In this article, we will take a look at the 10 Best Stocks to Buy to Beat the S&P 500.
According to a FactSet report published on May 1, nearly two-thirds through the earnings season, the S&P 500 has delivered strong results. Both the percentage of companies posting positive earnings surprises and the size of those surprises are running above recent averages. That has pushed first-quarter earnings estimates higher compared to both the end of last week and the end of the quarter itself. The index is also on track for its highest earnings growth rate since Q4 2021.
So far, 63% of S&P 500 companies have reported actual Q1 2026 results. Among them, 84% posted actual EPS above estimates. That is higher than the 5-year average of 78% and the 10-year average of 76%.The report also noted that nine of the eleven sectors are reporting year-over-year earnings growth. Seven of those nine sectors are posting double-digit earnings growth, led by the Communication Services, Information Technology, Consumer Discretionary, and Materials sectors. At the same time, two sectors are showing year-over-year earnings declines: Health Care and Energy.
The S&P 500 fell on Thursday, May 7, after touching a new all-time intraday high. Oil prices recovered from earlier losses as traders continued watching developments between the US and Iran. The broad market index slipped 0.38% to close at 7,337.11. Losses in Amazon, along with semiconductor names such as Broadcom and Micron Technology, weighed on the market. The Nasdaq Composite also edged lower, falling 0.13% to finish at 25,806.20. The tech-heavy index had reached a fresh all-time high earlier in the session.
Given this, we will take a look at some of the best stocks to buy to beat the S&P 500.
Stock market data. Photo by Alesia Kozik on Pexels
Our Methodology:
For this list, we screened for companies that are outperforming the S&P 500 this year so far. From that list, we picked companies that have recently reported noteworthy developments likely to impact investor sentiment. These companies are also popular among elite funds and analysts.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 498.7% since May 2014, beating its benchmark by 303 percentage points (see more details here).
10. Linde plc (NASDAQ:LIN)
YTD Return as of May 7: 15.65%
On May 5, BMO Capital raised its price recommendation on Linde plc (NASDAQ:LIN) to $560 from $545. It reiterated an Outperform rating after the company posted a Q1 earnings beat. The firm sees Linde as a strong performer, supported by higher near-term pricing, steady demand growth in the US, and improving helium market conditions. According to the analyst, those factors could help the company outperform its 2026 outlook.
On the same day, RBC Capital also lifted its price goal on LIN to $570 from $552 while keeping an Outperform rating on the stock. The firm said Linde delivered a mostly in-line quarter, while its higher FY26 guidance pointed to expectations for low single-digit volume growth and high single-digit EPS growth. The analyst added that foreign exchange tailwinds are expected to ease in the second half of the year. RBC also noted that Linde did not factor helium improvement into its guidance. If helium conditions continue to improve, the company could trend toward the upper end of its FY26 guidance range of $17.60-$17.90.
Linde plc (NASDAQ:LIN) is a UK-based industrial gases and engineering company. Its operations are divided into the Americas, EMEA, APAC, and Engineering segments.
9. QUALCOMM Incorporated (NASDAQ:QCOM)
YTD Return as of May 7: 15.76%
On May 1, Argus raised its price recommendation on QUALCOMM Incorporated (NASDAQ:QCOM) to $220 from $180. It reiterated a Buy rating following the company’s earnings report. The firm said Qualcomm continues to post solid growth outside its handset business. Argus also expects memory availability to gradually improve through 2026 and believes the stock remains attractive at “current depressed levels.”
During the fiscal Q2 2026 earnings call, CEO, President & Director, Cristiano Amon said Qualcomm generated $10.6 billion in revenue and reported non-GAAP earnings per share of $2.65. He noted that EPS reached the upper end of the company’s guidance range. Speaking about the automotive segment, Amon said Qualcomm surpassed $5 billion in annualized revenue for the first time during the quarter. He added that the company expects to exit fiscal 2026 with a revenue run rate above $6 billion.
Discussing the data center business, Amon said the integration of Alphawave had gotten off to a strong start. He also said Qualcomm is entering the custom silicon market and has started production ramp-up with a major hyperscaler. Initial shipments are expected in the December quarter.
QUALCOMM Incorporated (NASDAQ:QCOM) develops and commercializes foundational technologies for the wireless industry, including 3G, 4G, and 5G connectivity, along with high-performance and low-power computing technologies, including on-device artificial intelligence.
8. Verizon Communications Inc. (NYSE:VZ)
YTD Return as of May 7: 17.08%
On May 5, Erste Group downgraded Verizon Communications Inc. (NYSE:VZ) to Hold from Buy, saying the company’s earnings growth remains below the sector average. The analyst said this trend is expected to continue through 2026.
During the Q1 2026 earnings call, Daniel Schulman, Verizon’s Director and CEO, said the company’s turnaround strategy continued to make progress and was gaining momentum through a broad transformation program. Schulman said first-quarter revenue increased 2.9% to $34.4 billion. He also noted that the company added 55,000 postpaid phone net subscribers during the quarter.
He explained that reported growth included a one-time 80-basis-point impact on wireless service revenue tied to customer credits and other effects related to the company’s network outage. Schulman added that the company expects Q1 mobility and broadband service revenue growth to mark the low point for 2026. He also said acquisition and retention costs in March declined about 35% from the end of Q4, while adjusted earnings per share came in at $1.28 for the quarter.
Meanwhile, Anthony Skiadas, Verizon’s Executive Vice President and CFO, said the company completed the Frontier transaction during the quarter and also finalized a deal involving Starry. He noted that the investment is expected to create additional broadband growth opportunities in urban multi-dwelling units. Skiadas also said Verizon repurchased $2.5 billion worth of shares during the first quarter.
Verizon Communications Inc. (NYSE:VZ) is a holding company that, through its subsidiaries, provides communications, technology, information, and streaming products and services to consumers, businesses, and government entities.
7. Costco Wholesale Corporation (NASDAQ:COST)
YTD Return as of May 7: 17.35%
On May 6, Costco Wholesale Corporation (NASDAQ:COST) reported net sales of $23.92 billion for the four-week retail month ended May 3, 2026. That was up 13.0% from $21.18 billion during the same period last year.
For the first 35 weeks of the fiscal year, net sales totaled $197.18 billion, compared with $180.05 billion a year earlier. The increase came to 9.5%. Comparable sales stayed strong across regions during the four-week period. U.S. comparable sales rose 11.7%, while Canada and other international markets each posted 11.5% growth. Total company comparable sales increased 11.6%.
Digitally enabled sales also continued to grow, rising 18.8% during the month. Looking at the first 35 weeks of the year, U.S. comparable sales increased 6.9%. Canada posted 9.1% growth, and other international markets grew 11.0%. Total company comparable sales rose 7.8%, while digitally enabled sales climbed 21.6%.
Costco Wholesale Corporation (NASDAQ:COST) operates membership warehouses and e-commerce platforms that sell nationally branded and private-label products across a broad range of categories. The company buys most of its merchandise directly from suppliers and ships it either to distribution depots or straight to its warehouses.
6. Cisco Systems, Inc. (NASDAQ:CSCO)
YTD Return as of May 7: 21.04%
On May 4, Evercore ISI raised its price recommendation on Cisco Systems, Inc. (NASDAQ:CSCO) to $110 from $100. It reiterated an Outperform rating on the shares. The firm described Cisco’s Silicon One as an “underappreciated lever for upside” that could support both revenue and margin growth.
Analyst Amit Daryanani said Cisco could generate $12 billion or more in Silicon One-related revenue over the next three to four years. He estimated that about $7 billion to $8 billion could come from sales, with another $5 billion to $7 billion tied to optics. Daryanani also said those sales could strengthen Cisco’s long-term growth profile by adding another 300 to 500 basis points on top of the company’s expected mid- to high single-digit growth.
He added that hyperscaler capital spending could reach $900 billion or more by 2027. According to the analyst, spending is expected to shift toward “back-end networking and scale-across architectures where Cisco is now more competitive as customers look to diversify suppliers and optimize network performance.” Daryanani maintained an Outperform rating on Cisco and raised his price target to $110 from $100.
Cisco Systems, Inc. (NASDAQ:CSCO) designs and sells technologies that power the internet. The company is integrating its product portfolio across networking, security, collaboration, applications, and cloud services. Cisco operates through the Americas, EMEA, and APJC segments.
While we acknowledge the potential of CSCO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than CSCO and that has 100x upside potential, check out our report about the cheapest AI stock.
Click to continue reading and see the 5 Best Stocks to Buy to Beat the S&P 500.
Disclosure: None. Follow Insider Monkey on Google News.
