Winners win. Those two words might be some of the best investing advice you'll ever hear. Companies that can deliver strong earnings growth year in and year out tend to have stocks that regularly beat the market.
Granted, as the mutual fund disclosures say, past performance is not a guarantee of future results. However, stocks that have been proven winners in the past often have what it takes to keep up those winning ways. These three stocks have beaten the S&P 500 average return for years and are likely to continue that trend.
1. Axon Enterprise
Few stocks have consistently delivered positive returns like Axon Enterprise (AXON 1.27%). The last negative year for the Taser maker was back in 2015. Axon's shares have soared roughly 1,480% over the last 10 years, more than nine times greater than the S&P 500's gains. The stock has also flown high over the last 12 months, jumping nearly 50%.
NASDAQ: AXON
Key Data Points
But can Axon keep the momentum going? I think so. Although the company is best known for its Taser devices, it also makes body cameras used by law enforcement officers and digital evidence management systems. It targets a total addressable market of $50 billion.
Importantly, Axon's success thus far has been primarily in the U.S. and the British Commonwealth countries. The company has significant growth opportunities in Europe, Asia, and Latin America.
Perhaps the biggest knock against Axon is its valuation. Shares currently trade at a forward earnings multiple of nearly 59. The company must deliver exceptionally strong growth going forward to justify this premium valuation.
2. The Trade Desk
No, The Trade Desk (TTD 2.57%) hasn't outperformed the S&P 500 every year. However, since its initial public offering in 2017, the stock has beaten the market in all but two years. And its cumulative outperformance is staggering: The Trade Desk's share price has increased by nearly 23 times, including a 60% gain last year.
NASDAQ: TTD
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There's no secret behind The Trade Desk's remarkable success. Digital advertising is sizzling hot. The company arguably offers the best platform for digital ad buyers to be found.
I like The Trade Desk's prospects going forward. The company likes to say that "the future of TV is ad funded" with a specific focus on connected TV (CTV). I think that's correct, which means The Trade Desk should have significant growth opportunities in the CTV market.
Like Axon, The Trade Desk also has major opportunities internationally. Roughly two-thirds of global advertising spend is made outside of North America, but only around 10% of The Trade Desk's revenue is in international markets.
The stock shares another similarity with Axon, though: It's expensive. The Trade Desk's shares currently trade at 101 times expected earnings. Barring a big slowdown in growth, however, I don't think that valuation will be a roadblock.
3. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 2.35%) stands out as another stock that doesn't always outperform the S&P 500 but usually does. While the S&P plunged 19% in 2022, Vertex jumped nearly 32%. Last year, the big biotech stock soared 41%.
NASDAQ: VRTX
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In the past, Vertex's fortunes were driven by its cystic fibrosis (CF) franchise. Its CF therapies remain the only approved drugs that treat the underlying cause of the rare genetic disease. CF should continue to be a growth market for Vertex. The company could soon file for regulatory approvals of its vanzacaftor triple-drug combo, which I think will become its most profitable CF therapy so far.
Vertex's future, though, won't be limited to CF. The company recently won U.S. approval for Casgevy in treating sickle cell disease. It awaits a second approval in treating transfusion-dependent beta-thalassemia. Goldman Sachs analysts think that Casgevy could rake in peak annual sales of $3.9 billion.
Another non-CF drug could be headed to market as well. Vertex hopes to soon move forward with the regulatory filing process for VX-548 in treating acute pain. As a non-opioid with no addictive properties, the therapy could have huge market potential.
