The S&P 500 index has nearly doubled over the past five years (up almost 93%) and is hovering near its all-time high. It also looks historically expensive at 30 times earnings. That rally was largely driven by interest rate cuts, the artificial intelligence (AI) market's explosive growth, and an infectious fear among investors of missing out.
In other words, it might not seem like the best time to go shopping for new stocks. But if we dig a little deeper, we can still find plenty of stocks that are worth accumulating in this frothy market. Here are my three favorite stocks to buy right now: Coca-Cola (KO +0.54%), ASML (ASML 0.89%), and Upstart (UPST 0.72%).
Image source: Coca-Cola.
Coca-Cola
Coca-Cola, the world's largest beverage maker, might seem like a shaky investment as soda consumption rates decline worldwide. However, it's offset that pressure by launching and acquiring more brands of bottled water, fruit juices, teas, energy drinks, sports drinks, coffees, and even alcoholic beverages over the past few decades. It's also refreshed its classic sodas with healthier versions, new flavors, and smaller serving sizes to attract new customers.
NYSE: KO
Key Data Points
Coca-Cola produces only concentrates and syrups, while its independent bottling partners produce, package, and sell the finished drinks. That capital-light model helps it maintain high margins, steadily grow its earnings, and generate plenty of cash to continue its 63 consecutive years of dividend hikes. It currently pays a forward yield of nearly 3%.
From 2024 to 2027, analysts expect Coca-Cola's earnings per share (EPS) to grow at a compound annual growth rate (CAGR) of 12%. It's still reasonably valued at 22 times next year's earnings, so it's one of the safest places to park your cash and earn some extra income -- even if you expect the broader market to pull back soon.
ASML
ASML is one of the linchpins of the global semiconductor market. It's the top producer of lithography systems, which are used to optically etch circuit patterns onto silicon wafers. It's also the only producer of high-end extreme ultraviolet (EUV) systems, which are required to manufacture the world's smallest, densest, and most power-efficient chips. These systems cost about $300 million each and require multiple planes to ship, but they're used by all of the world's top foundries -- including TSMC, Samsung, and Intel.
NASDAQ: ASML
Key Data Points
ASML has established a first-mover advantage in the EUV space over the past two decades, and the high costs of developing and manufacturing those systems have prevented other semiconductor equipment makers from entering the market. That unmatched scale and pricing power enable it to consistently expand its gross margins and grow its earnings -- even as trade wars and export curbs disrupt its near-term sales to Chinese chipmakers.
From 2024 to 2027, analysts expect ASML's EPS to grow at a CAGR of 18%. That robust growth should be driven by the expansion of the AI market, the memory market's cyclical upswing, and the stabilization of the PC and smartphone markets. It isn't cheap at 35 times next year's earnings, but its core strengths could justify that higher valuation.
Upstart
Upstart's online lending marketplace crunches nontraditional data points -- including standardized test scores, GPAs, and employment history -- to approve a wider range of loans than traditional platforms, which review only annual incomes and credit scores. That approach helps it serve more applicants with lower incomes and limited credit histories.
NASDAQ: UPST
Key Data Points
Upstart doesn't offer any of its own loans. It's simply a middleman that approves loans for its lending partners -- which include banks, credit unions, and auto dealerships. It generates most of its revenue by taking a cut of each approved loan as a referral fee. Its originated loans skyrocketed when interest rates were low in 2020 and 2021, but they dried up in 2022 and 2023 as the Federal Reserve hiked those benchmark rates. But over the past two years, its growth accelerated again as the Fed reduced its rates, it automated more loans, and it attracted a higher mix of high-value "super prime" borrowers.
From 2024 to 2027, analysts expect Upstart's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to grow at a CAGR of 34% and 239%, respectively, as lower rates spark more lending again. It's also forecasted to turn profitable in 2025 and grow its EPS at a CAGR of 77% over the following two years. Those are incredible growth rates for a stock that trades at 13 times next year's adjusted EBITDA -- so it could continue rising even if the market swoons.
