It’s been a brilliant year for the S&P 500, with the blue-chip index rising by 25.1%. Considering that the long-term average is around 11%, that’s some going.
It means an investor who put 10 grand into an S&P 500 index tracker at the start of year is now sitting on about £12,510. Even a bit more with dividends.
A great year for US shares
Like many investors, I have a few S&P 500 stocks in my portfolio. And beyond Airbnb, which is flat, Uber, which is down 11% since I invested, and Moderna (don’t get me started), they’ve done very well for me.
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Here they are and how they’ve got on in 2024:
- Axon Enterprise: +136%
- Intuitive Surgical (NASDAQ: ISRG): +58%
- Visa: +22%
- CrowdStrike: +39%
The Trade Desk isn’t in the S&P 500 yet, despite having a $60bn market cap after its share price surged 72% in 2024. But the digital advertising platform looks a shoo-in for inclusion at some point in 2025.
Of course, it’s important to recognise that we’re in the middle of a US bull market. And as the old investing saying goes: “In a bull market, everybody’s a genius.”
Nevertheless, it’s certainly been lucrative in 2024 to be invested in some high-quality S&P 500 stocks.
Lofty valuations
However, many such stocks are now richly valued. Intuitive Surgical, for example, is trading on a high forward price-to-earnings (P/E) multiple of 69.
To be fair, the firm generally tends to command a premium market valuation. That’s because it’s a global leader in robot-assisted surgery, with nearly 10,000 of its da Vinci surgical systems installed worldwide.
Once these complex machines are up and running in hospitals, the switching costs are massive. Surgeons, who are trained at significant cost to use them, are understandably reluctant to switch to rival systems.
As a result, Intuitive has built a formidable moat around its business, with attractive recurring revenue streams from the instruments and accessories needed to work the robots. The market loves this predictability, and the share price is up 168% in five years.
That’s not to say the company doesn’t face rising competition. It does, especially in China, so that’s something for me to monitor. Also, anything that disrupts operations (such as another pandemic) is a risk.
However, this is a wonderful company that boasts very solid financials. In Q3, revenue ticked up 17% year on year to $2.04bn, while adjusted net profit jumped 27% to $669m.
Looking ahead, an ageing global population should see rising demand for operations, and therefore Intuitive’s market-leading surgical robots. It’s a business I just see being much larger in future, as do most investors (hence the pricey valuation).
As things stand, I don’t plan on selling this S&P 500 stock for many more years.
The UK’s still cheap
While overall US stock valuations remain high, I’m going to be selective where I invest in 2025. I have a list of shares I’d like to buy or add to, including Intuitive Surgical. But only if the price is right.
Fortunately, many UK shares still look good value, so I can do some bargain hunting here in the meantime.
