We recently compiled a list of the 8 Most Profitable Large Cap Stocks To Invest In. In this article, we are going to take a look at where S&P Global Inc. (NYSE:SPGI) stands against the other profitable large cap stocks.
US Stocks Surge as Economic Outlook Brightens
In the second half of 2024, the financial markets are navigating a complex landscape marked by volatility and cautious optimism. Recent reports indicate that the US economy has shown resilience, with growth rates remaining solid despite concerns about inflation and potential recession. Analysts from JPMorgan Asset Management highlight that the US economy has shown strong momentum in recent months, fueled by resilient consumer spending. Analysts suggest that with few excesses in cyclical sectors, the likelihood of a recession triggered by internal factors remains low. Moderate consumer spending is expected to support steady growth into 2025. However, with the upcoming US election, shifting monetary policies, and ongoing geopolitical tensions, there are external risks that could impact this expansion.
On October 9, 2024, US stocks rose for the second consecutive session, with the S&P 500 and Dow Jones Industrial Average closing at record highs. The S&P 500 climbed 0.71% to finish at 5,792.04, while the Nasdaq Composite gained 0.6%, closing at 18,291.62. The Dow surged by 431.63 points, or 1.03%, to settle at 42,512.00 and at a record close. Technology stocks led the rally, reflecting strong investor sentiment despite ongoing geopolitical concerns.
The market’s positive momentum followed the release of minutes from the Federal Reserve’s September meeting, which disclosed a preference among many participants for a larger rate cut. Mike Bailey, director of research at FBB Capital Partners, noted that the Fed’s actions are a key driver behind the market’s performance.
Overall, Wall Street is showing resilience, supported by optimism regarding the Fed’s ability to manage a soft landing for the economy, especially after the September jobs report showed strong growth in the labor market.
In a recent interview on CNBC’s “Closing Bell,” Malcolm Ethridge, managing partner at Capital Area Planning Group, shared his insights on the current state of the markets, particularly regarding mega-cap stocks and the impact of artificial intelligence (AI). Ethridge emphasized that the ongoing bull market, which has seen a remarkable 60% increase over the past two years, is likely to continue, driven primarily by advancements in AI technology. He noted that AI has demonstrated significant staying power, with companies like Microsoft and NVIDIA leading the charge. Ethridge posed an intriguing question: which stock will emerge as the next major player in the ongoing AI arms race?
Ethridge pointed out that mega-cap companies have not relied heavily on borrowing for growth. As the Federal Reserve begins to cut rates, he believes this will enable more companies to issue debt or borrow and invest in AI, potentially fueling further market expansion. He cautioned, however, that historical norms may not apply in this unique economic environment shaped by the COVID-19 pandemic. Overall, Ethridge remains optimistic about mega-cap stocks leading the way.
Methodology
To compile our list of the 8 most profitable large-cap stocks to invest in, we used stock screeners from Finviz and Yahoo Finance. First, we defined large-cap stocks as those with a market capitalization between $20 billion and $200 billion. Next, we focused on profitability by filtering for stocks that had an estimated 5-year EPS growth rate of over 10%. We sorted our results based on market capitalization and picked the top 20 stocks.
From this initial list of 20 profitable large-cap stocks, we further narrowed our choices to stocks that had positive trailing twelve-month (TTM) net income and stocks that have grown their net income positively over the past 5 years. To ensure the reliability of our findings, we consulted reputable sources such as SeekingAlpha, which provided insights into the net income compound annual growth rate (CAGR) over the past five years, and Macrotrends, which offered information on TTM net income.
Finally, from this list of large-cap stocks that met our criteria, we focused on the top 8 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s database of 912 elite hedge funds. The 8 most profitable large-cap stocks to invest in are ranked below in ascending order based on the number of hedge funds holding stakes in them as of Q2 2024.
Why do we care about what hedge funds do? 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of analysts studying data on a large monitor.
S&P Global Inc. (NYSE:SPGI)
TTM Net Income: $3.32 Billion
5-Year Net Income CAGR: 11.00%
Number of Hedge Fund Holders: 90
S&P Global Inc. (NYSE:SPGI) is a leading provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity, and automotive markets. With its vast resources and expertise, the company helps businesses, governments, and investors navigate through complex economic landscapes.
The company is actively enhancing its offerings, particularly through its S&P Capital IQ Pro platform. The June update included significant improvements such as new benchmarks and commodity insights, along with the deployment of generative AI capabilities.
The company launched ChatAI on the Platts Connect platform, which combines extensive data and insights to support global commodity markets. Additionally, S&P Global Inc. (NYSE:SPGI) has optimized its portfolio by closing deals like the acquisition of Visible Alpha and the planned divestment of its Fincentric business. With a focus on innovation, the company continues to develop tools that enhance user experience, such as the S&P Spark Assist platform, now utilized by around 14,000 of the company’s employees.
S&P Global Inc. (NYSE:SPGI) is a strong investment choice due to its dominant position in the financial information and analytics sector. As one of the largest credit rating agencies globally, the company benefits from significant pricing power, making it a reliable source of revenue. The company’s diverse offerings, including market intelligence and commodity insights, allow it to serve a wide range of clients in various industries, ensuring steady demand for its services.
The company reported strong financial results for the second quarter of 2024, achieving a record revenue of $3.5 billion, which is a 14% increase from the same quarter in the previous year. Three of its five divisions saw double-digit growth in both revenue and operating profit. Adjusted diluted earnings per share rose by 30% to $4.04, driven by revenue growth and a margin expansion of 450 basis points.
In the Private Market Solutions segment, revenue surged by 26% to $134 million, fueled by increased demand for debt, bank loans, and CLO ratings, as well as market intelligence products like Qval and iLEVEL.
Over the last five years, S&P Global Inc. (NYSE:SPGI) has achieved a compound annual growth rate (CAGR) of 15.87% in revenue and 11.00% in net income. With a solid track record of revenue growth and profitability, the company is well-positioned to continue thriving. Its commitment to innovation and expansion in areas like data analytics further enhances its competitive edge. The company’s essential role in providing critical financial insights is expected to drive sustained growth as global markets evolve.
According to Insider Monkey’s database, 90 hedge funds held stakes in S&P Global Inc. (NYSE:SPGI) in the second quarter of 2024. This brings SPGI to the 4th spot on our list of the 8 most profitable large-cap stocks to invest in.
Overall SPGI ranks 4th on our list of the most profitable large cap stocks to invest in. While we acknowledge the potential of SPGI as an investment, our conviction lies in the belief that 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 SPGI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
