Key Points

• The quality of Microsoft's business justifies its premium valuation.

• Brookfield Asset Management and Verizon continue to reward their shareholders with attractive dividends.

• The sell-off in Target and Procter & Gamble is a buying opportunity.

• 10 stocks we like better than Microsoft ›

Amid the back-to-school season and hints of crisp fall air, it's easy to miss the epic run the U.S. stock market has been on.

At the time of this writing, the S&P 500 (SNPINDEX: ^GSPC) is up 9.6% year to date and has gained a staggering 33% from its April low as investors bet big on sustained innovation from artificial intelligence (AI).

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With the market at an all-time high, investors may be grappling with what to do next, whether that's sticking with winning companies, digging deep in the bargain bin for hidden gems, or something in between. While it's never a good idea to overhaul your investment portfolio on emotion or just because the market has gone up, it can be a good idea to review what you own and why you own it, and make sure your holdings align with your risk tolerance and investment objectives. Holding shares in well-run businesses is a great way to bolster your conviction and be prepared for whatever comes next.

Here's why these Fool.com contributors believe that Microsoft (NASDAQ: MSFT), Brookfield Asset Management (NYSE: BAM), Verizon Communications (NYSE: VZ), Target (NYSE: TGT), and Procter & Gamble (NYSE: PG) stand out as top stocks to buy in July.

Sign up for Microsoft stock

Demitri Kalogeropoulos (Microsoft): Sure, it's already an over $3 trillion company. But Microsoft still looks like a great long-term buy heading into September. The software giant just closed out an eye-popping fiscal year headlined by a 15% revenue spike and even faster profit growth. Microsoft booked $129 billion of operating income in the past 12 months, in fact, translating into a blazing 46% profit margin.

You can't fault Wall Street for being excited about the potential for this business to capitalize on tech trends such as AI, the pivot toward subscription software services, and the cloud. That optimism helps explain why Microsoft stock has more than doubled since mid-2020.

The rally has admittedly pushed the stock into "expensive" territory, trading at 37 times the past year's earnings. Microsoft earns that premium, though, by providing a level of diversity that's hard to find in the tech world. Where else can you get so much exposure to enterprise and consumer software, gaming, and consumer tech in one package?

But the best reason to like Microsoft right now might be the simplest: cash flow. The tech giant generated $136 billion of operating cash this year, up from $119 billion in fiscal 2024. Those resources should support aggressive growth investments over the coming years while leaving room for an expanding dividend and ample stock buyback spending -- all factors that point to excellent shareholder returns from here.

A rock-solid stock with multibagger potential

Neha Chamaria (Brookfield Asset Management): Brookfield Asset Management was founded in late 2022 after the spinoff of the asset management operations of Brookfield Corporation (NYSE: BN), itself formerly known as Brookfield Asset Management. Investors who bought the stock then have already doubled their money, with dividends reinvested. Management believes the "best is yet to come," and it's highly likely those words will come true for investors who buy shares of Brookfield Asset Management now for five reasons.

BAM data by YCharts

First, Brookfield Asset Management is among the world's largest asset management companies with over $1 trillion of assets under management, with a goal to double the size of its business in five years. Second, the company generates revenue under long-term, fee-based contracts, which makes its revenue and cash flows highly stable and resilient. Third, megatrends like digitalization, decarbonization, and deglobalization should open up massive opportunities for Brookfield Asset Management across all five of its verticals -- renewable power and transition, infrastructure, real estate, private equity, and credit.

Fourth, the company believes these opportunities, investments, and pipelines could boost its fee-based and distributable earnings per share by compound annual growth rates of 17% and 18%, respectively, through 2029. Fifth, the company expects that earnings growth will support over 15% annual dividend growth.

Put it all together, and you have one of the most compelling investing theses here. It's a simple investing strategy: Brookfield Asset Management is a solid multibagger contender. Simply buy the stock now and hold.

An easy call for risk-averse investors

Keith Speights (Verizon Communications): Are you at least a little uneasy about frothy stock valuations and the possibility of market disruptions in the near future? If so, I think Verizon Communications could be an ideal stock for you.

Let's start with the telecommunications giant's valuation. Verizon's shares trade at a forward price-to-earnings (P/E) ratio of only 9.4. That's a fraction of the S&P 500's forward earnings multiple of 22.8. It's also much more attractive than the forward P/E ratio of 13.8 for Verizon's top rival, AT&T (NYSE: T).

Want even better news? Verizon has been a decidedly low-volatility stock in recent years. Its beta over the last five years is a super-low 0.36. I suspect that will remain the case going forward. Verizon's business continues to perform well, with the company reporting industry-leading wireless service revenue in the second quarter of 2025. The company is adding broadband and mobility customers at a healthy rate.

Sure, Verizon faces competition. However, the company stacks up well against others in the industry. As a case in point, J.D. Power recently recognized Verizon for having the best wireless network quality. This was the 35th time that Verizon earned this distinction. RootMetrics also selected Verizon's 5G network as the best, fastest, and most reliable in the U.S.

There's one other reason I really like Verizon, though: its dividend. The telecom company's forward dividend yield is an ultra-high 6.16%. Verizon has also increased its dividend for 18 consecutive years. Even if the stock market tanks, this stock will pay you handsomely to wait for better days.

Target is a high-end retail veteran on fire sale

Anders Bylund (Target): Wall Street is acting as if Target is going out of business. The big-box retailer trades at valuations normally reserved for truly desperate situations -- 11.3 times trailing earnings and 0.4 times sales. Meanwhile, investors are celebrating arch-rivals Walmart (NYSE: WMT) and Costco Wholesale (NASDAQ: COST) with valuation ratios doubling or even tripling Target's.

Sure, Target has some issues. The company's sales and earnings growth have stalled in recent years as it continues to struggle to overcome the inflation-driven retail panic of 2022. But Target has embraced a promising turnaround strategy, avoiding a rock-bottom price war with its cost-effective rivals. Instead, the company celebrates its slightly higher-end market position with the French-flavored "Tar-zhay" moniker. Offer a better shopping experience, and consumers will gladly pay a little bit extra. That's the idea, and I like it.

So, who sports the strongest net and operating profit margins in the big-box retail trio? That would be Tar-zhay. The company is already doing something right, and I look forward to seeing Target address the next holiday shopping season.

A leadership change is coming in February, but I'm not worried about that, either. Incoming CEO Mike Fiddelke is a longtime insider with several years of top-level executive experience. He should hit the ground running, with longtime CEO Brian Cornell providing support as Target's executive chairman.

So, I think Target is on the right track, and Wall Street should give the stock a fresh look as this turnaround effort unfolds. Meanwhile, you can pick up Target shares from the stock market's bargain bin, paired with a generous dividend yield of 4.7%. Don't be surprised if Tar-zhay starts ringing up even stronger profits over the next few years, making today's bargain hunters look like geniuses in the long run.

This ultra-reliable dividend stock is also a great value

Daniel Foelber (Procter & Gamble): P&G is a highly diversified consumer staples company with leading brands across major everyday use categories -- including fabric and home care, grooming and beauty, baby, feminine, and family care, and healthcare. Tide, Gillette, Bounty, Charmin, Dawn, Febreze, and Crest are just a few of its dozens of recognizable brands.

P&G's lineup of brands spanning several categories, supply chain, and marketing makes it a juggernaut in the consumer brands space. But even with its many advantages, P&G hasn't been immune to the impact of higher costs and strained consumer spending.

In July, P&G reported its fourth-quarter and full-year results -- including net sales growth of 0% and organic sales growth of just 2%. The impact of foreign exchange offset pricing increases. Most concerning of all was flat sales volume. P&G expects fiscal 2026 to show slight improvement, with 1% to 5% sales growth and a 3% to 9% increase in diluted earnings per share compared to 8% in fiscal 2025. All told, the company's results have been fairly mediocre relative to investor expectations, and the near-term guidance suggests that mediocrity will persist.

Still, P&G is growing at a pace that allows it to return value to shareholders through buybacks and dividend increases. P&G has boosted its annual payout for 69 consecutive years, making it one of the longest-tenured Dividend Kings. And there's no reason to think that will change anytime soon.

The stock is hovering around a 52-week low, pushing the yield up to around the high end of P&G's five-year range and the price-to-earnings ratio below the 10-year median.

PG Dividend Yield data by YCharts

Some of the best buying opportunities in the stock market come when top-tier companies go on sale for what appear to be near-term issues that don't have to do with the underlying investment thesis. That's exactly what's happening with P&G, making it a safe stock that dividend and value investors can confidently buy in September and hold for years to come.

Should you invest $1,000 in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,599!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,067,639!*

Now, it’s worth noting Stock Advisor’s total average return is 1,049% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 25, 2025

Anders Bylund has positions in Walmart. Daniel Foelber has positions in Procter & Gamble. Demitri Kalogeropoulos has positions in Costco Wholesale. Keith Speights has positions in Microsoft, Target, and Verizon Communications. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield, Brookfield Corporation, Costco Wholesale, Microsoft, Target, and Walmart. The Motley Fool recommends Brookfield Asset Management and Verizon Communications and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Ten Titans have contributed more than half of S&P 500 gains in the last decade.

• Avoiding stocks just because they have run-up is a mistake.

• The S&P 500 should be viewed more as a growth index than a balanced index.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

The largest growth-focused U.S. companies by market cap are Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), Tesla (NASDAQ: TSLA), Oracle (NYSE: ORCL), and Netflix (NASDAQ: NFLX).

Known as the "Ten Titans," this elite group of companies has been instrumental in driving broader market gains in recent years, now making up around 38% of the S&P 500 (SNPINDEX: ^GSPC).

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Investment management firm Vanguard has the largest (by net assets) and lowest cost exchange-traded fund (ETF) for mirroring the performance of the index -- the Vanguard S&P 500 ETF (NYSEMKT: VOO). Here's why the fund is one of the simplest ways to get significant exposure to the Ten Titans.

Ten Titan dominance

Over the long term, the S&P 500 has historically delivered annualized results of 9% to 10%. It has been a simple way to compound wealth over time, especially as fees have come down for S&P 500 products. The Vanguard S&P 500 ETF sports an expense ratio of just 0.03% -- or $3 for every $10,000 invested -- making it an ultra-inexpensive way to get exposure to 500 of the top U.S. companies.

The Vanguard S&P 500 ETF could be a great choice for folks who aren't looking to research companies or closely follow the market. But it's a mistake to assume that the S&P 500 is well diversified just because it holds hundreds of names. Right now, the S&P 500 is arguably the least diversified it has been since the turn of the millennium.

Megacap growth companies have gotten even bigger while the rest of the market hasn't done nearly as well. Today, the combined market cap of the Ten Titans is $20.2 trillion. Ten years ago, it was just $2.5 trillion. Nvidia alone went from a blip on the S&P 500's radar at $12.4 billion to over $4 trillion in market cap. And not a single Titan was worth over $1 trillion a decade ago. Today, eight of them are.

S&P 500 Market Cap data by YCharts.

To put that monster gain into perspective, the S&P 500's market cap was $18.2 trillion a decade ago. Meaning the Ten Titans have contributed a staggering 51.6% of the $34.3 trillion market cap the S&P 500 has added over the last decade. Without the Ten Titans, the S&P 500's gains over the last decade would have looked mediocre at best. With the Ten Titans, the last decade has been exceptional for S&P 500 investors.

The Ten Titans have cemented their footprint on the S&P 500

Since the S&P 500 is so concentrated in the Ten Titans, it has transformed into a growth-focused index, making it an excellent way to double up on the Ten Titans. But the S&P 500 may not be as good a fit for certain investors.

Arguably, the best reason not to buy the S&P 500 is if you're looking to avoid the Ten Titans, either because you already have comfortable positions in these names or you don't want to take on the potential risk and volatility inherent in a top-heavy index.

That being said, the S&P 500 has been concentrated before, and its leadership can change, as it did over the last decade. The underperformance by former market leaders, like Intel, has been more than made up for by the rise of Nvidia and Broadcom.

So it's not that the Ten Titans have to do well for the S&P 500 to thrive. But if the Titans begin underperforming, their sheer influence on the S&P 500 would require significantly outsized gains from the rest of the index.

Let the S&P 500 work for you

With the S&P 500 yielding just 1.2%, sporting a premium valuation and being heavily dependent on growth stocks, the index isn't the best fit for folks looking to limit their exposure to megacap growth stocks or center their portfolio around dividend-paying value stocks.

The beauty of being an individual investor is that you can shape your portfolio in a way that suits your risk tolerance and investment objectives. For example, you use the Vanguard S&P 500 ETF as a way to get exposure to top growth stocks like the Ten Titans and then complement that position with holdings in dividend stocks or higher-yield ETFs.

In sum, the dominance of the Ten Titans means it's time to start calling the Vanguard S&P 500 ETF what it has become, which is really more of a growth fund than a balanced way to invest in growth, value, and dividend stocks.

Investors with a high risk tolerance and long-term time horizon may cheer the concentrated nature of the index. In contrast, risk-averse investors may want to reorient their portfolios so they aren't accidentally overexposing themselves to more growth than intended.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*

Now, it’s worth noting Stock Advisor’s total average return is 1,057% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 18, 2025

Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Intel, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Tesla, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft, short August 2025 $24 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The S&P 500's rising yield is similar to what happened before the dot-com bubble burst.

• This time, the S&P 500 is being driven by earnings growth.

• Taking out the 20 largest S&P 500 components would push the index's yield close to 2%.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

The S&P 500 (SNPINDEX: ^GSPC) yields just 1.2% at the time of this writing. According to data by Multpl, that is the lowest monthly reading since November 2000 when the S&P 500 yielded 1.18% -- before the sell-off in the Nasdaq Composite (NASDAQINDEX: ^IXIC) accelerated as the dot-com bubble burst. Many top growth stocks would go on to suffer brutal losses that took years or even over a decade to recover.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's what the S&P 500's current low yield says about the state of the U.S. stock market and what you can do about it.

There's a clear explanation for the S&P 500's falling yield

With 500 holdings, the S&P 500 seems like a great way to invest in hundreds of top U.S. companies at once. But the index has become less diversified in recent years.

Just 4% of S&P 500 components make up 48% of the Vanguard S&P 500 ETF (NYSEMKT: VOO), an exchange-traded fund that closely tracks the index. Since the S&P 500 is weighted by market cap, massive companies can really move the index in a way smaller companies cannot.

Single companies are now worth the equivalent of entire stock market sectors, or multiple sectors. Nvidia (NASDAQ: NVDA) plus Microsoft (NASDAQ: MSFT) make up more than the combined value of the materials, real estate, utilities, energy, and consumer staples sectors -- illustrating the top-heavy nature of the index.

The following table shows the 20 largest S&P 500 components by market cap and their dividend yields as I write on Aug. 18. The "weighted yield" column is the dividend yield multiplied by the percentage weighting in the Vanguard S&P 500 ETF -- which shows the impact each stock has on the index's yield.

Company	Percentage of Vanguard S&P 500 ETF	Dividend Yield	Weighted Yield
Nvidia	8.06%	0.02%	0.002%
Microsoft	7.37%	0.62%	0.046%
Apple	5.76%	0.44%	0.025%
Amazon	4.11%	0%	0%
Alphabet	3.76%	0.4%	0.015%
Meta Platforms	3.12%	0.26%	0.008%
Broadcom	2.57%	0.75%	0.019%
Berkshire Hathaway	1.61%	0%	0%
Tesla	1.61%	0%	0%
JPMorgan Chase	1.48%	1.82%	0.027%
Visa	1.09%	0.69%	0.008%
Eli Lilly	1.08%	0.83%	0.009%
Netflix	0.92%	0%	0%
ExxonMobil	0.89%	3.72%	0.033%
Mastercard	0.85%	0.64%	0.005%
Walmart	0.79%	0.91%	0.007%
Costco Wholesale	0.78%	0.51%	0.004%
Oracle	0.77%	0.89%	0.007%
Johnson & Johnson	0.74%	2.84%	0.021%
Home Depot	0.62%	2.28%	0.014%
Sum	47.98%	N/A	0.25%

Data sources: Vanguard, YCharts.

The key takeaway is that 48% of the S&P 500 contributes just 0.25% of the index's yield. Meaning that if you took out the 20 largest stocks, the S&P 500 would yield around 2% -- just like it did a decade ago.

So it's not that companies have stopped paying dividends, it's just that low- or no-yield megacap growth stocks like the "Ten Titans" now make up such a large share of the index that the overall S&P 500 yield is lower.

A justified rally

The S&P 500 and Nasdaq Composite underwent massive surges heading into the turn of the millennium that made stock prices go up faster than dividends. Similar to today's market, many of the top holdings in these indexes shifted to growth companies that prioritize reinvesting in their underlying businesses rather than distributing a portion of profits to shareholders through dividends.

The S&P 500's low yield illustrates the extent to which growth stocks dominate the stock market. But unlike the lead-up to the dot-com bust, this rally is much healthier because it is being driven largely by earnings growth and positive sentiment rather than euphoria.

Nvidia is a good example of a company with both a surging stock price and earnings that have compounded several-fold in just a few years. Investors aren't betting on what Nvidia could do in the future if everything goes right. Rather, they are betting on sustained momentum for what Nvidia is delivering right now.

As of Aug. 1, the forward price-to-earnings (P/E) ratio of the S&P 500 was 22.2 -- which is about a 20% premium to its 10-year average. However, the quality of the S&P 500's earnings and growth rate is arguably better today than over that 10-year average. So buying the S&P 500 still makes sense if you agree that the quality is worth paying up for. By this metric, the S&P 500 is pricey, but it's not remotely at nosebleed levels like we saw during the dot-com bubble.

Achieving a more balanced portfolio

The S&P 500 can still be a great tool for building long-term wealth. However, risk-averse investors may be looking for stocks at less expensive valuations and higher dividend yields.

The simplest way to counteract the S&P 500's premium valuation and low yield is to allocate other portions of your portfolio to help fulfill value and income objectives. That can be done by investing directly in top dividend-paying value stocks or value-focused ETFs.

It's important to understand what makes up the S&P 500 and let the index work for you rather than accidentally investing too much in the index and taking on more exposure to growth stocks than you're comfortable with.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*

Now, it’s worth noting Stock Advisor’s total average return is 1,057% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 18, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Costco Wholesale, Home Depot, JPMorgan Chase, Mastercard, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Tesla, Vanguard S&P 500 ETF, Visa, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Ten Titans illustrate the top-heavy nature of the U.S. stock market.

• The combined market cap of the Titans far exceeds the value of the entire Chinese stock market.

• Concentration adds risk, but the reward has historically been worth it.

• 10 stocks we like better than Nvidia ›

The "Ten Titans" are the 10 largest growth-focused S&P 500 (SNPINDEX: ^GSPC) components by market cap -- Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), Tesla (NASDAQ: TSLA), Oracle (NYSE: ORCL), and Netflix (NASDAQ: NFLX).

Combined, these 10 companies alone make up a staggering 38% of the S&P 500.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Even if you don't own any of the Ten Titans outright, the reality is they have a substantial impact on the broad market.

Here's what the dominance of the Titans in the S&P 500 means for your investment portfolio.

Titans of the global economy

To understand the importance of the Ten Titans, it's helpful to take a step back and quantify the sheer size of the S&P 500.

The S&P 500 has a market cap of $54.303 trillion at the time of this writing and makes up over 80% of the overall U.S. stock market. According to 2024 data from the World Bank, the market cap of the entire U.S. stock market was $62.186 trillion. China, the second-largest stock market in the world, had a market cap of $11.756 trillion in 2024. As a ratio of stock market value to gross domestic product, the U.S. has a far larger market than many other leading countries due to its capitalist structure and the international influence of top U.S. firms.

So, the S&P 500 alone is worth several times more than China's stock market. And with the Ten Titans at 38% of the S&P 500, this group of companies alone is worth roughly double China's entire stock market and over a third of the value of the entire U.S. stock market.

This concentration means that just a handful of companies are moving not only the U.S. stock market but global markets as well.

S&P 500 concentration is a double-edged sword

The S&P 500's high allocation to growth stocks has benefited long-term investors. This becomes evident when comparing the performance of the S&P 500 and S&P 500 Equal Weight indexes.

Data by YCharts.

The S&P 500 Equal Weight index gives each of its components a 0.2% (or 1/500) weighting, so Nvidia makes up the same amount of the index as The Campbell's Company. But Nvidia is worth more than 400 times as much as Campbell's based on market cap, which explains why the chip giant has a 7.5% weight in the standard S&P 500 versus a 0.02% weight for the soup company.

If the S&P 500 Equal Weight index was outperforming the S&P 500, it would mean the top companies by market cap aren't doing well. But as you can see above, investors are benefiting from the concentration in companies such as the Ten Titans.

You may also notice the gap between the two indexes narrowed during the bear markets of 2020, 2022, and earlier this year. But overall, those downturns have been more than made up for by compounding gains.

In sum, having a concentrated index can be a good thing when the largest companies keep expanding, which is precisely what has happened with the Ten Titans.

Paradigm shifts in the major indexes

When I first began investing, I was taught the Nasdaq Composite was the growth index, the S&P 500 was balanced, and the Dow Jones Industrial Average favored value and income. That's no longer the case.

Today, I would define the Nasdaq as ultra-growth, the S&P 500 as growth, and the Dow Jones Industrial Average as balanced. Even the Dow's additions of Salesforce, Amazon, and Nvidia over the last five years have made the index more growth-oriented and less geared toward legacy blue chip dividend stocks.

These changes reflect the evolving economy and the international powerhouse of U.S. technology. Twenty years ago, the 10 largest S&P 500 components in order of market cap were ExxonMobil, Microsoft, Citigroup, General Electric, Walmart, Bank of America, Johnson & Johnson, Pfizer, Intel, and American International Group. Today, eight of the Ten Titans make up the eight largest S&P 500 components.

Balancing S&P 500 risks in your portfolio

Understanding that a handful of companies and growth-focused sectors like technology, communications, and consumer discretionary are driving the S&P 500 is essential for filtering out noise and making sense of market information.

For instance, knowing that the S&P 500 is more growth-focused, investors can expect more volatility and a higher than historical index valuation. This doesn't necessarily mean the S&P 500 is overvalued; it just means the composition of the index has changed. It's a completely different market when the most valuable U.S. company is Nvidia rather than ExxonMobil, and when a social media company like Meta Platforms is worth more than the combined value of several top banks.

As an individual investor, it's especially important to know what you own and why you own it. If you're buying an S&P 500 index fund, expect it to behave more like a growth-focused exchange-traded fund or mutual fund. That may be all good and well if you have a high risk tolerance, want more exposure to the Ten Titans, and have a long-term investing horizon. But for investors with a greater aversion to risk, it may make sense to pair the S&P 500 with value and income-oriented stocks or ETFs.

In sum, the S&P 500's concentration has been a net positive for the U.S. stock market, and I fully expect it to continue benefiting long-term investors because the Ten Titans are truly phenomenal companies. But the growth focus does require investors to reevaluate how the S&P 500 fits into their portfolio.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*

Now, it’s worth noting Stock Advisor’s total average return is 1,057% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 18, 2025

Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Intel, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Pfizer, Salesforce, Tesla, and Walmart. The Motley Fool recommends Broadcom, Campbell's, GE Aerospace, and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft, short August 2025 $24 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• A staggering 38% of the S&P 500 is in "Ten Titans," but there are low-cost growth ETFs with even more exposure.

• One fund is an especially good pick for investors interested in the likes of Nvidia, Alphabet, Netflix, and others.

• Picking an ETF that works for you will depend on what’s already in your portfolio and your investment objectives.

• 10 stocks we like better than Vanguard Admiral Funds - Vanguard S&P 500 Growth ETF ›

The "Magnificent Seven" is a powerhouse group of leading mega-cap growth-oriented companies developed by Bank of America analyst Michael Hartnett. They include Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta Platforms, and Tesla.

The "Ten Titans" expands on that list by adding three influential companies -- Broadcom, Oracle, and Netflix. Over half of the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) is invested in the Magnificent Seven, plus these three names.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Up 13.9% year to date -- outpacing the S&P 500's 9.7% gain -- here's why this exchange-traded fund (ETF) is a great choice for investors looking to build a portfolio around the Ten Titans.

Amplifying your exposure to the Ten Titans

Investment management firm Vanguard offers several low-cost ETFs. The Vanguard S&P 500 ETF (NYSEMKT: VOO) has just a 0.03% expense ratio and offers a good starting point as it mirrors the performance of the index. Investors with a growth bent may prefer the Vanguard Growth ETF (NYSEMKT: VUG) -- which filters out many value stocks and assigns extra weighting to growth stocks. The Vanguard Value ETF (NYSEMKT: VTV) takes the opposite approach. Both of those ETFs charge just slightly higher expense ratios than the S&P 500 ETF at 0.04%

With a higher, but still low, expense ratio of 0.07% or just 70 cents for every $1,000 invested, the Vanguard S&P 500 Growth ETF is similar to the Vanguard Growth ETF in that it doubles down on top growth stocks in the S&P 500. But a major difference is the weight it assigns to different holdings.

Company	Market Cap	Vanguard S&P 500 ETF	Vanguard Growth ETF	Vanguard S&P 500 Growth ETF
Nvidia	$4.44 trillion	8.06%	12.64%	14.89%
Microsoft	$3.84 trillion	7.37%	12.18%	7.08%
Apple	$3.43 trillion	5.76%	9.48%	4.9%
Amazon	$2.468 trillion	4.11%	6.72%	4.4%
Alphabet	$2.29 trillion	3.76%	6.01%	6.94%
Meta Platforms	$1.664 trillion	3.12%	4.62%	5.77%
Broadcom	$1.436 trillion	2.57%	4.39%	4.74%
Tesla	$1.08 trillion	1.61%	2.69%	2.97%
Oracle	$699.53 billion	0.77%	0%	1.42%
Netflix	$528.89 billion	0.92%	1.57%	1.69%
Total	$22.89 trillion	38.05%	60.3%	54.8%

Data sources: YCharts, Vanguard.

As you can see in the table, the Vanguard Growth ETF doesn't include Oracle. Oracle is still in the Vanguard Value ETF because it used to be seen as a value stock before it transformed its business by launching a flexible approach to cloud computing and combining that offering with its leadership in database services. But besides Oracle, the Vanguard Growth ETF has a higher weighting in the rest of the "Ten Titans" than the Vanguard S&P 500 ETF.

The Vanguard S&P 500 Growth ETF is totally different. It has less Apple, slightly less Microsoft, and barely more Amazon than the S&P 500 ETF. But it has even more Nvidia, Alphabet, Meta Platforms, Broadcom, Tesla, and Netflix than the Growth ETF. Overall, the Vanguard S&P 500 Growth ETF has less exposure to the "Ten Titans" than the Vanguard Growth ETF, even when factoring in Oracle.

Loading up on the best of the Ten Titans

The best reason to go with the S&P 500 Growth ETF over the Growth ETF or S&P 500 ETF is if you want outsized exposure to Nvidia, Alphabet, Meta Platforms, Broadcom, Tesla, and Netflix, and want to limit the concentration in Apple.

Apple has been a massive winner for long-term investors. And its latest quarter showed a return to moderate growth in product sales, which was good to see because Apple had been relying heavily on services and stock buybacks to fuel its earnings-per-share growth. However, Apple doesn't have nearly the growth rate of higher octane "Ten Titans" like Nvidia or Broadcom. By contrast, Alphabet has a dirt-cheap valuation to account for its more moderate growth rate.

Similarly, Amazon's latest quarter wasn't very good as its cloud growth failed to impress relative to Alphabet or Microsoft. So, in terms of valuation, Apple and Amazon, with 31.3 and 35.1 forward price-to-earnings ratios, seem on the expensive side compared to some of their mega-cap peers. Apple could grow into its valuation if it is able to efficiently integrate and monetize artificial intelligence across its suite of devices. It's best not to value Amazon on its near-term results because the company consistently reinvests excess profits back into its business -- which can impact its earnings.

Still, if I had to pick, Apple and Amazon wouldn't make my list of favorite Ten Titans stocks. So, for that reason, the Vanguard S&P 500 Growth ETF's outsized exposure to what I would consider to be the best of the best in terms of growth prospects in Nvidia, Broadcom, and Oracle, as well as its heightened exposure to some of the more value-oriented Ten Titans in Alphabet and Meta Platforms, is definitely appealing.

Selecting the ETF that's best for you

While there are plenty of similarities across low-cost growth-focused ETFs, there are nuances worth paying attention to for investors who prefer certain Ten Titans over others. It's a great feeling to find an ETF that works especially well for your portfolio and investment objectives.

The S&P 500 Growth ETF is a good pick for folks who want exposure to all of the Ten Titans with less emphasis on Apple and Amazon. The Vanguard Growth ETF is better for maximum overall weighting in the Ten Titans as a group.

Should you invest $1,000 in Vanguard Admiral Funds - Vanguard S&P 500 Growth ETF right now?

Before you buy stock in Vanguard Admiral Funds - Vanguard S&P 500 Growth ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Admiral Funds - Vanguard S&P 500 Growth ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $650,499!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,072,543!*

Now, it’s worth noting Stock Advisor’s total average return is 1,045% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of August 18, 2025

Bank of America is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, Tesla, Vanguard Index Funds-Vanguard Growth ETF, Vanguard Index Funds-Vanguard Value ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Honeywell is getting closer to spinning off the first of three stand-alone companies.

• The company’s full-year guidance showcases solid growth and tariff resilience.

• Its stock is an excellent value for those who believe the split will unlock advantages.

• 10 stocks we like better than Honeywell International ›

With just 30 components, the Dow Jones Industrial Average isn't as representative of the broader market as the S&P 500 or Nasdaq Composite. But it's still an excellent resource for finding high-quality, industry-leading companies, many of which pay dividends.

After nearly making an all-time high in July, Dow Jones component Honeywell International (NASDAQ: HON) is down 9.8% in the past month. The sell-off may come as a surprise, given that Honeywell delivered a great quarter, raised its guidance, and is producing high operating margins across its business segments.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's why the dividend stock is a great buy in August.

Honeywell's conglomerate days are rightfully coming to a close

Shortly after becoming CEO in June 2023, Vimal Kapur launched a comprehensive portfolio review of Honeywell's businesses to try to give the once thriving industrial conglomerate a jolt. The company had been languishing, failing to capitalize on its three highest-conviction megatrends: automation, the future of aviation, and the energy transition.

Kapur and his team concluded that the best way to unlock value for shareholders was to split the company into three separate publicly traded businesses: Honeywell Automation, Honeywell Aerospace, and Solstice Advanced Materials. In July, Honeywell said it is on track to spin off Solstice Advanced Materials for the fourth quarter of 2025 and the other two companies in the second half of 2026.

The conglomerate structure isn't inherently bad. In fact, it can work well when it provides diversification and resources to help each business segment perform.

For example, Berkshire Hathaway owns insurance businesses; retail, service, and manufacturing companies; the BNSF railroad; the utility and energy infrastructure company Berkshire Hathaway Energy, and more. By owning quality businesses across various industries, Berkshire accesses different growth opportunities and end markets. And by not overly managing its businesses and having a leadership structure with very little red tape, it can avoid many of the downsides of a conglomerate.

Honeywell's decision to split into three companies is a way of admitting that being a big and bulky company with a lot of moving parts had become a net negative. And there's reason to believe each business can perform better as a stand-alone company.

But with roughly a year to go until the full separation is complete, Honeywell investors are caught in no-man's-land. The stock is down 8.3% since it published a news release on Dec. 16, 2024, announcing the decision to split into three companies.

Honeywell has a compelling valuation and quality dividend

Buying the stock now is based on the belief that the company is a good value and will be an even better one once it splits into three companies.

Honeywell reported 8% sales growth and exceeded the high end of its prior guidance in adjusted earnings per share (EPS) with a 10% increase. Its updated 2025 guidance calls for $40.8 billion to $41.3 billion in revenue, $10.45 to $10.65 in adjusted EPS, and $5.4 billion to $5.8 billion in free cash flow (FCF) -- or $8.43 to $9.05 in FCF per share. On its second-quarter 2025 earnings call, management said that it is committed to offsetting tariff impacts with productivity, pricing, and alternative sourcing.

Based on the stock price at the time of this writing of $216.31 per share, investors are paying just 20.5 times the midpoint of adjusted 2025 earnings and 24.7 times FCF. That's a steep discount to Honeywell's five-year median price-to-earnings ratio (P/E) of 25.5 and price-to-FCF of 29.5, and a good value compared to its 10-year median P/E of 23.6 and 24.5 price-to-FCF.

Or put another way, Honeywell is already an attractive valuation. If the split is a success and unlocks value, it will look like a steal at these levels in hindsight.

The company has a 14-year streak of boosting its dividend, which yields 2.1% at the time of this writing. It remains to be seen what the dividend will look like post-split, but Honeywell has the FCF needed to support future dividend raises: The midpoint of its 2025 projected FCF per share is nearly double its $4.52 its annual payout.

Honeywell is a buy before its breakup

The decision to split into three companies is the right move for investors, and the stock is a good value right now, making it a strong buy. Given how different aerospace is from industrial automation and sustainable materials, some investors may prefer to wait until post-breakup to invest in the business segment that is most appealing to them.

However, it's worth noting that the valuations of each stand-alone company could vary based on their growth. For example, Honeywell Automation's potential in artificial intelligence may lead this segment to fetch a higher valuation than the aerospace business, where even industry leaders tend to command value stock P/E ratios.

All told, investors who wouldn't mind owning shares in all three stand-alone companies may want to consider buying Honeywell now before the breakup.

Should you invest $1,000 in Honeywell International right now?

Before you buy stock in Honeywell International, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Honeywell International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $660,783!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,122,682!*

Now, it’s worth noting Stock Advisor’s total average return is 1,069% — a market-crushing outperformance compared to 184% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of August 13, 2025

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Key Points

• Nvidia stays red hot, pushing the S&P 500 and Nasdaq toward all-time highs.

• Going forward, gaining trillions in market cap will be easier on a percentage basis.

• The chipmaker’s sustained success depends on a handful of key customers.

• 10 stocks we like better than Nvidia ›

Nvidia (NASDAQ: NVDA) has continued to soar higher after becoming the first company to surpass $4 trillion in market capitalization on July 9. On Aug. 7, Nvidia hit a new all-time intraday high and reached $4.48 trillion in market cap -- just shy of the $4.5 trillion mark.

Nvidia's meteoric rise isn't just a stock story; it's a market story. Nvidia is so large that it can single-handedly move the Nasdaq Composite or S&P 500 with a big gain. Gaining close to $500 billion in market value is like creating a company the size of Netflix out of thin air -- which is saying something, considering Netflix is the 16th-largest S&P 500 component by market cap. As Nvidia and its megacap peers go, so do broader market gains.

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Here's why I fully expect the growth stock to surpass $5 trillion in market value and why Nvidia has a clearly defined runway for future success.

The power of percentages

Three years ago, Nvidia's market value was under half a trillion. It took a medley of investor optimism, earnings growth, and the dawn of a new age in artificial intelligence (AI) to pole-vault Nvidia over $4 trillion in market cap to become the most valuable company in the world. But Nvidia's road to $5 trillion and beyond will be much easier.

Going from $0.5 trillion to $4 trillion is an eightfold gain, whereas going from $4 trillion to $5 trillion is just a 25% gain. It's an unprecedented amount of value creation, but on a percentage basis it's not asking a lot over a few years. However, if Nvidia's earnings growth rate slows, investors may be less willing to pay such a premium price for the stock.

Nvidia commands a price-to-earnings ratio of 58 -- which is far higher than most of its megacap peers. But Nvidia is growing earnings much faster, so it can back up that valuation. However, if Nvidia were to slow down to levels of a company like Microsoft -- which has achieved 15% revenue growth over the last few years with net profit margins around 36% -- then Nvidia's valuation could compress.

The stock's P/E could come down, its earnings growth rate could slow, and it could still be an excellent investment, continuing to hit market-cap milestones. But the bigger question is, where are the earnings going to come from?

Nvidia's "big four"

Arguably the simplest reason why Nvidia can continue steadily growing over time is that its customers are some of the best companies in the world.

In Nvidia's quarterly 10-Q filings, the company typically has a section titled Concentration of Revenue. In Nvidia's most recent 10-Q from May -- which was the first quarter of its fiscal 2026 -- the company said that sales to one direct customer, Customer A, represented 16% of total revenue for the quarter. Customer B was 14%, sales to another direct customer were 13%, and a fourth customer was 11%.

All four customers' revenue was attributable to Nvidia's compute and networking segment -- which is primarily high-performance graphics processing units (GPUs) for data centers and associated hardware and software to handle AI workloads, like products that connect GPUs together and help the system communicate.

Combined, these customers made up a staggering 54% of total quarterly revenue. While Nvidia doesn't directly disclose who these customers are, it's highly likely they are Amazon, Microsoft, Alphabet, and Meta Platforms -- all of which are using Nvidia chips to power their AI data centers, infrastructure, and services.

Outside of these "big four," there are plenty of companies that are rapidly expanding their cloud and AI aspirations, like Oracle through Oracle Cloud Infrastructure. Tesla is a big Nvidia customer, using its chips for its autonomous driving models. OpenAI is also a major indirect customer of Nvidia through the Microsoft Azure OpenAI service, which is a platform for using and developing OpenAI models.

Normally, revenue concentration is a red flag because it means one or two customers can tank results if they pull back on spending. But in the case of Nvidia, it's arguably a strength because its top customers have exceptional balance sheets, growing earnings, and ample free cash flow. In other words, they have the resources and innovation pathways to steadily grow their spending over time, and in turn, contribute to Nvidia's earnings growth.

Nvidia needs AI spending to pay off

Nvidia's road to $5 trillion in market cap will be easier on a percentage basis now that it is hovering around the $4.5 trillion mark. However, for Nvidia to continue being a winning stock, its top customers have to get a worthwhile return on their investments. In other words, the AI market must continue to grow, and Nvidia must lead it from a compute and networking standpoint.

Therefore, Nvidia investors may want to consider connecting the dots by following what its top customers are saying in their investor presentations and quarterly results. If they remain enthusiastic about AI and continue boosting their budgets for it, then Nvidia stands to benefit. However, Nvidia's earnings and stock price could take a big hit if the spending cycle goes from expansion to a slowdown.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Netflix, Nvidia, Oracle, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• WM’s acquisitions are paying off by contributing to free cash flow.

• IBM lays claim to a formidable portfolio of generative-AI patents, making it a stellar choice for investors seeking AI exposure.

• Delta Air Lines is leading the way in a new era of profitability for network airlines.

• 10 stocks we like better than Waste Management ›

The S&P 500 (SNPINDEX: ^GSPC) is on track to have an above-average year in 2025 after a rapid recovery from a steep sell-off in April. The impressive performance comes on top of back-to-back gains of more than 20% in 2023 and 2024.

Needless to say, the S&P 500 is running hot, so investors may want to take extra care to ensure they are targeting quality companies that can justify their valuations with future earnings growth.

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Here's why these three Motley Fool contributors think WM (NYSE: WM), International Business Machines (NYSE: IBM), and Delta Air Lines (NYSE: DAL) stand out as top dividend stocks to double up on in August.

WM is as reliable as it gets when it comes to generating passive income

Daniel Foelber (WM): You may be wondering how WM, formerly known as Waste Management, can be classified as a growth stock. But the industrial giant has outperformed the S&P 500 over the last five-year and 10-year periods despite a good chunk of S&P 500 gains being driven by megacap tech stocks.

The company isn't delivering groundbreaking innovation in artificial intelligence (AI) or cloud computing. But you could say it is literally turning trash (and recycling) into treasure thanks to its stable and predictable business model.

As the population and economy expand, the need for trash and recycling collection, transportation, and processing grows. WM has an integrated business model covering the entire waste management value chain, which gives it more control over its operations and opportunities to increase efficiency. And since WM is the U.S. leader, it has the size needed to take market share through organic growth and acquisitions.

The company is steadily growing its operating margins and free cash flow, which is a sign that the business continues to get better. In the second quarter, it reported a 29.9% total company margin under adjusted operating earnings before interest, taxes, depreciation, and amortization (EBITDA); 7.1% growth in its legacy business, and 19% overall revenue growth factoring in its acquisition of Stericycle.

The Stericycle deal was completed in November 2024, giving WM a play on the growing healthcare waste market, which is more specialized than general residential, commercial, or industrial waste services. The $7.2 billion deal follows up the $4.6 billion acquisition of Advanced Disposal in October 2020, which expanded the company's geographic coverage in the eastern half of the U.S.

At 29.9 times forward earnings, WM is far from a cheap stock. It's actually fairly expensive. But it backs up its premium valuation with stable free cash flow that it uses to grow its dividend, repurchase stock, and reinvest in the business.

The company has 22 consecutive years of raising its dividend. Despite many sizable dividend increases (the most recent being a 10% bump), the stock only yields 1.5% due to its outperforming stock price.

WM's dividend is highly affordable. It costs the company about $669 million per quarter or $2.676 billion per year, but it plans to earn $2.8 billion to $2.9 billion in 2025 free cash flow.

Add it all up, and WM stands out as an ultra-high-quality dividend stock that is best suited for investors not looking to maximize their passive income, but rather to collect a dividend as the cherry on top of a strong underlying growth story.

With ample AI exposure, IBM is over a century old but still qualifies as a growth stock

Scott Levine (International Business Machines): I know, I know: It's hard to look at a company like IBM that was incorporated in 1911 and characterize it as a growth stock, but considering its strong exposure to AI, the potential for outsize growth in the coming years is exactly something that's within the realm of possibility for Big Blue.

Add to this the fact that the stock offers an attractive 2.6% forward-yielding dividend, and it emerges as a great opportunity to sit back and get paid for doing nothing while the AI market evolves.

Of the many achievements that IBM celebrated when it reported second-quarter 2025 financial results recently, one of the most notable is the company's strong generative-AI book of business -- more or less a running total of active contracts and orders it has secured -- that represented $7.5 billion from its inception in 2023 to date.

For another perspective on how robust its AI exposure is, consider the fact that, according to research from The Motley Fool, the company has the most generative AI patents among American companies.

From watsonx, a suite of AI tools that help customers manage data, to Red Hat, which offers generative AI and predictive AI tools, IBM provides customers with a sophisticated set of AI applications that is expected to grow at a steeper rate than previously thought.

As for the dividend, IBM's five-year average payout ratio of 156% may set off alarm bells for some, but after taking a breath and recognizing how the company's strong free cash flow more than covers it, investors will find their concerns assuaged.

IBM Free Cash Flow Per Share (Annual) data by YCharts.

For those interested in bolstering their AI exposure with a rock-solid dividend play, IBM is a great option right now.

A long-term growth story with a dividend in tow

Lee Samaha (Delta Air Lines): I have two surprises for you in this section. First, Delta Air Lines pays a dividend (current yield: 1.4%), and second, it's a genuine contender for a place in the growth end of a balanced portfolio.

The first point might surprise you because airlines are seen as being highly cyclical businesses whose earnings collapse in a slump (making sustaining a consistent dividend challenging). Still, the reality is that the industry is changing, and Delta's focus on growing more-sustainable premium cabin revenue, combined with its loyalty programs and remuneration from co-brand credit cards with American Express, is reducing its earnings cyclicality.

The second might also be surprising because, again, Delta is traditionally seen as a cyclical stock, not a growth stock per se. That assumption remains true; however, the argument here is that the long-term trend line -- that growth oscillates about -- is heading upward for Delta for the reasons outlined above.

And network operators like Delta are in a favorable position to deal with rising airport costs because they account for a smaller portion of their business compared to, say, a low-cost carrier. Furthermore, airlines are behaving in a much more disciplined manner than they historically have. It all adds up to make Delta an attractive stock for growth investors.

Should you invest $1,000 in Waste Management right now?

Before you buy stock in Waste Management, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Waste Management wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

American Express is an advertising partner of Motley Fool Money. Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool recommends Delta Air Lines and Waste Management. The Motley Fool has a disclosure policy.

Key Points

• The Vanguard Value ETF has a much lower valuation than the Vanguard S&P 500 ETF.

• The Value ETF is a wealth compounder first and a passive income tool second.

• The ETF can be an effective tool for investors who don’t want to amplify their exposure to mega-cap growth stocks.

• 10 stocks we like better than Vanguard Index Funds - Vanguard Value ETF ›

The S&P 500 (SNPINDEX: ^GSPC) has historically been a fantastic way to compound wealth -- generating annualized total returns of 9% to 10%. The proliferation of low-cost index funds and exchange-traded funds (ETFs) has made it easier than ever to invest in the S&P 500 without racking up high fees.

The Vanguard S&P 500 ETF (NYSEMKT: VOO) -- one of the largest S&P 500 index funds by net assets -- has an expense ratio of just 0.03% -- or 3 cents for every $100 invested. When I first began investing, it was normal to see flat fees per stock trade of around $5 to $10. So fees and expense ratios are no longer a major drag on returns for investors who regularly pour their savings into equities.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

One issue with buying the S&P 500 is that it doesn't have a high yield. Today's top S&P 500 companies are growth stocks that have yields well below 1% or don't pay dividends at all -- a stark contrast to the days when the most valuable companies were oil and gas giants, industrials, or consumer staples behemoths with high yields.

As a result, the yield of the S&P 500 has fallen to just 1.2%. What's more, the valuation of the S&P 500 has gotten more expensive as stock prices have outpaced earnings growth.

Here's why investors looking to use passive income as a key way to achieve their financial goals may want to consider buying the Vanguard Value ETF (NYSEMKT: VTV) over the Vanguard S&P 500 ETF.

A lower yield at a better valuation

The Vanguard Value ETF sports an expense ratio of 0.04%, so it has just one cent more in annual fees per $100 invested than the Vanguard S&P 500 ETF. It also offers a full percentage point higher in 30-day SEC yield at 2.2% compared to 1.2% for the S&P 500 ETF.

In addition to having a higher yield, the Value ETF sports a 19.6 price-to-earnings (P/E) ratio (as of June 30) and holds 335 stocks compared to a 27.2 P/E ratio (also as of June 30) and 505 holdings for the S&P 500 ETF.

The Value ETF's higher yield and significantly lower valuation may appeal to investors looking to avoid paying a premium for the top stocks that are leading the S&P 500.

A different cast of characters

The Value ETF's higher yield and lower valuation result from its composition.

	Vanguard Value ETF		Vanguard S&P 500 ETF
Holding Rank	Company	Weighting	Company	Weighting
1	Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)	4%	Nvidia (NASDAQ: NVDA)	7.3%
2	JPMorgan Chase (NYSE: JPM)	3.6%	Microsoft (NASDAQ: MSFT)	7%
3	ExxonMobil (NYSE: XOM)	2.1%	Apple (NASDAQ: AAPL)	5.8%
4	Walmart (NYSE: WMT)	2%	Amazon (NASDAQ: AMZN)	3.9%
5	Procter & Gamble (NYSE: PG)	1.7%	Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)	3.5%
6	Oracle (NYSE: ORCL)	1.7%	Meta Platforms (NASDAQ: META)	3.1%
7	Johnson & Johnson (NYSE: JNJ)	1.7%	Broadcom (NASDAQ: AVGO)	2.5%
8	Home Depot (NYSE: HD)	1.7%	Berkshire Hathaway	1.7%
9	AbbVie (NYSE: ABBV)	1.5%	Tesla (NASDAQ: TSLA)	1.7%
10	Bank of America (NYSE: BAC)	1.4%	JPMorgan Chase	1.5%
	Total	23.1%	Total	38%

Data source: Vanguard.

Aside from Berkshire Hathaway and JPMorgan Chase, there are no other companies that overlap the top 10 holdings in the Value ETF and S&P 500 ETF.

You'll also notice that the S&P 500 is much more top-heavy -- meaning that just a handful of names can move the index. Whereas the Value ETF is more balanced and not as dominated by just 10 companies.

Far more than a passive income vehicle

Over the last decade, the Value ETF has gone up 111.5% and has a total return of 173.5%. Meaning that capital gains have made up a much higher percentage of the total return than dividend income. The investment thesis centers around the companies it holds rather than being all about yield, a stark contrast to ETFs that prioritize passive income over upside potential.

The JP Morgan Nasdaq Equity Premium ETF (NASDAQ: JEPQ) sells covered call options on the Nasdaq-100 as a way to generate income -- which provides a sizable stream of monthly payouts while capping the upside potential of the Nasdaq-100 moving higher. The fund sports an 11.2% 30-day SEC yield (as of June 30), so it could be a great way for investors who are primarily focused on passive income. However, the Value ETF offers a way to get a higher yield than the S&P 500 without having any cap on upside potential.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) doesn't use call options to achieve its high 3.9% yield. But many of its holdings are arguably lesser quality companies than what you'll find in the Value ETF.

The Vanguard Value ETF remains a top fund to buy now

The Value ETF is a good buy if you already own many of the top growth stocks in the S&P 500 and are looking to diversify your portfolio into different companies and boost your passive income.

It's also a good option for investors who want to participate in the broader market and collect more passive income than the S&P 500.

While there are plenty of ETFs that offer higher yields than the Value ETF, I would argue that the quality of companies in the ETF makes it one of the best ways to consistently collect more passive income than the index.

Should you invest $1,000 in Vanguard Index Funds - Vanguard Value ETF right now?

Before you buy stock in Vanguard Index Funds - Vanguard Value ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Index Funds - Vanguard Value ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia and Procter & Gamble. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Berkshire Hathaway, Home Depot, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Oracle, Tesla, Vanguard Index Funds-Vanguard Value ETF, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Lockheed Martin has been lagging other major defense contractor stocks.

• It is taking action to address underperforming aspects of its business.

• The stock's valuation is compelling and the dividend yield is generous.

• 10 stocks we like better than Lockheed Martin ›

Lockheed Martin (NYSE: LMT) shares fell a whopping 10.8% this past Tuesday in response to the defense contractor's second-quarter 2025 earnings and updated guidance. Lockheed badly missed analyst earnings estimates for the quarter due to a flurry of (mostly) one-time charges.

Despite the sell-off, here's why Lockheed is a no-brainer dividend stock to buy now.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

More losses for Lockheed Martin

Lockheed reported pre-tax losses on programs of $1.6 billion and other charges of $169 million, which dragged down its earnings per share (EPS) by $5.83 -- leading to net EPS of just $1.46. If program losses sound familiar, that's because Lockheed reported a similar quarter in January, when the stock fell 9.2% in a single session after Lockheed incurred $1.72 billion in write-offs.

The company does the vast majority of its business with the U.S. government, and to a lesser extent, approved allies. As such, investors can be left in the dark regarding classified national security programs. One-off charges usually don't impact a long-term investment thesis unless they signal prolonged challenges. Lockheed is testing investor patience because two out of its last three quarters drastically underperformed expectations due to one-off charges.

In its second-quarter press release, Lockheed attributed the program losses to its new review process, which is causing the company to reevaluate legacy programs and address associated risks. However, Lockheed believes that the review process is a necessary step to improve execution.

Results are still decent despite ongoing challenges

Lockheed Martin is a stodgy company with long-term contracts spanning fighter jets and other aircraft, missiles, weapons, combat systems, helicopters, space systems (primarily satellites), and more. Not every program is a high-margin cash cow. And that's been known in Lockheed's results for a while, given its slow growth. So while its program losses jump out in headline EPS figures, they are really just symptoms of a bigger problem.

Long-term investors would prefer a company address issues instead of letting them fester. But for now, Lockheed's stock is selling off while many of its peers are up big year to date and making all-time highs. To make matters worse, industrials have been the best-performing sector so far in 2025.

BA data by YCharts

Lockheed's underperformance in a hot sector is akin to a software company missing the boat on artificial intelligence. Earlier this year, Boeing beat Lockheed Martin for a major fighter jet contract that could be worth tens of billions of dollars over an extended period of time.

Growth at Lockheed has stagnated, as evidenced by a paltry 12% increase in revenue in the last five years and lower operating margins. Meanwhile, its peer, RTX, continues to generate solid organic growth. Northrop Grumman just hit an all-time high after beating earnings expectations and raising its full-year guidance.

It would be one thing if other major defense contractors were experiencing similar challenges as Lockheed, but this is far from the case. Lockheed isn't in a full-blown turnaround. Rather, it is addressing weaker areas of its business to return to growth.

The good news is that Lockheed is maintaining its full-year 2025 guidance for sales, cash from operations, capital expenses, free cash flow (FCF), and share repurchases -- illustrating that these changes aren't impacting its long-term investments or plans to return capital to shareholders.

Granted, Lockheed's low-single-digit revenue guidance and high-single-digit FCF guidance is far from exceptional. But it still has a healthy backlog to rely on to support its targets.

A value stock with a high yield

Lockheed isn't at the top of its game, but it is addressing program losses across its segments to improve its processes and operations going forward. In the meantime, the stock's dividend yield has pole-vaulted to the top of the industry. In fact, Lockheed is the only major defense contractor with a dividend yield above 2%.

LMT Dividend Yield data by YCharts

Lockheed's valuation will appear more expensive in the near term due to program losses dragging down EPS. But if the internal review leads to higher margins over time, the stock will look dirt cheap.

Management is guiding for 2025 sales of $73.75 billion to $74.75 billion and free cash flow of $6.6 billion to $6.8 billion. Based on the midpoint of those forecasts, and Lockheed's market capitalization of $96.2 billion at the time of this writing, the company would have a price-to-sales ratio of just 1.3 and a price-to-FCF ratio of 14.4.

For context, Lockheed's 10-year median is 1.7 for the P/S ratio and 19.2 for price-to-FCF ratio -- illustrating just how beaten-down the stock is right now. Lockheed arguably deserves to trade at a discount to its historical averages, given the company isn't delivering on shareholder expectations. However, the stock could be a great option for value investors who are willing to give the company time to recover.

Lockheed is a buy for patient investors

Unlike some one-off impairment charges, Lockheed's program charges are indicative of a larger issue at the company. Therefore, a sell-off was warranted. However, investing is more about where a company is going, rather than where it has been. And with Lockheed now beaten down, investors are getting an opportunity to scoop up shares at their lowest valuation in years.

Lockheed's discounted valuation and 3.2% dividend yield make it one of the best choices in the defense industry for value investors looking to boost their passive income. The mounting program losses quantify the extent of issues at the company, but at least Lockheed is ripping off the proverbial bandage and reviewing these issues rather than letting them persist.

Given Lockheed's diversified business model and strong cash flow, the stock appears to be a safe bet for income investors seeking to add stability to their passive income stream.

Should you invest $1,000 in Lockheed Martin right now?

Before you buy stock in Lockheed Martin, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lockheed Martin wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

Now, it’s worth noting Stock Advisor’s total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 21, 2025

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends L3Harris Technologies. The Motley Fool recommends Lockheed Martin and RTX. The Motley Fool has a disclosure policy.

Key Points

• Nvidia and Microsoft are knocking on the door of $4 trillion market caps.

• Nvidia deserves a lot of credit for being the backbone behind AI development.

• AI has added to Microsoft’s investment thesis rather than redefining it.

On Dec. 26, 2024, Apple crossed $3.9 trillion in market capitalization, putting it just 2% away from becoming the world's first $4 trillion company. But it didn't get there. Apple has recovered in recent weeks but remains down big year to date, whereas Nvidia (NASDAQ: NVDA) and Microsoft (NASDAQ: MSFT) just made new all-time highs.

Here's why Nvidia will likely become the first company to surpass $4 trillion in market value, what Nvidia and Microsoft must do to continue rising in price, and whether either growth stock is a buy now.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

A new frontrunner

In less than three years, Nvidia has gone from billions to trillions in market cap. And now, it is the closest company to $4 trillion -- a little over 3% away as of market close on July 3.

NVDA Market Cap data by YCharts.

Nvidia will likely reach $4 trillion before Microsoft simply because it is closer to the threshold, and its stock is more volatile. Nvidia is now up over 18% year to date (YTD), but it was down around 30% YTD in early April during the worst of the tariff-induced sell-off. So it's not unreasonable that the stock could move a few percentage points higher to pole-vault its market cap above $4 trillion.

The better question isn't whether Nvidia or Microsoft will hit $4 trillion in market cap but rather what each company must do to justify that valuation.

An earnings-driven rally

The two biggest drivers of stock-price appreciation are earnings growth and investor sentiment. If earnings are increasing, investors will likely pay a higher price for the company's shares. But if investors expect the pace of earnings growth to accelerate, then they may be willing to give a stock a premium valuation.

Nvidia and Microsoft have been such strong performers in recent years because they are growing earnings and investors are willing to pay a premium price for these companies relative to their earnings. Nvidia went from making under $10 billion in annual net income to a staggering $76.8 billion in just a few years. Microsoft has doubled its net income over the past five years, and its stock price has more than doubled as well.

NVDA data by YCharts.

For Nvidia and Microsoft to continue being good investments going forward, both companies must demonstrate that their earnings growth is sustainable and not temporary.

Nvidia's valuation is still reasonable

Nvidia has greatly benefited from the rapid rise of big tech spending on artificial intelligence (AI). Nvidia has a dominant market share in providing high-powered graphics processing units (GPUs) for data centers and associated AI solutions for enterprises.

Due to limited supply and high demand, Nvidia can charge top dollar for its AI offerings, which allows it to convert over half of its sales into pure profit. And because Nvidia's customers are some of the most financially secure, big-budget companies in the world (like Microsoft), then Nvidia knows its customers can afford to spend a ton on AI.

However, that wouldn't be the case if challenges arise for key Nvidia customers if there is an industrywide slowdown or if competition comes along and erodes Nvidia's margins. Buying Nvidia now is a bet that the company can continue growing its earnings even if its margins gradually decline over time.

The good news is that Nvidia doesn't have to double its earnings every year to be a great buy. Even if it grows earnings at, let's say, 25% per year, it could still reduce its valuation over time and be a market-beating stock. Here's a look at how Nvidia's price-to-earnings (P/E) ratio would go from over 50 to under 35 in five years if it grew earnings at 25% per year, and the stock price gained an average of 15% per year.

Metric	Current	Year 1	Year 2	Year 3	Year 4	Year 5
Stock Price (15% Annual Growth)	$159.20	$183.08	$210.54	$242.12	$278.44	$320.21
Earnings Per Share (25% Annual Growth)	$3.10	$3.88	$4.84	$6.05	$7.57	$9.46
P/E Ratio	51.4	47.2	43.5	40	36.2	33.8

Under these assumptions, Nvidia's stock price roughly doubles in five years, but its earnings triple, so the P/E ratio falls considerably.

The key takeaway is that Nvidia doesn't have to sustain its parabolic growth to be a good investment. However, the stock could sell off dramatically if investors believe an unforeseen risk will interrupt its growth trajectory. We got a taste of that in April when Nvidia estimated it would incur multibillion-dollar charges due to tariffs, and the stock price nose-dived in a short period.

In sum, investors should only consider Nvidia if they are confident in sustained AI spending and the company's ability to pivot as the market matures.

Far from a one-trick pony

Microsoft may be a better choice for investors seeking a more balanced tech stock to purchase. Microsoft has a lower P/E than Nvidia, and for good reason, because it isn't growing as quickly. However, Microsoft also doesn't need a lot to go right for it to continue growing steadily over time.

The vast majority of Nvidia's earnings are directly tied to AI. Microsoft has a diverse earnings profile, encompassing cloud computing, software, hardware, platforms such as GitHub, LinkedIn, and Xbox, as well as other areas. AI is accelerating Microsoft's earnings growth and expanding its earnings, but the company can still do extremely well even if AI investment slows and the industry matures.

It's also worth mentioning that Microsoft routinely buys back its stock and has raised its dividend for 15 consecutive years. So it has a more balanced capital-return program than Nvidia, which rewards shareholders by growing the core business rather than directly returning capital.

Two solid buys for long-term investors

Nvidia and Microsoft are exceptional companies. It wouldn't be surprising to see them both surpass $4 trillion market caps and continue building from there. However, investors should be mindful that both companies are seeing their stock prices rise faster than their earnings are growing, which puts pressure on them to bridge the gap between expectations and reality.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Alphabet would be the most valuable company in the world if it were valued similarly to its peers.

• It seems that earnings don't directly translate into higher share prices over the short term.

• However, at current levels, Alphabet's stock is too undervalued for investors to ignore.

The stock market cares more about future earnings potential than the past -- and that may be why Nvidia, Microsoft, Apple (NASDAQ: AAPL), and Amazon (NASDAQ: AMZN) are all worth more than Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) today even though Alphabet is the only S&P 500 stock with over $100 billion in trailing-12-month net income.

Here's why the market views Alphabet's earnings differently than other megacap growth stocks, and whether Alphabet is a buy now.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

More than just a number

Earnings are one of the most important metrics investors use to value a company. How much profit a company generates is an integral part of an investment thesis. But so are expectations for future profits.

GOOGL Net Income (TTM) data by YCharts

Although net income is just a number, there are nuances worth understanding. A leading company that operates in a growing industry with competitive advantages, high profit margins, and a great balance sheet will have far higher-quality earnings than a company operating in a declining or even failing industry that is cyclical and capital-intensive.

This concept is why even the best oil and gas companies, like ExxonMobil and Chevron, sport such inexpensive valuations. Their earnings aren't high-margin. Generating them takes a lot of capital. And oil and gas consumption may look much different decades from now than today. This doesn't mean ExxonMobil and Chevron are bad companies. In fact, both are excellent dividend stocks. It just means investors are unlikely to pay the same price for these companies relative to their earnings as, say, an ultra-fast-growing company with high margins like Nvidia.

Alphabet doesn't have a capital-intensive business model. It generates high margins and has diverse revenue streams from its services like Google Search, Google Network, YouTube, Android, Google Cloud, and more. It also has a phenomenal balance sheet with more cash, cash equivalents, and marketable securities than debt. Despite these advantages, Alphabet sports a price-to-earnings (P/E) ratio and forward P/E ratio that are far lower than Nvidia, Microsoft, Apple, and Amazon.

NVDA PE Ratio data by YCharts

Expectations drive valuations

This discounted valuation is why Alphabet is worth less than its peers despite making more profit. Alphabet's valuation is much cheaper than some of its peers because investors are less optimistic about its future earnings prospects.

Nvidia is powering the future of artificial intelligence (AI) with its graphics processing units for data centers. Big tech continues to spend on AI, so investors are optimistic that demand for Nvidia's products will continue growing.

Microsoft is integrating AI into its software and is the No. 2 player in cloud computing behind Amazon. In contrast, Alphabet's Google Cloud is a distant third in market share.

Apple isn't growing quickly, but the company has such a dominant, vertically integrated ecosystem of consumer products and services that investors are willing to pay a premium price for the stock relative to its earnings.

Alphabet makes the majority of its operating income from Google Search. Unlike Amazon (and arguably Microsoft), cloud is not the most valuable aspect of the company. Alphabet's AI plays mainly come from Google Cloud and its "Other Bets" category, which consists of projects like self-driving company Waymo and AI research lab DeepMind, which is behind the chatbot Gemini.

In sum, the market may be viewing Alphabet's business model as more vulnerable to technological advancements in AI than other megacap growth companies that are clearly benefiting from AI.

Alphabet is an impeccable value

There's a famous (and still relevant) quote by Warren Buffett that goes, "You pay a very high price in the stock market for a cheery consensus." Companies that are favorable to many investors tend to demand expensive valuations, whereas companies with an element of uncertainty can fetch a discount.

The simplest reason to buy Alphabet right now is if you believe the market's skepticism about the company's AI potential is unwarranted or overblown. In that case, investors can buy Alphabet at a steep discount to its peers. If Alphabet had a 30 P/E ratio instead of a sub-20 P/E, it would be worth well over $3 trillion. If it had Microsoft's P/E, it would be the most valuable company in the world.

In many ways, Alphabet deserves to trade at a discount to these other big tech names. But maybe only by a little bit -- not the drastic discrepancy we are seeing in the market today. All told, now is a great time for value investors interested in big tech to buy Alphabet stock.

Should you invest $1,000 in Alphabet right now?

Before you buy stock in Alphabet, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,050% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Chevron, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Many top stocks aren't at bargain bin levels, but that doesn't mean investors should stop buying stocks altogether.

• Investors should focus less on timing the market and more on quality companies that could compound in value.

• Visa is a good example of a company whose valuation has increased, but could still be a sensible long-term buy.

The S&P 500 hit a new all-time high last Friday, surpassing its previous record from February. The index is now up 5% year to date -- a truly remarkable recovery given that the index was down over 17% year to date at its intraday low on April 7.

Here's why investors should continue buying stocks even though the major indexes are hitting new highs, but why investing in quality companies is especially important when valuations are elevated.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Get comfortable buying high

Buying a higher price goes against every instinct ingrained in us as consumers. Buyers benefit when clothing goes on sale, cars can be purchased below sticker price, or when housing prices or land values fall.

Most goods are stagnant assets. There's very little chance that a pair of jeans you buy today will be worth more a few years from now. And cars fall in value the second they are driven off the lot.

House prices and land values in growing urban areas have historically increased over time, but it's not because the land is magically better than it used to be. Rather, it's all about supply and demand.

Stocks are different. They represent partial ownership of a company. No matter how small, a slice of a big pie can be powerful if the company compounds in value. And yet, investors still often make the mistake of assuming a stock is a good buy because the price is lower, or that a stock is not a good buy or is worth selling because the price has gone up.

A good stock to buy near an all-time high

Visa (NYSE: V) is a good example of a well-known company that has continued to go up in value for all the right reasons. Its business model has remained essentially the same for decades. However, what has changed is a massive shift away from cash payments toward debit and credit cards and digital payments.

The company makes money when its cards are tapped, swiped, or entered digitally. It earns revenue based on the volume and frequency of transactions with its cards. And yet it doesn't bear the credit risk of its customers. Instead, it partners with financial institutions to bear that risk.

The larger and more secure Visa's network becomes, the more merchants may be willing to absorb Visa's fees so they don't hurt their sales. At the same time, consumers are incentivized to use their cards for as many purchases as possible, given the purchase protection offered by many financial institutions and credit card rewards programs.

It's a simple and relatively easy-to-understand business model that has made patient investors rich.

V data by YCharts

As you can see in the above chart, Visa has extremely high margins because it converts over half of its revenue into pure profit -- which has helped the stock price increase over 400% in the last decade. And because Visa's expenses are manageable, it can afford to pass along profits to shareholders by repurchasing stock and paying a growing dividend.

Just because Visa's stock price has compounded several-fold over the long term doesn't mean the stock is a bad buy now. Visa commands a premium valuation with a price-to-earnings (P/E) ratio of 35 compared to its 10-year median P/E of 33.2. But its forward P/E is 30.7, suggesting analysts believe that Visa has the qualities necessary to grow into that valuation over time.

Be selective

Visa is just one of many companies hovering within striking distance of all-time highs that could still be worth buying now. The stock isn't as good a deal as it was a couple of months ago, but it could still be a solid long-term investment.

When the broader market is undergoing a rapid sell-off, many phenomenal companies can fall to bargain-bin valuations. But when the major indexes are making new highs, it is even more important for investors to be selective and only put their hard-earned savings into companies they are highly committed to.

In sum, folks shouldn't stop investing just because stocks have gone up, but rather, understand the effect of valuation changes on their existing holdings and how price increases could impact the risk and potential reward of stocks on their watch lists.

Should you invest $1,000 in Visa right now?

Before you buy stock in Visa, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Visa wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $697,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $939,655!*

Now, it’s worth noting Stock Advisor’s total average return is 1,045% — a market-crushing outperformance compared to 178% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Visa. The Motley Fool has a disclosure policy.

Key Points

• Home Depot is a blue chip dividend stock long-term investors can count on.

• Nucor, UnitedHealth, and Alphabet have become too cheap to ignore.

• Criteo is a hidden-gem growth stock packed with upside potential.

The second half of the year is a great time for folks to review what companies they are invested in, why they are invested in them, and to update their watch lists with exciting stocks to buy.

However, some investors may be hesitant to put new capital to work in the market given the rapid recovery over the last few months. The S&P 500 is up more than 20% from its April lows, putting pressure on companies to deliver on expectations.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

When valuations are high, it's even more important that investors focus on quality companies that have what it takes to deliver strong returns without everything having to go right.

Here's why these Fool.com contributors believe that Home Depot (NYSE: HD), Nucor (NYSE: NUE), UnitedHealth Group (NYSE: UNH), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Criteo (NASDAQ: CRTO) stand out as top stocks to buy in July.

Spring for this retailer's cheap stock

Demitri Kalogeropoulos (Home Depot): Home Depot stock has become cheaper relative to the market over the past year, and that fact should have investors feeling excited about adding the retailer to their portfolios. Sure, the home improvement giant's business hasn't been performing as well as it did through the pandemic and its immediate aftermath. Comparable-store sales (comps) in the most recent quarter were essentially flat due to a sluggish housing market. Consumers are trading down to less ambitious home improvement projects, too.

Yet customer traffic through early May was positive, rising 2% to help overall revenue improve by 9%. Those figures bode well for the chain's crucial spring selling season, when homeowners tend to spend aggressively on outdoor projects.

"We feel great about our store readiness and product assortment as spring continues to break across the country," CEO Ted Decker told investors in late May. Executives at the time affirmed their fiscal year outlook that calls for comps growth of about 1%, combined with a drop in profit margin to 13% of sales.

That decline would still keep Home Depot ahead of rival Lowe's on profitability. And cash flow remains strong enough for the chain to continue repurchasing shares and paying a robust dividend while investing in the business. The dividend yield is at 2.4%, compared to Lowe's 2%, giving investors another reason to prefer the market leader in this niche.

It could be some time before Home Depot's sales gains accelerate to above 5% again, while operating margin returns to its prior level of just over 14%. But patient investors can hold this sturdy stock while waiting for that rebound, collecting those generous dividend checks along the way.

A turnaround story in the making?

Neha Chamaria (Nucor): After I recommended Nucor in February, the stock sank to a 52-week low in April but has bounced back dramatically -- almost 33% since. Although I am a long-term investor and do not track price movements in the short term, there's a reason I brought this up here. The thesis that I saw earlier this year is playing out for Nucor, meaning the time is ripe to buy the stock if you still haven't.

President Donald Trump imposed a 50% tariff on steel and aluminum imports on June 3, up from 25% he had proposed earlier, to curb the dumping of low-cost steel by other countries and boost the domestic steel industry. Nucor CEO Leon Topalian has publicly supported Trump's tariff policies and believes some, like steel tariffs, were long overdue. Soon after the tariff announcement, his company raised the prices of hot-rolled steel coils and issued encouraging guidance for its second quarter.

After muted first-quarter numbers, the company expects second-quarter earnings to rise considerably across all its segments: steel mills, steel products, and raw materials. Steel mills, also Nucor's largest segment, are expected to report the largest growth in earnings, driven by higher average selling prices.

Overall, the company expects to report earnings between $2.55 and $2.65 per share for the second quarter versus only $0.67 in the previous quarter. Although its second-quarter earnings could still be around 5% lower year over year, this could just be the beginning of an upward earnings and sales trend.

Shares have hugely underperformed the S&P 500 over the past year or so because of declining sales and profits. With demand and prices both picking up, this could be an inflection point for Nucor stock, making it a solid long-term buy at current prices.

A blue chip stock that's a bad-news buy

Keith Speights (UnitedHealth Group): Timing the market is next to impossible. But timing can sometimes be important when buying specific stocks. I don't think there has been a better time to invest in UnitedHealth Group in years.

To be sure, this healthcare stock faces numerous problems. UnitedHealth's Medicare Advantage costs have gotten so out of hand that the company was forced to first cut its full-year 2025 guidance and then later suspend the guidance altogether. This issue seems to have played a big role in the unexpected departure of former CEO Andrew Witty.

The Wall Street Journal's article about a Justice Department (DOJ) investigation into alleged criminal fraud by the company made matters worse. To add to the healthcare giant's misery, President Trump threatened to eliminate pharmacy benefits managers (PBMs). UnitedHealth's Optum Rx ranks as the nation's third-largest PBM.

Why buy UnitedHealth Group stock amid all of this doom and gloom? Its business prospects are significantly better than its valuation reflects. After plunging more than 50%, shares trade at only 13.3 times forward earnings. But most of the headwinds the company faces should eventually wane.

For example, management expects to return to growth next year. I think that makes sense. The solution to higher-than-anticipated Medicare Advantage costs is to boost premiums. While the company has to wait to implement its higher premiums, you can bet they're coming.

Witty was replaced by former longtime CEO Stephen Hemsley, and the company should again be in good shape under his leadership. I suspect Hemsley will direct the company to issue new full-year guidance as soon as possible, which should bolster investors' confidence.

What about the DOJ investigation? It hasn't been confirmed yet. And President Trump's threats to cut out the PBM middleman? That's much easier said than done.

The bottom line is that I believe UnitedHealth Group stock is way oversold right now. This blue chip is a great bad-news buy in July.

A standout in the "Magnificent Seven"

Daniel Foelber (Alphabet): Google parent Alphabet rebounded in lockstep with the broader market last week. But it's still a compelling buy in July.

As many megacap growth stocks have compounded in value, some investors are questioning whether there's still room for these stocks to run or if valuations could limit returns. Alphabet doesn't have that problem.

The stock is so attractively priced that it is cheaper than the S&P 500 on a forward price-to-earnings basis. Whereas the rest of the "Magnificent Seven" are more expensive than the S&P 500 based on this key metric. Meaning that investors don't have the same lofty earnings expectations for Alphabet as they do for companies like Nvidia, Microsoft, or even Apple (even though Apple is growing slower than Alphabet).

To be fair, getting too bogged down by valuations has been a historically bad idea for many of today's top companies. Measuring Microsoft for its legacy software suite alone would have drastically undervalued its now huge cloud computing segment.

Amazon used to be an online bookstore turned e-commerce giant. Similarly, its cloud computing segment, Amazon Web Services, is arguably more valuable than the rest of the company combined. Nvidia used to make most of its money from selling graphics processing units (GPUs) and other solutions for gaming and visualization customers. But today, GPU demand for data centers is the company's bread and butter.

Since no one has a crystal ball, investors have to make calculated bets based on where they think a company could be headed. Looking at Alphabet, I think the company has fairly low risk for its upside potential. Part of that reasoning is that its existing assets are drastically undervalued, and investors aren't giving the company much credit for the upside potential of self-driving through Waymo, the company's quantum computing investments, or its artificial intelligence tool Gemini.

Add it all up, and Alphabet stands out as an effective way to get exposure to many different end markets at a good value.

This ad-tech expert's stock is way too cheap in July

Anders Bylund (Criteo): Sometimes I wonder what it takes to impress Wall Street's market makers. Digital advertising expert Criteo has consistently stumped analysts since the spring of 2023, but the stock is down by 39% in 2025 at the time of this writing.

I get where the market skepticism is coming from. Criteo's top-line sales have been rather slow in recent quarters. The macroeconomic backdrop isn't ideal for big-ticket marketing campaigns, since consumers are holding on to their money with an iron grip.

But the company has tightened up its operations in this uncertain economy. In May's first-quarter report, adjusted earnings rose 38% year over year while free cash flow soared from breakeven to $45 million. For a sense of scale, that's 10% of its revenue in the same quarter.

So Criteo is a cash machine when it counts, and the lessons learned in these hard times should result in solid profit gains when the economy turns sweeter.

Meanwhile, the stock is priced for absolute disaster. Shares are changing hands at 9.8 times earnings and 5.7 times free cash flow, as if the company were losing money by the truckload. The stock price is entirely inappropriate for a very profitable specialist in a temporarily downtrodden industry.

I'm tempted to double down on my Criteo holdings in July, and I highly recommend that you consider this overlooked stock while it's cheap.

Should you invest $1,000 in Home Depot right now?

Before you buy stock in Home Depot, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Home Depot wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $697,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $939,655!*

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See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet, Amazon, Criteo, Nvidia, and UnitedHealth Group. Daniel Foelber has positions in Nvidia. Demitri Kalogeropoulos has positions in Amazon, Apple, and Home Depot. Keith Speights has positions in Alphabet, Amazon, Apple, Lowe's Companies, and Microsoft. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Home Depot, Microsoft, and Nvidia. The Motley Fool recommends Criteo, Lowe's Companies, and UnitedHealth Group and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The second half of 2025 offers a chance for investors to shake off the cobwebs of tariffs and recession fears and focus on where the market is going, rather than where it has been. Archer Aviation (NYSE: ACHR) has been on a roller coaster, while Cognex (NASDAQ: CGNX) and First Solar (NASDAQ: FSLR) have sold off considerably year to date.

Despite these jarring moves, these three companies could be worth buying in the second half of 2025 and holding for years to come. Read on to find out why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Archer Aviation stock has soared since this time last year -- and it's poised to keep ascending.

Scott Levine (Archer Aviation): If you take a look at Archer Aviation stock's performance in 2025, you'll see it has logged a modest 3% gain (as of June 20). If you expand your perspective to the past year, however, you'll find a much different story -- a 222% gain.

In light of this, growth investors may feel like it's too late to hitch a ride with the electric vertical takeoff and landing (eVTOL) stock, but there's no reason to think that Archer can't gain considerably more altitude.

Developing innovative aircraft -- such as Archer's eVTOL aircraft dubbed Midnight -- is no small feat. To ensure that the aircraft is safe, Archer is undergoing a rigorous certification process from the Federal Aviation Administration (FAA) that's nearing its conclusion.

The company has received a variety of requisite certifications from the FAA and is currently working toward receiving Part 142, the final certificate it needs before commencing commercial operations. Management is optimistic about receiving the certification soon and projects it will start commercial operations in 2025.

Separate from the FAA certification, Archer continues to make progress in securing partnerships. Most recently, it announced an agreement (valued at up to $18 million) to deploy its Midnight aircraft in Indonesia, which is the third agreement of its type. Archer has also inked agreements in the United Arab Emirates and Ethiopia.

According to Business Research Insights, the eVTOL market is poised for significant growth. Whereas it was valued at about $1.2 billion in 2024, it's expected to climb to $20.1 billion by 2033.

For those scanning the skies for a growth stock with tremendous upside, Archer hits the mark.

Machine vision is the future of automated manufacturing

Lee Samaha (Cognex): If you looked at a three-year chart of revenue growth -- or rather decline, in this case, as Cognex's revenue is down 15.3% over the period on a 12-month rolling basis -- the last thing you'd conclude is that it's a "monster growth" stock. That said, the chart below provides a broader perspective.

CGNX Revenue (TTM) data by YCharts.

Unfortunately, the last few years have been challenging, with high interest rates pressuring end demand in two key markets -- automotive and consumer electronics. Meanwhile, the company's logistics end market (primarily e-commerce warehousing) experienced a boom during the lockdowns, only to face a correction in the following years.

Still, Cognex's long-term growth trend remains impressive, and management highlighted the opportunity ahead during its recent investor day event. In a nutshell, management expects a combination of underlying industry growth of 4%, with 6% to 7% growth on top of that from the increasing penetration of machine vision into automated processes. Throw in 3% growth from inorganic sources (Cognex is the industry leader, so acquisitions are likely), and it results in long-term growth of 13% to 14% per annum.

Those assumptions appear reasonable, considering the ever-increasing complexity of production, the need to improve manufacturing efficiency and quality control, the desire to reshore production to higher-labor-cost countries, and the increased value added to its solutions through artificial intelligence. It adds up to a compelling growth story -- if you can tolerate some possible volatility, given challenging near-term end markets.

A bright light in a cloudy industry

Daniel Foelber (First Solar): Solar stocks soared in 2020 due to a combination of low interest rates, favorable policies, government support, and a push for clean energy. Since then, however, many solar stocks have gotten crushed as these same factors that drove the industry higher have reversed course.

Borrowing costs now are elevated. And last week, the Senate Finance Committee proposed accelerating the reduction and removal of tax credits for solar and wind energy.

Solar-panel manufacturer First Solar plunged on the news in lockstep with the broader industry. But even when factoring in the sell-off, First Solar has been a standout and is actually outperforming the S&P 500 over the last five years. In contrast, the solar industry, as measured by the Invesco Solar ETF, is down over that period.

FSLR data by YCharts.

There are several reasons why First Solar has held its own despite immense industry pressure. For starters, it's profitable and has an impeccable balance sheet. It also doesn't manufacture in China -- an advantage if trade tensions mount.

The company has been expanding its U.S. footprint recently, including opening a $1.1 billion manufacturing facility in Alabama last year. These moves could pay off over the long run if government incentives and trade policy continue to favor companies that onshore their manufacturing and create U.S. jobs.

Despite these advantages, First Solar still relies on government subsidies and sustained commercial investment in solar. In its Q1 2025 earnings release, First Solar guided for $1.45 billion to $2 billion in operating income. But that figure assumes $1.65 billion to $1.7 billion in 45X tax credits.

The 45X tax credit incentivizes domestic production and sale of renewable energy components (like solar panels). Take away the tax credits, and First Solar's profitability and high cash flow are put in jeopardy.

Given the industrywide uncertainty, it's understandable investors may be on the sidelines with First Solar stock. But the company has what it takes to ride out the industrywide downturn.

Despite profitability pressures, First Solar still expects to finish 2025 with $400 million to $900 million in net cash (cash, cash equivalents, restricted cash, restricted cash equivalents, and marketable securities, less expected debt). The company also has a massive order backlog that supports years of future cash flow (although that backlog could decrease if customers pull back on purchases).

Add it all up, and First Solar stands out as one of the best all-around buys in the industry for patient investors.

Should you invest $1,000 in Archer Aviation right now?

Before you buy stock in Archer Aviation, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Archer Aviation wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $664,089!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $881,731!*

Now, it’s worth noting Stock Advisor’s total average return is 994% — a market-crushing outperformance compared to 172% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

Daniel Foelber has positions in First Solar. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cognex and First Solar. The Motley Fool has a disclosure policy.

We aren't even halfway through 2025, and already, it has been a roller-coaster year in the stock market. The major indexes incurred steep sell-offs, only to snap back like nothing happened.

Some investors may be looking for ways to take their feet off the gas by investing in stocks that distribute a portion of their profits to shareholders through dividends. Dividends are a great way to generate passive income, no matter what the stock market is doing. This can be a good approach for risk-averse investors, folks looking to preserve capital, or even investors who feel they have plenty of exposure to growth stocks and are looking to balance their portfolios.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Here's why Devon Energy (NYSE: DVN), Brookfield Infrastructure (NYSE: BIP) (NYSE: BIPC), and Clorox (NYSE: CLX) stand out as three dividend stocks to buy in June.

Devon Energy offers a sustainable dividend to energy investors

Lee Samaha (Devon Energy): Now, I know what you are thinking, and you have a point. How can an oil and gas exploration and production company be an ultra-reliable dividend stock? The answer lies in your degree of comfort with the price of oil.

To put matters into context, Devon Energy's management calculates that its "breakeven funding level" is $45 per barrel. In other words, that's the minimum price of oil the company needs to fund all its costs, operations, debt, and its fixed dividend.

Suppose you are comfortable with the implied assumption regarding the price of oil. In that case, you will be comfortable with the notion that Devon can sustain its current $0.96-per-share dividend, which translates to a dividend yield of more than 3%.

Moreover, based on the current price of oil of $63 per barrel, Devon could pay even more in dividends and/or continue buying back shares. Assuming a price of oil of $60 per barrel, management believes it will generate $2.6 billion in free cash flow (FCF) in 2025, a figure equivalent to 12.9% of its current market capitalization. In theory, that's what Devon's dividend yield could be if it used all its FCF to pay the dividend. All in all, Devon's dividend appears sustainable, barring a significant decline in oil prices.

Brookfield Infrastructure is a high-yield dividend stock that's on sale to start summer

Scott Levine (Brookfield Infrastructure): Building positions in trustworthy dividend stocks is a tried-and-true way for investors to fortify their portfolios. When reliable stocks like Brookfield Infrastructure -- along with its 5.2% forward-yielding dividend -- are available at a discount, therefore, investors would be wise to sit up and take notice. And that's exactly the opportunity that's now presented with shares of Brookfield Infrastructure trading at a discount to their historical valuation.

While investing in Brookfield Infrastructure doesn't offer a sizable growth opportunity like those artificial intelligence stocks or space stocks may offer, it does provide a conservative approach to procuring plentiful passive income. The company operates a massive portfolio of global infrastructure assets including (but not limited to) rail, data centers, and oil pipelines.

The allure of Brookfield Infrastructure for income investors is that the company generates ample funds from operations to cover its dividend payments.

BIP FFO Per Share (Annual) data by YCharts.

Over the past 15 years, the company has excelled at growing its funds from operations. From 2009 to 2024, Brookfield Infrastructure has increased its funds from operations at a 14% compound annual growth rate. While this doesn't guarantee the same results for the next 15 years, it's certainly an auspicious sign that should inspire confidence in management's ability to grow the business -- which is encouraging for those looking for passive income.

Currently, Brookfield Infrastructure stock is changing hands at 3.1 times operating cash flow, a discount to its five-year average cash-flow multiple of 4. Today's clearly a great time to load up on the stock while it's sitting in the bargain bin.

A safe dividend stock for passive-income investors

Daniel Foelber (Clorox): Clorox stock has been hit hard by a slower-than-expected turnaround, tariff risks, and cost pressures. But the maker of Clorox cleaning products, Kingsford charcoal, Burt's Bees, Hidden Valley Ranch dressing, Glad trash bags, and more could be a great high-yield dividend stock to buy for patient investors.

The great news for investors considering Clorox now is that the bulk of challenges related to its turnaround are likely over. The company's multiyear efforts to improve its internal operations -- known as its enterprise resource planning (ERP) system -- is set to begin adding cost benefits to Clorox in calendar year 2026.

Clorox's results have been improving. The company has achieved 10 consecutive quarters of gross margin expansion, showcasing better cost management even amid slower sales. Clorox expects to finish the fiscal year (ending June 30) with a 150-basis-point improvement in gross margin compared to fiscal 2024 -- even when factoring in tariff and cost pressures.

Clorox is heading in the right direction, but the stock may be selling off simply because investors have grown impatient with the company's multiyear turnaround. Another factor could be opportunity cost.

Clorox yields a hefty 3.8% and has 48 consecutive years of dividend increases -- but with three-month Treasury bills at 4.4%, some investors may prefer to go with the risk-free option.

Clorox is far from the only struggling high-yield consumer-focused brand to see its stock price around multiyear lows. Another example is Target, which has an even higher dividend yield than Clorox and has over 50 consecutive years of increasing its payout. Yet investors have grown impatient due to sluggish sales growth and weakening margins.

All told, Clorox is an excellent high-yield dividend stock for folks who want to participate in the stock market to collect passive income rather than go with non-equity products like T-bills.

Should you invest $1,000 in Devon Energy right now?

Before you buy stock in Devon Energy, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Devon Energy wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $875,479!*

Now, it’s worth noting Stock Advisor’s total average return is 998% — a market-crushing outperformance compared to 174% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 9, 2025

Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool recommends Brookfield Infrastructure Partners. The Motley Fool has a disclosure policy.

Investors often gravitate to value stocks for their reliability and reasonable valuations.

Amid volatility in 2025, value stocks like Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), Allegion (NYSE: ALLE), and American Electric Power (NASDAQ: AEP) are all outperforming the benchmark S&P 500 (SNPINDEX: ^GSPC). But buying a stock just because it is doing well in the short term is a great way to lose your shirt.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Here's why all three value stocks have what it takes to be excellent long-term investments and could be worth buying now.

Berkshire's competitive advantages are built to last

Daniel Foelber (Berkshire Hathaway): Berkshire Hathaway is up 10.4% year to date (YTD) at the time of this writing -- handily outperforming the S&P 500's slight YTD decline.

Warren Buffett grew Berkshire into a company with a market cap of over $1 trillion. And I think Greg Abel, who is set to become the new CEO of Berkshire at the end of 2025, can take Berkshire far beyond a $2 trillion market cap and outperform the S&P 500 in the process.

Berkshire has numerous advantages that position it to thrive over the long term. The company has a portfolio of top dividend-paying stocks like Apple, American Express, Coca-Cola, Bank of America, and Chevron. It also has a massive cash position that it can use to pounce on investment opportunities. But the most valuable jewels in Berkshire's crown are its controlled assets.

Berkshire has been shifting its focus away from public equities toward its controlled businesses by growing its insurance businesses, Berkshire Hathaway Energy, BNSF railroad, and its various manufacturing, services, and retail segments. Combined, the value of Berkshire's controlled companies is worth much more than its public equity portfolio.

The controlled companies generate operating earnings, which Berkshire can park in cash or Treasury Bills, use to buy public stock, or reinvest back into its controlled businesses. And because Berkshire doesn't pay a dividend and only buys its stock when it deems it a bargain, the company is left with plenty of extra cash to put to work in its top ideas.

Berkshire earns insurance investment income on its float, which is the sum of premiums collected that haven't been paid in claims. Buffett often refers to this investment income as "free money," since Berkshire earns a return on the float. The float has gradually grown, ballooning to $173 billion as of March 31. Even if Berkshire simply invested the float in a risk-free asset yielding something like 4%, that would still be around $7 billion a year in "free" money. The float is just one of many ways Berkshire is well-positioned to compound its operating earnings for years to come.

Add it all up, and Berkshire has plenty of levers to pull to generate value and reward patient investors.

This company is helping keep America safe

Lee Samaha (Allegion): This doors-and-locks security company's stock is up 8.6% in 2025, compared to a slight decline for the S&P 500. This move highlights the business' underlying attractiveness and potential for long-term growth. Allegion's long-term development has several key drivers, including the opportunity to grow sales via the convergence of electronic and mechanical security products, the growing importance of safety and security (notably in the institutional sector), and the opportunity to continue consolidating a highly fragmented industry.

The increasing use of web-enabled electronics and services in locks and doors creates substantially more value for building owners because it allows them to monitor and control who has access to which areas, provides valuable data on workflows, and improves convenience.

The need for such features will only increase as urbanization trends create greater population density in cities, a statistic often linked to increased crime. As for industry consolidation, its key rival, Sweden's Assa Abloy, is a serial acquirer, and Allegion itself expects mergers and acquisitions to contribute 3% of its total long-term growth rate of above 7%.

Management expects the revenue growth rate to drop to double-digit growth in earnings. Wall Street analysts expect $8.42 in earnings per share in 2026 with $675 million in free cash flow (FCF), putting Allegion on 16.7 times earnings and 18 times FCF -- excellent valuations for a company with double-digit earnings growth prospects.

Plug American Electric Power into your portfolio and watch the passive income surge

Scott Levine (American Electric Power): While the S&P 500 has struggled to stay in positive territory, utility stock American Electric Power has charged considerably higher since the start of the year. As of this writing, shares have climbed more than 11% while the S&P 500 is down 1.3%. Despite its climb, the stock still sports an inexpensive valuation, appealing to those looking for a bargain. Besides value investors, those seeking passive income will also find their interests amped up with the prospect of owning the stock and its 3.7% forward-yielding dividend.

From its 4% year-to-date rise in February to the 17% year-to-date plunge in April, the S&P 500 has been on a roller coaster. During this turmoil, investors have sought the safety of rock-solid investments that represent minimal risk -- stocks like American Electric Power.

Because the company primarily operates as a regulated utility, it doesn't enjoy the freedom of raising rates when it wants. However, it guarantees certain rates of return. This low-risk business model may not spark joy in growth investors, but for those seeking conservative investments, it works just fine. Moreover, it lends credibility to management's target of providing an annual 10% to 12% total shareholder return, based on earnings-per-share growth of 6% to 8% and a dividend that yields about 4%.

With a lack of clarity regarding President Donald Trump's trade policy and geopolitical tensions continuing to run high, market volatility seems likely to continue to rattle the market's nerves for the foreseeable future, leading investors to the safety of utility stocks like American Electric Power.

With its stock trading at 8.8 times operating cash flow -- a discount to its five-year average cash flow multiple of 9.2 -- now looks like a good time to click the buy button on American Electric Power.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Daniel Foelber has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.

Sunny days and summertime festivities are on the horizon for June. But there's no guarantee the clouds overhanging the broader market will dissipate.

Instead of trying to guess what the stock market will do in the short term, a better approach is to invest in companies with strong underlying investment theses that have the staying power to endure economic cycles.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Here's why these Fool.com contributors see Apple (NASDAQ: AAPL), Shopify (NASDAQ: SHOP), Cava Group (NYSE: CAVA), ExxonMobil (NYSE: XOM), and Energy Transfer (NYSE: ET) as five top stocks to buy in June.

Apple's pricing power will be put to the test

Daniel Foelber (Apple): There are 30 components in the Dow Jones Industrial Average (DJINDICES: ^DJI), and the worst-performing year to date is health insurance giant UnitedHealth (NYSE: UNH) -- which crashed due to cost pressures, regulatory scrutiny, suspended guidance, and another major leadership change. However, it's the second-worst performing Dow stock that is piquing my interest in June -- Apple.

Apple is down 22% year to date at the time of this writing -- making it the worst-performing "Magnificent Seven" stock. I think the sell-off is an excellent opportunity for long-term investors.

The simplest reason to buy Apple is if you think it can pass along a decent amount of tariff-related cost pressures. The latest update at the time of this writing is a 25% tariff on smartphones made outside the U.S. And since Apple assembles the vast majority of iPhones in China, the tariff could directly impact its bottom line.

Given higher labor costs and manufacturing challenges, moving production to the U.S. isn't a viable option. So, the million-dollar questions are how long tariffs will last and if Apple can pass along some of its higher costs to consumers.

A major catalyst that could drive iPhone demand even if prices go up is the upgrade cycle. Apple releases new iPhones every September. Most consumers aren't upgrading every year, but rather, waiting until they need to upgrade or the features appeal to them.

The upcoming iPhone 17 could have far more artificial intelligence (AI) features than the iPhone 16 -- which could attract buyers even with a higher price tag. Investors will learn more about Apple's technological advancements at its Worldwide Developers Conference from June 9 to 13.

Also, in Apple's favor, its pricing has stayed consistent for years. The base price of a new iPhone hasn't changed since 2017 as the company has preferred to keep prices low to get consumers involved in its ecosystem to support growth in its services segment. Apple's product growth has been weak in recent years, but the services segment has flourished, led by Apple TV+, Apple Music, Apple Pay, iCloud, and more.

Given tariff woes, it's easy to be sour on Apple stock right now. But the glass-half-full outlook on the company is that if tariffs do persist, at least they are coming during a time when Apple is expected to make by far its most innovative iPhone ever.

All told, long-term investors looking for an industry-leading company to buy in June should consider scooping up shares of Apple.

A growing e-commerce platform giant

Demitri Kalogeropoulos (Shopify): Shopify stock returns are roughly flat so far in 2025, but there are brighter days ahead for owners of this e-commerce services giant. The company just wrapped up a stellar Q1 period, as sales growth landed at 27%. Sure, that was a modest slowdown from the prior period's 31% increase, but it still marked the eighth consecutive quarter of growth of at least 25%.

Merchants are finding plenty of value in Shopify's expanding suite of services, even through the latest disruptive tariff-fueled trade disruptions. Merchant solutions revenue jumped 29%, helping lift sales growth above the company's 23% increase in gross sales volumes. "We built Shopify for times like these," company president Harvey Finklestien said in a press release. "We handle the complexity so merchants can focus on their customers."

Shopify is having no trouble converting those market share gains into rising profits, either. Operating income more than doubled to $203 million, and the company achieved a 15% free cash flow margin, up from 12% a year ago.

Concerns over more trade disruptions have likely kept a lid on the stock price following that positive Q1 earnings report in early May. But the company still expects 2025 growth to be in the mid-20s percentage range year over year. Shopify affirmed its initial aggressive outlook for free cash flow, too, although management sees a slightly slower profit increase (in the low-teens percentage rate) ahead for the year.

Investors can look past that minor profit downgrade and focus on Shopify's broader growth story that involves more merchants signing up for more services and booking more transactions on its platform. Success here should make the stock a great one to add to your portfolio in June, with the aim of holding it for the long term.

A Mediterranean feast for growth investors

Anders Bylund (Cava Group): Shares of Cava Group are down more than 40% in the last six months. That doesn't exactly make it a cheap stock, since Cava trades at 69 times earnings and 9.2 times sales even now.

But the Mediterranean fast-casual restaurant chain is growing quickly while reporting profits, and also widening its profit margins over time. That's a lucrative combo that deserves a premium stock price.

Cava's success hasn't gone unnoticed, despite the plunging stock chart. Two-thirds of analysts who follow this stock have issued a "buy" or "overweight" rating, and Wall Street's average target price is 44% above Thursday's closing price.

The company has a habit of absolutely crushing each quarter's analyst estimates across the board, including a huge surprise in May's first-quarter report. The average analyst expected earnings of just $0.02 per share on revenues in the neighborhood of $281 million. Instead, Cava reported earnings of $0.22 per share and $332 million in top-line sales.

A report like that would normally boost Cava's stock, but the market reaction was negative. Management noted that same-store sales growth could slow down in the second half of 2025, since the unpredictable economy is weighing down consumer spending. Cava's healthy salad bowls and pita wraps are on the pricey side, making the chain a vendor of everyday luxuries. This strategy could make Cava vulnerable to shifts in consumer confidence, especially when paired with the stock's lofty valuation.

So you won't find the stock in Wall Street's bargain basement today, but it did move down from the high-end valuation penthouse it inhabited a few months ago. If you like your investments fresh and flavorful, Cava's combination of healthy growth and expanding profits could be a recipe for long-term portfolio success.

42 dividend raises, with more coming up

Neha Chamaria (ExxonMobil): With renewables on the rise, people often believe the oil and gas industry isn't where to bet on anymore. While the global demand for energy overall is only expected to grow, driven by developing countries, ExxonMobil is in a sweet spot. It is working hard to bring down its break-even oil price significantly to stay relevant in the long run. At the same time, it is developing new low-carbon products and solutions.

It believes these new businesses could have potential addressable markets worth $400 billion by 2030 and over $2.3 trillion by 2050. Biofuels, carbon capture and storage, and low-carbon hydrogen are just some of the new products ExxonMobil is focused on.

Overall, ExxonMobil wants to produce "more profitable barrels and more profitable products" and is also cutting costs aggressively. The oil and gas giant believes a better product mix and its cost-reduction efforts combined could add nearly $20 billion in incremental earnings and $30 billion in operating cash flows by 2030.

In short, ExxonMobil is already charting a growth path to 2030 without compromising on capital discipline. It wants to generate big cash flows and maintain a strong balance sheet even through oil market down cycles, and ensure it can continue to reward shareholders with a sustainable and growing dividend on top of opportunistic share buybacks.

ExxonMobil has already proven its mettle when it comes to shareholder returns. It has increased its dividend each year for the past 42 consecutive years. Even without dividends, the stock has more than doubled shareholder returns in the past five years. With ExxonMobil stock now trading almost 20% off its all-time highs, it is one of the top S&P 500 (SNPINDEX: ^GSPC) stocks to buy now and hold.

Ready to rebound

Keith Speights (Energy Transfer): I'm not worried in the least that Energy Transfer LP's unit price is down year to date. This pullback presents a great opportunity to buy the midstream energy stock in June.

Energy Transfer's business continues to rock along. The limited partnership (LP) set a new record for interstate natural gas transportation volume in the first quarter of 2025. Its crude oil transportation volume jumped 10% year over year in Q1. Natural gas liquid (NGL) transportation volumes rose 4%, with NGL exports increasing 5%.

The LP's growth prospects remain solid. Energy Transfer commissioned the first of eight natural gas-powered electric generation facilities in Texas earlier this year. It plans to partner with MidOcean Energy to build a new LNG facility in Lake Charles, Louisiana. Artificial intelligence (AI) is a new growth driver, with Energy Transfer agreeing to provide natural gas to Cloudburst Data Centers' AI data centers.

The Trump administration's tariffs shouldn't affect Energy Transfer much. All of the company's 130,000-plus miles of pipeline are in the U.S. Energy Transfer has already secured most of the steel to be used in phase 1 of its Hugh Brinson pipeline project. Co-CEO Marshall "Mackie" McCrea said in the Q1 earnings call that management doesn't "expect to see any major challenges, if any challenges at all, selling out our terminal every month, the rest of this year."

Even if Energy Transfer's unit price doesn't move much, investors will still make money thanks to the LP's generous distributions. The midstream leader's forward distribution yield currently tops 7.3%. Energy Transfer plans to increase its distribution by 3% to 5% each year.

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*Stock Advisor returns as of June 2, 2025

Anders Bylund has positions in UnitedHealth Group. Daniel Foelber has no position in any of the stocks mentioned. Demitri Kalogeropoulos has positions in Apple and Shopify. Keith Speights has positions in Apple, Energy Transfer, and ExxonMobil. Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Shopify. The Motley Fool recommends Cava Group and UnitedHealth Group. The Motley Fool has a disclosure policy.

On May 3, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) reported its first-quarter 2025 results and hosted its annual shareholder meeting in Omaha.

One of the standouts from the earnings release was Berkshire's position in cash, cash equivalents, and short-term Treasury bills, which increased by 84% over the past year from $188.99 billion as of March 31, 2024, to a whopping $347.68 billion as of March 31, 2025.

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Yet even with all that cash, Berkshire elected not to repurchase its own stock. It marked the third consecutive quarter Berkshire didn't buy back its stock -- which is out of the ordinary considering Berkshire had been on a 24-quarter streak of buybacks prior to the recent dry spell.

Here's what the treasure trove of cash and lack of buybacks signal, and if Berkshire is still an excellent value stock to buy now.

Building up cash

Buffett has a track record for making occasional blockbuster moves and then doing very little for multiple years. The strategy involves deploying significant capital toward top ideas rather than acting on impulse.

Most of Berkshire's largest stock holdings were acquired fairly quickly and then held over time. Similarly, the success of controlled assets like Berkshire's insurance businesses is a testament to developing these businesses over the long term, not constant wheeling and dealing.

If there were ever a time for Berkshire to build up its cash position, it would be now.

The S&P 500 is coming off back-to-back years of over 20% gains in 2023 and 2024 -- which Berkshire benefited from through its holdings in public securities and the growth of its controlled assets.

Furthermore, interest rates are relatively high, which provides an added incentive to hold risk-free assets like Treasury bills.

Data by YCharts.

Given these factors, it makes sense why Berkshire would build up its cash position, but that still doesn't explain why it wouldn't repurchase stock.

Berkshire's valuation is more expensive

The price-to-book ratio, also known as book value, is a better financial metric for valuing Berkshire than price-to-earnings or price-to-free cash flow because Berkshire operates as a conglomerate where net income can swing wildly from year to year based on changes to operating earnings and the value of its businesses.

Buffett has long used buybacks as a way to return capital to shareholders. Berkshire famously doesn't pay a dividend because Buffett feels that buybacks are a better use of capital than the one-time benefits of dividends, and he's been absolutely correct, given the long-term appreciation of Berkshire's stock price.

In Berkshire's quarterly earnings reports, there's a note that "Berkshire's common stock repurchase program permits Berkshire to repurchase its shares any time that Warren Buffett, Berkshire's Chairman of the Board and Chief Executive Officer, believes that the repurchase price is below Berkshire's intrinsic value, conservatively determined." And that "repurchases will not be made if they would reduce the value of Berkshire's consolidated cash, cash equivalents and U.S. Treasury bill holdings below $30 billion."

Since Berkshire's cash equivalents and U.S. Treasury bill holdings are over 11 times the $30 billion threshold, the holdup must be due to Berkshire's intrinsic value being above what Buffett would like.

Historically, Buffett has given the green light for buybacks when Berkshire's book value falls below 1.1, which was later upped to 1.2 times book value. But the guidelines have been flexible in recent years because Berkshire was buying back stock before the recent pause at higher price-to-book levels.

Berkshire's book value has soared because its market cap has grown at a faster rate than the value of its assets. Or, put another way, the stock price has been going up not because of massive gains in public equities Berkshire holds, but because investors are putting a premium price on its controlled assets and cash position.

Data by YCharts.

Berkshire is viewed as a safe stock amid tariff turmoil and market uncertainty because of its operational excellence and industry-leading performance across key economic sectors. Many of Berkshire's controlled assets, like the insurance businesses, are U.S.-focused, insulating them from geopolitical and trade tensions.

It's also worth mentioning that, during the annual meeting, Buffett discussed the 1% excise tax imposed on stock buybacks by publicly traded companies as another reason why buybacks aren't as attractive right now.

Buying Berkshire for the right reasons

The simplest reason to own Berkshire Hathaway stock over the long term is a belief in its capital allocation strategy and risk management. Berkshire stock isn't as cheap as it used to be, but just because Berkshire isn't buying back its stock doesn't mean individual investors should run for the exits. Berkshire is simply doing what it feels is best to maximize operating earnings and protect savings that investors have entrusted it to manage.

All told, Berkshire isn't a screaming buy, but it's a perfectly fine stock to buy and hold for long-term investors looking for a company they can count on no matter what the economy is doing.

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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Meta Platforms (NASDAQ: META) rocketed 4.2% higher on Thursday in response to strong first-quarter earnings. The stock has erased almost all of its year-to-date losses in recent weeks, and, at the time of this writing, it is just a couple of percentage points off from being even on the year.

Here's why the company's latest results -- and management commentary on the earnings call -- reinforce its underlying investment thesis, and why Meta is a top growth stock to buy now.

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Family of apps continues to drive high-margin growth

Meta delivered 16% higher revenue -- but operating income soared 27%, thanks to just a 9% increase in costs and expenses. Meta finished the quarter with a sky-high operating margin of 41% -- meaning it converted 41 cents of every dollar in revenue into operating income.

Manageable spending also led to a 35% increase in net income and a 37% jump in diluted earnings per share (EPS).

This profitability is a testament to the company's strong business model. It's driving user engagement, which attracts advertisers. Meta's engagement metric -- family daily active people (DAP) -- refers to daily active people across its "family of apps" segment, which includes Instagram, WhatsApp, Facebook, Messenger, and Threads. DAP rose 6% year over year, which supported a 5% increase in ad impressions and a 10% increase in price per ad.

The following chart shows how diluted EPS has more than tripled from pre-pandemic levels, thanks to consistent revenue growth and margin expansion:

META Revenue (TTM) data by YCharts.

Results were excellent, but the company's outlook and confidence in its long-term investments were arguably even more encouraging.

Accelerating AI spending

Meta is guiding for $42.5 billion to $45.5 billion in Q2 2025 revenue. At the midpoint of $44 billion, that would be a 12.6% jump from Q2 2024 -- which was a difficult comparable, considering Q2 2024 revenue was up 22% year over year.

The company is lowering its full-year guidance for total expenses from a range of $114 billion to $119 billion to a new range of $113 billion to $118 billion. But it's raising its full-year 2025 capital expenditures (capex) expectations to between $64 billion and $72 billion -- up from its prior outlook of $60 billion to $65 billion.

Most of capex is going toward generative artificial intelligence (AI) and core business needs. Meta is investing in infrastructure improvements (like building data centers) to scale up its AI services, while maintaining control and flexibility of its operations so it can react to changing customer preferences. Management said that it's generating strong returns from its AI initiatives by increasing the efficiency of its workloads. For example, AI-driven feed and video recommendations delivered a 7% increase in time spent on Facebook and a 6% increase in time spent on Instagram.

AI is favorably impacting user engagement and helping advertisers customize campaigns based on their objectives and budgets. On April 29, the day before Meta reported earnings, it released the Meta AI app, which leverages the latest version of its large language model -- Llama 4. The Meta AI app is a stand-alone tool, which is different from embedded AI functionality in Instagram, Facebook, and WhatsApp. The app can solve problems, answer questions, provide deep dives on topics, and more -- which makes it a competitor to ChatGPT and Alphabet-owned Google Search.

Meta's sustained growth and higher capex, despite difficult comps and an uncertain macro environment, speak volumes about its business model's effectiveness and its belief in long-term investments in AI and other research and development.

The company continues to pour money into its Reality Labs division, which is building devices and experiences in virtual reality, augmented reality, the metaverse, and other efforts. And while the core family of apps segment continues to deliver high-margin growth, Reality Labs is a money pit -- posting an operating loss of $4.2 billion in the quarter. In 2024, Reality Labs lost a staggering $17.73 billion. As high as that figure is, Meta can afford it because of the impeccable performance of its family of apps.

Reality Labs has shown some bright spots. For example, Ray-Ban Meta AI glasses had four times as many monthly active users as a year ago. Despite the upside potential, Reality Labs is simply too unproven to factor into Meta's investment thesis.

Returning capital to shareholders

Even with its aggressive capex spending and ongoing support of the unprofitable Reality Labs division, Meta can still afford to return a significant amount of capital to shareholders. In its latest quarter, it spent $13.4 billion on buybacks and $1.33 billion on dividends. (Meta began paying dividends last year.)

If it were to sustain the same pace of buybacks and dividends for the whole year, it would return roughly 4% of its market cap to shareholders. Put another way, if Meta only paid dividends and didn't repurchase stock, it would have a dividend yield of 4% -- illustrating just how massive its capital return program is.

Over time, buybacks have helped the company grow earnings far faster than net income. Despite its high stock-based compensation, Meta has achieved one of the most aggressive share-count reductions of the megacap tech-focused companies. In just five years, Meta has reduced its share count by 11.4%, which is slightly more than Alphabet's 10.9% reduction and a bit shy of Apple's 12.8%.

Steady buybacks and earnings growth have helped keep the stock's valuation reasonable despite its strong share price. Meta's stock price has soared 152% in the last five years, but diluted EPS has grown even faster, so the price-to-earnings (P/E) ratio has actually fallen. In fact, Meta sports a P/E of just 22.4 -- which is dirt cheap for an industry-leading company with high margins.

What's even more impressive is that earnings would be even higher if the company weren't losing billions each quarter on Reality Labs. So from that perspective, Meta is beyond cheap.

Meta Platforms is a high-conviction buy

Meta checks all the boxes of a top growth stock to buy now.

The core business continues to fire on all cylinders and generate plenty of cash flow to use for higher capex. Meta has done a good job managing operating expenses to support its long-term investments and help cushion the blow from Reality Labs losses.

The company continues to repurchase stock at a breakneck pace, keeping a tight lid on its valuation. Its ultrastrong balance sheet allows it to navigate an economic slowdown or pounce on acquisition opportunities.

Add all that up, and Meta Platforms is one of the best buys today: It can play a foundational role in a diversified portfolio for growth and value investors alike.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

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See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, and Meta Platforms. The Motley Fool has a disclosure policy.