3 S&P 500 stocks that could make index funds look silly in the next 5 years

I S&P 500 The index can be gold for stocks with the greatest growth potential. Over the past few decades, many stocks in this index (Nvidia, Amazon, an appleetc) make the investors into absolute wealth.

Here, I’ll highlight three S&P 500 stocks that I think will rise over the next five years, and make index fund strategies look silly. Are these words worth looking into today?

A cybersecurity powerhouse

In the next five years, the cybersecurity industry may experience exponential growth as companies embrace artificial intelligence (this will increase the attack surface). This expansion of the industry should encourage strong growth CrowdStrike (NASDAQ: CRWD).

It is one of the largest players in the cybersecurity sector with an estimated $120bn market. It aims to protect the most dangerous areas for businesses – storage, cloud workloads, identities, and data – to keep customers ahead of cybercriminals.

Now, like most high-growth stocks, CrowdStrike carries some risk from an investment perspective. Not only does it work in a very dynamic environment (the cybercrime landscape is constantly changing) but it has a high value because the income is still small.

However, when I look at five years, I see a lot of potential. I think it’s worth a look right now.

The chip monster

Another industry that I believe will see significant growth in the coming years is semiconductor (chip) manufacturing. And one company that looks well-placed to benefit here – and one that could be worth considering as a long-term investment – is Company KLA CORP (NASDAQ: KLAC).

It specializes in process control and yield management solutions for the industry. So it’s basically a game of ‘picks and spades’ in essence – you have to do well whichever companies have the best chips.

One thing I like about this company from an investment perspective is that it is very profitable. The Return on capital employed (ROCE) is very high, which means that the company should have a lot of money to reinvest in order to grow in the future (and get bigger).

I will point out though, that the chip industry is cyclical (up and down). So while I’m taking a long-term view here, there may be times when this stock gets short-term underperformance.

Social security stock

Finally, I’m busy Axon Company (NASDAQ: AXON). It is known for its Tasers (power guns) but also produces other police and security solutions such as body cameras and drones.

The company has grown at an impressive rate in recent years. Over the past five years, for example, revenue has risen from $531m to $2,083m.

Looking ahead, I expect it to continue to grow at a rapid pace. Ultimately, it looks like it will benefit from a ‘perfect storm’ of social and political factors (a lot of unrest around the world, low levels of police staffing, the need for transparency in police work, etc).

Of course, there are risks here. Slow growth is one – right now the stock has a strong growth rate.

Taking a long-term view here, I see this stock doing very well given the complex socio-political environment. I think it’s worth considering while it’s less than 30% below its peak.