Goldman Sachs Reveals Winning Portfolio: 'Rule of 10' Unlocks S&P 500's Future Top Performers

Zinger Key Points
  • Twenty S&P 500 stocks screen double-digit revenue growth over the past two years and similar projections for the next two years.
  • A 10% or higher increase in annual sales has shown a positive effect on stock returns.

Only 20 stocks out of the entire S&P 500 Index have remarkable revenue growth. These companies have boosted sales at a rate of at least 10% per year since 2021. This upward trend is expected to continue at least through 2025.

Equity analysts from Goldman Sachs screened these stocks and studied their performance, using what’s called the “Rule of 10.”

The ‘Rule of 10’ Has Outperformed The S&P 500

The investment bank noted that rapid and consistent revenue growth has been a key feature of many of today’s largest stocks.

From 2013 to 2019, the seven largest publicly traded technology companies have seen their sales increase by an impressive 15% compound annual growth rate (CAGR). They are:

  • Apple Inc. AAPL
  • Microsoft Corp. MSFT
  • Alphabet Inc. GOOG GOOGL
  • Amazon Inc. AMZN
  • Meta Platforms Inc. META
  • NVIDIA Corp. NVDA
  • Tesla, Inc. TSLA

Meanwhile, the revenues for the S&P 500 as a whole only increased by 4% during the same time frame.

This double-digit increase in annual sales has had a clear positive effect on stock performance.

As for the seven tech giants, they have led the S&P 500 with a remarkable return of 58% so far in 2023. They also eclipsed the 5% gained by the remaining 493 stocks.

Investors who have built a portfolio according to the “Rule of 10” in 2023 outperformed the S&P 500 by 2% and the equally-weighted S&P 500 by 12%.

S&P 500 Stocks That Comply With The ‘Rule of 10’

CompanySectorMarket cap ($ bn)YTD %2019 to present %P/E2022-25E
Sales growth CAGR
Enphase Energy ENPHInformation Technology$22(40)%508%2427%
Tesla TSLAConsumer Discretionary$812109%823%6326%
SolarEdge Tech SEDGInformation Technology$15(10)%167%2224%
Palo Alto Networks PANWInformation Technology$7882%229%5122%
ServiceNow NOWInformation Technology$11241%94%5122%
Paycom Software PAYCIndustrials$191%19%3721%
Fortinet Inc FTNTInformation Technology$5854%252%4721%
DexCom DXCMHealth Care$4913%134%9920%
Insulet PODDHealth Care$21(1)%70%16219%
Axon Enterprise AXONIndustrials$1418%167%5719%
Arista Networks ANETInformation Technology$4831%213%2616%
Ceridian CDAYIndustrials$103%(3)%4816%
Chipotle CMGConsumer Discretionary$5852%152%4314%
Intuit INTUInformation Technology$12918%78%2913%
Adobe ADBEInformation Technology$22144%47%2912%
Cadence Design Systems CDNSInformation Technology$6342%229%4212%
Monster Beverage MNSTConsumer Staples$6013%81%3412%
Starbucks SBUXConsumer Discretionary$1130%20%2511%
Aptiv APTVConsumer Discretionary$298%6%1911%
Salesforce CRMInformation Technology$20759%29%2611%

Read Also: 8 Dow Jones Stocks Were Up Double Digits In The First Half Of 2023. Here’s The List And What’s Ahead.

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