3 “Hiding-in-Plain-Sight” Growth Stocks to Buy Now

If you read the financial news, you’ve definitely seen all the headlines about how much large-cap growth stocks have been the driving force behind the rise of the major indexes.

In fact, over the last three years, large-cap growth stocks are up more than 14% a year, drastically outperforming the 4% annual returns of large-cap value stocks.

That’s led to a lot of hand-wringing about how long they can keep up the outperformance pace.

For several years, economic gurus have been calling for a recession. Even now, as the economy continues to look pretty good, recession odds are about 58% for this year. But hey, economists are also right about 50% of the time!

The stock market and the economy are interrelated, and the economy’s been very strong so far this year, so the natural question on investors’ minds is, how long can the market rally last?

I’m no soothsayer, but we can learn a lot from history. And it’s a fact that during certain economic cycles, some sectors do better than others. Here’s a picture of how, historically, economic and market sectors have meshed.

Sectors and Market Cycles

Of course, history hardly ever exactly repeats itself, as you can see by the sector table below.

U.S. Sectors & Returns

It’s weird, for instance, that Financials are finally breaking out of their doldrums at the same time that Energy and Utilities are doing well. And that Consumer Staples are doing better than Consumer Discretionary—but I’m fairly sure that has more to do with high inflation than an expansionary cycle. Same with Real Estate. That industry has had a wild run since COVID, but escalating home prices and rising mortgage rates have dampened demand.

I show you this sector table to demonstrate that while statistics and historical averages are great tools, you cannot automatically rely on them to provide exact market timing for getting into and out of particular sectors.

However, having said that, I would be remiss to totally ignore cycles. And the following chart depicts the cycle that many economists believe we are currently seeing—still in an expansionary mode.

Looking over these charts, I have to say that I mostly agree with them. I do believe we are still in an expansionary mode, and that large-cap stocks remain attractive. But I also think that investors need to choose their stocks wisely and not just go with the flow or assume that all large-cap stocks are great investments.

With that in mind, my research has turned up a few names that still look pretty interesting. I hope you’ll agree!

3 Large-Cap Growth Stocks for This Cycle

All three of these stocks could benefit from continuing economic expansion, but if you’re interested in learning more about which stocks I’m currently buying, subscribe to Cabot Money Club today.