Q3’s Rising Stars: 3 S&P 500 Stocks for Your Must-Watch List

The S&P 500 is one of the most recognized benchmarks in the stock market. In fact, an ETF that tracks the S&P 500, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is regularly one of the top ETFs by trading volume. It’s also one of the few stocks that has options expiring every day of the week, instead of only on Fridays.

The index holds the Top 500 companies by market cap, but it goes a little deeper than that. Each company on the list must generate most of its revenue from the United States. Furthermore, companies must be profitable over the trailing 12 months and within the past quarter to be eligible for inclusion. If a company underperforms, it gets replaced by a qualifying stock that has been doing well.

It’s possible to beat the index if you pick the right stocks within the index. These three S&P 500 stocks look poised to outperform the index itself. 

Iron Mountain (IRM)

Iron Mountain (NYSE:IRM) offers physical and data storage for numerous corporations, including 90% of Fortune 1,000 Companies. The firm serves more than 240,000 customers and has a history of outperforming the S&P 500. Shares are up by 44% year-to-date, and they have more than tripled over the past five years. Wall Street analysts believe the stock can rally higher based on its strong buy rating. The highest price target of $110 implies a 12% upside from current levels.

First quarter results suggest that Iron Mountain can continue the momentum. Revenue increased by 12% YOY to reach $1.48 billion. Net income was up by 18% YOY and came in at $77 million. Full-year guidance suggests that total revenue will increase by 11% YOY while AFFO per share will go up by 8% YOY. 

To top it all off, Iron Mountain boasts a 2.64% yield. The company took a break from dividend hikes during the pandemic, but raised its dividend by 5% last year. Iron Mountain is due to announce another dividend hike shortly. 

Alphabet (GOOG, GOOGL)

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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been a top performing stock for many years. It’s one of the Magnificent Seven stocks that regularly captures headlines, and long-term results make it easy to see why. The global advertising leader’s stock is up by 21% YTD and has soared by 170% over the past five years. Both of those returns comfortably exceed the S&P 500’s returns during the same timeframes.

Past results do not guarantee future success, but Alphabet’s recent earnings report certainly makes a case. The tech giant reported 14% YOY revenue growth and 28.6% YOY net income growth in the second quarter. The company’s net profit margin came to 27.9%. Google Cloud is also a key driver that represents more than 10% of the company’s total revenue.

Despite the good earnings, Alphabet stock is in the middle of a correction. Part of the blame falls on ChatGPT for releasing an AI-powered search engine. It’s similar to how Alphabet got off to a slow start as investors worried that ChatGPT would replace Alphabet’s search engine, especially with Gemini mishaps to start the year. We’ve seen this story play out before, and Alphabet should retain its dominance in the search engine industry. Meanwhile, the stock trades at a 24.5 P/E ratio, presenting a buy-the-dip opportunity for investors.

Cintas (CTAS)

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Cintas (NASDAQ:CTAS) serves more than one million businesses in North America. The company offers business supplies and safety equipment. It’s essential for many industries which results in steady revenue and earnings growth for Cintas.

The corporation reported $2.47 billion in Q4 FY24 revenue which was 8.2% higher than the same quarter last year. Net income jumped by 19.7% YOY, reaching $414.3 million in the process. It was another successful quarter that stirred up momentum for the stock. Shares are up by 29% YTD and have rallied by 191% over the past five years.

Cintas offers an 0.82% yield and has maintained a double-digit dividend growth rate for several years. Furthermore, it has plenty of support on Wall Street. Cintas is currently rated as a moderate buy among 14 analysts. The highest price target of $875 per share suggests that the stock can rally by an additional 15% from the current price.

On this date of publication, Marc Guberti held a long position in GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.