be a decent growth rate, it’s not something truly amazing. The stocks in the index tumbled in 2022, mainly owing to the FED’s shift in monetary policy, the Russia-Ukraine war, and lingering post-COVID supply chain disruptions. Even after this period, the trendline is not something that would break records or catch an eye. In a span of 3 years, the stocks have witnessed a growth of 32%, which is just decent in this high-growth world.
From energy, agriculture, and finance to gold mining, automotive, technology, and construction industries, the companies have showcased strong returns in a short period. This is a result of favorable macroeconomic policies for these markets, particularly with Trump back in office. The stocks we have favored are the ones featuring good performance in the past, as well as the ones surrounding optimism in the future. Thus, we can safely say that it’s still not too late to invest in these stocks. As the elders used to say, “The best time to plant a tree was 20 years ago. The second-best time is now.”
Our Methodology
We have taken a list of 15 companies from Finviz and Yahoo Finance that have witnessed a growth rate of more than 32%, witnessed by the S&P index funds, over three years. These companies then have been listed in descending order, from the highest growth to the lowest growth. The trend line has been captured from Google’s latest stock prices, with respect to the returns of the respective shares.
At Insider Monkey, we are obsessed with hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up view of a natural gas compression equipment, with parts and components scattered on the ground.
Archrock, Inc. (NYSE:AROC)
3-Year Return as of the Close of March 12: 165%
Archrock, Inc. (NYSE:AROC) is a global energy infrastructure company, based in Houston, USA. With an emphasis on midstream natural gas compression, the company has two main segments: Contract Operations and Aftermarket Services. The product offerings of this mid-cap enterprise include natural gas compression services to energy sector customers and aftermarket services to customers who own compression equipment. As more and more companies outsource this natural gas compression need, Archrock is all set to meet this rising demand.
Just recently, the company announced its strategic partnership and distribution agreement with Coldstream Energy, enabling Archrock, Inc. (NYSE:AROC) to capitalize on the growing demand for MaCH4 solutions. Although the EPS growth rate of AROC has stood at 6.4%, the anticipated growth rate is what keeps the investors hooked. The company’s EPS is expected to grow by 37.5%, surpassing the industry average of 26.3%. Even if we consider the cash flow of the company, the year-over-year cash flow growth rate is over three times higher than the industry average.
In Archrock, Inc. (NYSE:AROC)’s recent financials, we could see the impact of the TOPS acquisition. With an EPS of $0.34, up from $0.22, the company truly benefited from scaling operations. Additionally, the company is investing to grow its fleet by 5% in 2025.
In this “America First” Trump regime, favorable energy policies—such as boosting oil and gas production on the state lands, promoting energy exploration and production on the Outer Continental Shelf (OCS), and adopting policies that lift restrictions on oil and gas leasing—the AROC stock is already up 479% in the past five years. The expansion plans, along with a favorable macro environment, give us a good reason to believe that Archrock, Inc. (NYSE:AROC) is all set to outshine its peers.
Overall, AROC ranks 9th on our list of stocks that outperform the broader market. While we acknowledge the potential for AROC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AROC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.