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.

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*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.

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*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!*

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

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.

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*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.

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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.

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

Before you buy stock in Apple, 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 Apple 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

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.

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 »

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.

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

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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.

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 »

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?

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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.

Investors have been on such a turbulent roller coaster that it's easy to forget that the S&P 500 (SNPINDEX: ^GSPC) was up slightly through the first two months of the year.

With April coming to a close and the major indexes firmly in the red, investors may be wondering how long volatility will last, and if now is a good time to buy stocks or run for the exits.

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 are five lessons I've learned from major sell-offs over the last seven years, and how these lessons can help you navigate market uncertainty.

1. Each sell-off is different

No one knows when the market will go down or why. But we do know that the circumstances that lead to a sell-off are never truly the same.

Through the first three quarters of 2018, the S&P 500 was pretty much flat. But in the fourth quarter, it began selling off due to U.S. President Donald Trump's trade war with China in his first term. The sell-off intensified, and the index was down around 20% year to date on Christmas Eve before staging an epic recovery, ending the year down just 6.2%.

The index then shot up a staggering 7.9% in January 2019 to make up for all the Q4 losses. If you hadn't checked your portfolio for four months, it would've looked like nothing had happened.

The March 2020 pandemic-induced sell-off was a true flash crash -- amplified by the instantaneous spread of news, sophistication of modern markets, and fear. As mandates took effect and vaccines progressed, sentiment shifted from panic to viewing the pandemic as a temporary phenomenon.

After rallying a staggering 47.5% between the start of 2020 and the end of 2021, the S&P 500 fell 19.4% in 2022. The sell-off was driven by valuation concerns, rampant inflation, and supply chain challenges. 2022 was a fairly reasonable sell-off in hindsight. Cooling inflation and resilient earnings growth set the stage for another epic two-year rally in 2023 and 2024, in which the S&P 500 gained 53.2%, driven by excitement for growth trends like artificial intelligence.

As in 2018, the 2025 sell-off has been a rapid pullback in response to geopolitical tensions and tariffs. Only this time, the Federal Reserve is in a completely different position. The Federal Reserve was raising interest rates into the fall of 2018, which fueled the subsequent sell-off. Then, Fed Chair Jerome Powell reversed course and cut rates in the summer of 2019, marking the Fed's first rate reduction since 2008.

Still concerned about inflation, the Fed is hesitant to cut rates at this time, despite pressure from Trump and threats that Powell should be fired. The composition of a sell-off is always different, so it's best to view our present-day pullback with context in mind. History can provide some insight, but it's a mistake to assume a swift or straightforward road to recovery.

2. You won't know it's the bottom till it's over

It's easy to analyze the causes of past stock market sell-offs and identify their starting and ending points. But when you're living through one, as we are now, it's impossible to know when the bottom will arrive, if it has already happened, or if there's a long way to go.

It felt like the damage from the fall 2018 and March 2020 sell-offs was so intense that it could take years to recover, when in fact it ended up being a matter of months. However, the 2022 bear market lasted nearly a year.

We're still in a period of high uncertainty in the present-day sell-off. There could be lasting economic effects from tariffs and a recession, a resolution could be reached tomorrow, or anything in between could happen. We simply don't know how long it will last, and admitting that we don't know is an important step in avoiding speculation.

3. Top companies will go on sale for reasons that have nothing to do with the underlying investment thesis

One common thread among most sell-offs, regardless of their cause, is that investors tend to overweight near-term risks. When investors are pessimistic, they may be less willing to pay for potential earnings growth or gravitate toward stable companies like blue chip dividend stocks. This can lead to drastic sell-offs in excellent companies, even though the investment thesis hasn't changed.

One of my favorite examples from recent years is Meta Platforms (NASDAQ: META). It's hard to imagine, but in 2022, Meta Platforms fell below $90 a share. It was a perfect storm for the company, as TikTok was gaining popularity and challenging Instagram. Meta was pouring money into the metaverse and other virtual reality endeavors at a time when investors had little patience for spending on projects that didn't contribute to the bottom line. To top it all off, there was a widespread sell-off in growth stocks.

Meta ended 2022 down a staggering 64%. During the worst of the sell-off in early November, Meta Platforms' price-to-earnings ratio fell below 9. Meta could have done a better job managing expenses and addressing investor concerns. But the sell-off's extent was magnitudes beyond what was reasonable, especially since Instagram Reels had been out since August 2020 and was gaining popularity as an alternative to TikTok.

The lesson is that sell-offs can present incredible opportunities to scoop up shares of excellent companies when they're out of favor. The trick is to stick to high-conviction companies you understand in case the sell-off lasts longer than expected or stock prices continue to decline.

4. Invest with a long-term time horizon

Buying shares in top companies doesn't work if it's for the wrong reasons or time frame. Trying to time the market and play a quick bounce by speculating on companies you don't understand is a great way to lose your shirt.

Maintaining a long-term time horizon alleviates the pressure caused by volatility and fluctuations in asset prices. This is especially important because emotions can flare up during sell-offs.

Again, it's easy to look at past sell-offs and the reward of subsequent market highs as obvious times to buy in hindsight. However, in real time, sell-offs can be emotionally taxing. No one likes losing money. Seeing months or even years of gains evaporate in a flash can strain even the most seasoned investors.

By focusing on the big picture, you can let investment theses be your guide, rather than allowing stock prices to dictate true value.

5. Don't take on more risk than you're comfortable with

Perhaps the most important lesson of all during sell-offs is risk management. The stock market is merely a tool for reaching your financial goals. Letting the stock market work for you can be a path to wealth and financial success. But letting the stock market bully you around can lead to financial mistakes.

One of the easiest ways to feel adrift is to get caught in a riptide of market volatility. If you're taking on more risk than you're comfortable with, either through allocation or by using margin, you can amplify gains on the upside but also magnify losses on the downside.

It's best to be true to yourself and invest in a way that complements your personal preferences and financial goals.

Benefiting from market sell-offs

All the lessons I've learned over the last seven years center around one common theme: pressure. The more you can limit pressure and anxiety during a sell-off, the better equipped you'll be to make smart investment decisions.

The good news is that there are straightforward ways to reduce pressure. They include properly managing risk, focusing on the long term, investing in businesses with strong fundamentals, accepting that things could worsen before they improve, and being prepared for a prolonged downturn, even if it doesn't happen.

If you can reduce pressure and control your emotions, stock market sell-offs can be tremendous, sometimes life-changing buying opportunities.

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

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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 Meta Platforms. The Motley Fool has a disclosure policy.

The "Magnificent Seven" -- Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, and Tesla -- took the market by storm in 2023 and 2024 by contributing a sizable portion of gains in major indexes like the S&P 500 and Nasdaq Composite.

But that momentum has ground to a halt this year. As of the time of this writing, all seven stocks are underperforming the S&P 500 in 2025. The best of the bunch, Microsoft, is down 8.1% year-to-date, while Tesla has tumbled over 35% even when factoring in its post-earnings rebound on Wednesday and Thursday.

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 investors looking for low-cost exchange-traded funds (ETFs) that don't include the Magnificent Seven may want to take a closer look at the Vanguard High Dividend Yield ETF (NYSEMKT: VYM).

In defense of the Magnificent Seven

Before diving into the attractive qualities of the Vanguard High Dividend Yield ETF, it's worth mentioning that it's a mistake to bail on the Magnificent Seven just because their stock prices are lower this year.

The group boasts numerous competitive advantages and robust balance sheets. And the sell-off has only made their valuations more attractive for long-term investors. Risk-tolerant investors may want to consider top names in the Magnificent Seven, such as Meta Platforms, which has strong free cash flow, an inexpensive valuation, and a clear runway for future growth.

However, there are also compelling reasons not to buy Magnificent Seven stocks. The simplest is that you already have your desired exposure to the group, either by directly investing in individual names or through Magnificent Seven-heavy ETFs.

The Magnificent Seven are so large that they comprise a massive amount of the major indexes. The Vanguard S&P 500 ETF has 29.9% in the Magnificent Seven, and the Invesco QQQ Trust -- which mirrors the performance of the Nasdaq-100 -- has a staggering 40.5% in the group.

Investors seeking to deploy new capital in a diversified ETF while avoiding the Magnificent Seven may want to consider income and value funds. One fund that is especially appealing right now is the Vanguard High Dividend Yield ETF.

Industry leadership across value-focused sectors

Many of the top holdings in the Vanguard High Dividend Yield ETF are industry-leading companies from non-tech-focused sectors -- like JPMorgan Chase and Bank of America for financials; ExxonMobil and Chevron for energy; UnitedHealth Group, Johnson & Johnson, and AbbVie for healthcare; and Procter & Gamble, Coca-Cola, and Walmart for consumer staples. The tech stocks the ETF holds -- like Broadcom, Cisco Systems, and International Business Machines -- pay growing dividends.

This ETF has an expense ratio of just 0.06%, which is slightly higher than the Vanguard S&P 500 ETF's 0.03%. However, the subtle difference won't significantly impact most investors, as it amounts to only 30 cents more in annual fees per $1,000 invested.

The Vanguard High Dividend Yield ETF targets companies with strong track records of dividend growth. The lack of exposure to the Magnificent Seven makes the fund much more balanced across sectors than the S&P 500.

Sector	Vanguard High Dividend Yield ETF	Vanguard S&P 500 ETF
Financials	20.4%	14.6%
Healthcare	14.3%	11.2%
Technology and Communications	13.3%	38.9%
Industrials	13.2%	8.5%
Consumer Staples	10.6%	6%
Consumer Discretionary	10.2%	10.3%
Energy	9.4%	3.7%
Utilities	6.6%	2.5%
Basic Materials	2%	2%
Real Estate	0%	2.3%

Data source: Vanguard.

By overweighting sectors such as financials, healthcare, industrials, consumer staples, energy, and utilities relative to the S&P 500, the Vanguard High Dividend Yield ETF achieves a 2.9% dividend yield, roughly double the 1.4% yield of the Vanguard S&P 500 ETF. The High Dividend Yield ETF fund also has a lower price-to-earnings ratio at 18.1 compared to 23.9 for the S&P 500 ETF.

A plug-and-play option for all kinds of investors

The Vanguard High Dividend Yield ETF is a straightforward and effective way to gain exposure to several top dividend-paying value stocks without incurring high fees. The fund could be a good fit for risk-averse investors, income investors, or even balanced investors who don't want to increase their exposure to companies they already own.

During times of heightened market volatility, it can be useful to have a list of stocks and ETFs to turn to when you're trying to filter out noise and make a calculated decision not based on emotion. The Vanguard High Dividend Yield ETF certainly checks the "value" and "income" boxes, making it a useful tool for folks targeting those objectives.

Should you invest $1,000 in Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF right now?

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $594,046!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $680,390!*

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*Stock Advisor returns as of April 21, 2025

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. 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. 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 positions in Nvidia. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Bank of America, Chevron, Cisco Systems, International Business Machines, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard S&P 500 ETF, Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF, and Walmart. The Motley Fool recommends Broadcom, Johnson & Johnson, 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 price of gold is hitting new all-time highs -- surpassing $3,500 per ounce. Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) is in a correction. Some investors may be wondering if it is better at the moment to buy the dip in the S&P 500 or ride the gold wave higher.

Below I'll discuss why gold is doing so well, different ways to invest in gold -- including through an exchange-traded fund (ETF) -- and if gold is a better buy than an S&P 500 index fund.

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 »

Gold is piling on the gains

Gold prices are up over 30% year to date at the time of this writing, compared to a 12.3% sell-off in the S&P 500. Its price performance also slightly beat the S&P 500 in 2024.

Gold has been so hot that it's up more than the S&P 500 over the last three-year, five-year, and 10-year periods -- although the S&P 500 is beating it over the last five-year and 10-year periods when you account for dividends reinvested.

Still, gold's torrid run-up may come as a surprise, especially given the strong gains in the S&P 500 led by megacap growth stocks. It wasn't long ago that investors questioned when the first U.S. company would surpass $1 trillion in market cap. Apple, Microsoft, and Nvidia all closed out 2024 with market caps over $3 trillion.

Gold has made most of its gains over the S&P 500 during the last three years (there were two major sell-offs in the S&P 500 -- in 2022 and now in 2025) thanks to its steady rise in that time. Even with dividends included, the Vanguard S&P 500 ETF (NYSEMKT: VOO) is massively underperforming the SPDR Gold Shares ETF (NYSEMKT: GLD) fund over the last three years.

Data by YCharts.

The S&P 500 generally is driven higher by earnings and investor sentiment, and higher earnings justify higher stock prices. When sentiment is positive, investors may be willing to pay more for stocks, based on future earnings expectations.

Gold is based on supply and demand. It's a commodity, not a company.

Lower interest rates can reduce borrowing costs and drive gold prices higher. However, geopolitical uncertainty is an even greater catalyst for higher gold prices.

Tariff tensions, the threat of trade wars, and President Donald Trump's attacks on Federal Reserve Chairman Jerome Powell can weaken confidence in U.S. markets and potentially jeopardize their credibility. As a result, fearful investors around the world may turn away from U.S. stocks toward gold.

Another driving factor is the People's Bank of China -- the largest official sector buyer of gold in 2023 and 2024. Reports indicate that the central bank boosted its gold reserves for the fifth consecutive month in March.

In sum, there are valid near-term factors driving gold prices higher. However, that doesn't mean investors should dump stocks in favor of gold.

Buying gold versus equity ETFs

Buying gold through jewelry, coins, or bullion comes with storage and security risks. The most straightforward and liquid way to buy and sell gold is through an ETF, such as the SPDR Gold Shares.

The fund uses a custodian that holds physical gold on its behalf, with the fund passing along a 0.4% expense ratio as a fee for its services. By comparison, the Vanguard S&P 500 ETF charges a mere 0.03% expense ratio.

The better buy now depends on your investment objectives and existing holdings. If you're looking to add a new asset class to your portfolio that can perform well, even if geopolitical tensions persist, then gold could be worth a closer look. However, if you're looking to invest in a variety of companies under the simplicity of one tradable ticker, then an S&P 500 index fund may be a better fit.

Another factor worth considering is what makes up the S&P 500. A whopping 35% of the Vanguard S&P 500 ETF is invested in just 10 companies -- Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta Platforms, Berkshire Hathaway, Broadcom, Tesla, and JPMorgan Chase. If you already own sizable positions in these companies, then buying an S&P 500 index fund may not achieve the level of diversification you're looking for. There are plenty of low-cost ETFs out there that don't include these megacap names or are less top-heavy.

However, if you're looking for broad-based exposure to the market, then an S&P 500 index fund is a good starting point.

Integrating gold into a diversified portfolio

Gold has been on a tear in recent years, which has bridged the gap between gold's gains and the S&P 500 over the last decade. However, for most investors, it's probably best that gold serve more as a role player in a diversified portfolio, rather than the focal point.

Gold could fall or underperform the S&P 500 if the supply/demand imbalance changes. It's also more difficult to analyze because it isn't based on business fundamentals.

Another factor worth considering is that there aren't dividends on gold ETFs, whereas S&P 500 index funds and plenty of other equity-based ETFs have dividends, which provide passive income no matter what the market is doing.

Ultimately, the amount of gold to include in a portfolio depends on your risk tolerance and what you already own. Investors with ultra-long-term time horizons may be better off keeping gold exposure to a minimum, especially given the long-term opportunity cost of investing in gold instead of the stock market. However, the near-term catalysts for gold are undeniable, so it makes sense that gold is crushing the S&P 500 year to date.

Should you invest $1,000 in SPDR Gold Trust right now?

Before you buy stock in SPDR Gold Trust, 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 SPDR Gold Trust 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 $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

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