A proven strategy to create generational wealth is to buy and hold shares of quality companies for several years to benefit from the power of compounding. While investors should have sizeable exposure to low-cost passive-index funds, they should consider allocating a small portion of their investments towards growth stocks positioned to deliver market-thumping gains over time.
Here are three S&P 500 stocks Canadian investors can buy in October 2024 to benefit from stellar gains in the upcoming decade.
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Microsoft stock
An iconic tech giant, Microsoft (NASDAQ: MSFT) is among the largest companies in the world, valued at a market cap of US$3.1 trillion. Microsoft is a major player in several verticals, such as enterprise software, public cloud, gaming, and artificial intelligence.
Despite its massive size, Microsoft is forecast to grow revenue by 13.8% to US$279 billion in fiscal 2025 (ended in June) and by 14.3% to US$319 billion in 2026. Comparatively, adjusted earnings are forecast to expand at a compound annual growth rate of 15% in the next five years.
The key driver for Microsoft’s revenue is its Intelligent Cloud business, which reported revenue of US$28.5 billion in the June quarter, an increase of 19% year over year. This includes sales from verticals such as Azure public cloud, GitHub, Nuance, and Windows Server. Notably, GitHub’s revenue exceeded an annual run rate of US$2 billion, while Azure and cloud sales were up 29% in fiscal Q4.
In fiscal Q1, the tech stalwart expects cloud sales to rise between 28% and 29% year over year, making MSFT stock a top investment choice today.
Eli Lilly stock
A healthcare heavyweight, Eli Lilly (NYSE: LLY) is valued at US$847 billion and might soon join the trillion-dollar club. In Q2 2024, Eli Lilly reported revenue and earnings that blew past estimates and hiked its revenue outlook for 2024 by $3 billion.
In recent years, the sales of its blockbuster drugs, Mounjaro and Zepbound, which treat diabetes and obesity, respectively, have pushed the blue-chip stock higher. While Zepbound sales rose to US$1.2 billion, Mounjaro raked in US$3.1 billion in Q2 2024. After a successful launch in the U.S., Eli Lilly is now looking to sell Mounjaro in international markets such as Europe.
Eli Lilly forecasts 2024 sales between US$45.4 billion and US$46.4 billion, with adjusted earnings between US$16.10 and US$16.60 per share. LLY stock has returned more than 1,600% to shareholders in the last 10 years after adjusting for dividend reinvestments.
Broadcom stock
The final S&P 500 stock on the list is Broadcom (NASDAQ: AVGO), one of the largest semiconductor companies in the world. Broadcom offers enterprises a portfolio of hardware and software solutions.
Its hardware business includes networking switches, which are devices used to build data centres and train AI models. While the software segment enables businesses to control their mainframe computers. Its software suite also includes cybersecurity solutions, and Broadcom’s acquisition of VMware allows users to establish a virtual desktop on the cloud.
In fiscal 2025 (ending next October), Broadcom is forecast to increase sales by 17% year over year, while adjusted earnings growth is forecast at 28%. Valued at 30 times forward earnings, AVGO stock is reasonably priced, as the company should benefit from AI-related tailwinds in the upcoming decade.
