You’ve probably heard by now. On the back of a strong earnings season, global trade optimism and supportive central bank policy, the stock market has surged to all-time highs in October. Specifically, the S&P 500 notched an all-time high of 3,050 on Oct. 30, up an impressive 22% year-to-date.
But, this surge to all-time highs has been carried by a select few stocks. Specifically, the number of stocks on the New York Stock Exchange that are currently at all-time highs is just 48. The number of stocks on the NYSE in total? About 2,800.
Which stocks are pacing the market to all-time highs? What has made these stocks so special? And will these hot stocks keep making new highs going forward?
Let’s answer these questions, and more, by taking a look at five of the most important stocks to buy that presently sit at all-time high levels.
Stocks to Buy Near All-Time Highs: Apple (AAPL)
How it got here: Shares of global technology giant Apple (NASDAQ:AAPL) have sprinted to an all-time high price tag just shy of $250 in October 2019, mostly thanks to the company’s hardware growth narrative regaining momentum with lower priced iPhones. Broadly, $1,000-plus price points on new iPhone models scared away consumers over the past few years. But this year’s new iPhone costs just $700, and this lower price point is bringing buyers back into the market. Hardware revenue growth is coming back into the picture, coupling with still-healthy software revenue growth, to put Apple in arguably the best position the company has been in, maybe ever.
Where it’s going next: Apple stock will likely continue to grind higher for a few reasons. First, strong iPhone 11 sales will help power big holiday numbers for the company. Second, there are rumors that a cheaper new iPhone is due in early 2020. Third, the 5G iPhone is launching next year. Fourth, Apple TV+ will come into its own in 2020 and power big software growth. Putting all those catalysts together, Apple should continue to fire on all cylinders for the next few quarters.
How it got here: Shares of athletic apparel brand Lululemon (NASDAQ:LULU) have roared to all-time highs in October 2019 thanks to two big things. First, secular growth tailwinds in the global athleisure market have provided a rising tide for all athletic apparel makers. Second, Lululemon has been able to differentiate itself as a leading, premium brand in the athleisure market. This combination has produced consistently impressive revenue and profit growth at Lululemon.
Where it’s going next: LULU stock will likely continue higher over the next few quarters for three big reasons. First, thanks to easing trade tensions and falling rates, the global economy should pick up steam over the next few quarters, leading to continued robust consumer spending trends.
Second, athleisure market tailwinds will persist because consumers are increasingly obsessed with health, wellness and being active. Third, Lululemon will continue to leverage its high brand equity to grow into other athleisure verticals, including men’s apparel and footwear. Lululemon will continue to fire off impressive growth numbers and that will power LULU stock higher.
How it got here: Shares of global beverage giant Coca-Cola (NYSE:KO) have powered to all-time highs in October 2019 thanks to both favorable externals and internals. On the external side, global labor markets are about as healthy as they’ve ever been, and these healthy labor market conditions have supported continued healthy consumer spending, a bulk of which has naturally made its way into the beverage sector.
On the internal side, Coca-Cola is successfully expanding its reach in the beverage market by acquiring up-and-coming brands and giving them global distribution. This combination of favorable internals and externals has powered big revenue, profit and share price growth.
Where it’s going next: KO stock can head higher. But, it won’t go higher with impressive pace. That is, Coca-Cola’s fundamentals are favorable and support the idea that this company will remain a low single-digit revenue and profit grower for the foreseeable future. But, at an all-time-high valuation of 25-times forward earnings, these growth prospects are fully priced in. Thus, going forward, KO stock will be a tug-of-war between steady profit growth and a stretched valuation.
How it got here: Paint market leader Sherwin-Williams (NYSE:SHW) is a classic example of how highly predictable, stable growth companies shine in good economic times. Sherwin’s business isn’t hard to understand — it sells paint, a thing which everyone needs at one time or another. It dominates this business, both because it makes the best product in the market, and because it has basically acquired all other competitors, including Valspar.
The past few years have been defined by solid U.S. economic growth. This solid economic growth has led to solid demand for paint products. Because Sherwin dominates this market, solid paint products demand has led to solid Sherwin sales and profit growth. And that solid and steady growth has powered SHW stock to all-time highs.
Where it’s going next: As long as the U.S. economic backdrop remains favorable and healthy, Sherwin’s sales and profit trends will remain favorable and healthy, and SHW stock will grind higher. But, at current levels, investors need to be wary of valuation. With a forward price-to-earnings ratio of 23 SHW stock is richly valued, considering this is a 10%-15% profit grower in the long run.
In the big picture SHW stock will grind higher, but valuation friction will limit the pace of gains.
How it got here: Global technology giant Microsoft (NASDAQ:MSFT) rushed to all-time highs in October 2019 thanks to the same growth driver which has propelled shares higher over the past five years — sustained cloud strength. Back in 2014, when CEO Satya Nadella took the reigns, he made it his priority to turn Microsoft into a cloud computing giant. Microsoft hasn’t looked back since. Sustained cloud strength has driven broad revenue and margin improvements across the whole company. This strength has powered MSFT stock to consistently make new all-time highs in each of the past several years.
Where it’s going next: MSFT stock will go higher from here. Microsoft’s recent win of the U.S. Department of Defense’s JEDI cloud contract is evidence that the company’s red-hot cloud growth narrative isn’t losing any momentum. If anything, it’s gaining momentum, as Microsoft now has a visible opportunity to overthrow Amazon (NASDAQ:AMZN) as the cloud king. Consequently, over the next few years, cloud growth will remain robust. This sustained growth will continue to push MSFT stock higher.
As of this writing, Luke Lango was long LULU and MSFT.