The S&P500 is one of the world’s most successful stock indexes. It is composed of the collective value of the top 500 companies in the world, each with different weightings. In essence, owning the S&P500 is like owning a portion of all the top 500 companies in the world.

As you can see in the chart above, the S&P500 has grown rapidly, increasing over 184% in the last decade. In fact, if you invested $10,000 in 2014, that money would now be worth over 28 thousand dollars. As an investor however, how can we potentially beat the returns of the S&P500. This is what institutional investors have sought out to do: seek higher returns that the S&P500 to increase funding and allow managers to take larger cuts. Now with that said, what companies can investor look into to potentially beat the S&P500?

Looking at a chart of how different sectors have performed vs the S&P500, we can see that the technology sector has historically outperformed the S&P by a significant margin or been only slightly below with the exception of 2023. Additionally, we can see that the energy sector had an extremely strong year in 2023; however, the sector’s performance has significantly declined in recent years, questioning the viability of investing in that sector. Finally, we can see a sharp uptick in the returns for the technology sector in 2024 - this is something we should explore more. Compared to other industries as well, the technology sector’s returns have usually been near the upper end compared to its peers, once again, with the exception of 2023 which was a serious down year in tech during 2023.

Looking at current year returns, we can see that Industrials and Technology are outperforming the S&P500, with the technology sector significantly outperforming and attributing to most of the S&P500s growth this year. If an investor wants to outperform the S&P500, they should most likely look into the technology sector, as these are the companies that seem to be growing the most, both in the past and present.

Additionally, when we analyze the makeup of the global economy, a large majority of the largest companies are technology companies. This means that the market highly values these types of companies. As a result, companies in the tech sector have the most potential to “boom” into these major companies, making them extremely attractive investment prospects.

The idea that the market highly values these technology companies is also shown by their trading volume. Technology companies account for over 1/3 of the volume in the S&P500, meaning that lots of investors are buying/selling these companies. High trading volume also signals that these companies are popular within the media, and have higher potential to skyrocket.

Now that we’ve uncovered that the technology sector is the most opportune sector for high-growth investments, we now need to investigate what types of technology companies to invest in. To do this, we need to explore the different industries. Using this app, we can select different sectors and industries to see how each industry compares against the S&P500. For this file, select Technology as your sector and click through the different industries. You will be able to see a list of companies, their returns in 2024 to date, and also a bar chart below that shows the ytd return of the industry vs the S&P500 ytd return.

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Here is a snapshot of all the industry’s average returns. As you can see, most of the industries outperform the S&P500, a testament to the industries strong growth this year. Most notably, the Computer Hardware industry and Semiconductor industries have boasted impressive growth numbers, which are things we need to investigate.

Using this treeplot, we can see the volume traded within each industry in the tech sector. Not surprisingly, semiconductors, one of the industries with the highest average returns, also has the highest trading volume. This shows that investors are extremely interested in semiconductor stocks, which makes sense due to their various uses in AI, a booming area in the economy. Because of this, we will narrow our stock hunt to mainly semiconductor companies; however, we will still include a few from other industries such as the Computer Hardware industry to ensure we don’t miss out on any high potential prospects.

The shiny app above allows us to compare industries and sectors to the S&P500, but not stocks. Use the app above to identify some key companies of interest within the Computer Hardware and Semiconductor industries (the highest growht industries), and use this new Shiny app to compare how the firm’s stock price has changed compared to the S&P 500. Using this identify a few key companies that have grown significantly and look into them. If you choose companies like AMD and NVDA, you can see that these firms have exploded and significantly outgrown the S&P500. This shows that semiconductor stocks are in high demand currently, and investors seeking high returns should invest in them.

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After searching through the companies, a few stood out. These companies are “Monolithic Power Systems, Inc.”, “NVIDIA Corporation”, “NXP Semiconductors N.V.”, “QUALCOMM Incorporated”,“Super Micro Computer, Inc.”, “Micron Technology, Inc.”, and “Arista Networks, Inc,” which are some of the fastest growing companies in the market. The animation below shows how the stock price for these individual companies have changed over time. All of them are either semiconductor or computer hardware companies, and after this animation, we can see that this industry has seen steady growth over the years, with significant increases from 2020-2022 and in 2024. This lets us know that these companies have lots of growth potential in the future, and are ones we should investigate.

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After assessing all these companies, I would recommend investing in NVIDIA; Super Micro Computer, Inc; and Monolithic Power Systems, Inc. These companies are semiconductor companies in the technology sector, the industry that seems to be the most popular within the sector that boasts the highest returns.