Where are stocks headed as we approach the fourth and final quarter of the year? Hard to say. There’s a lot weighing on markets right now. From an economic slowdown in China to a possible government shutdown in Washington, D.C., to persistently high inflation and the growing proliferation of artificial intelligence (AI) products. Stocks have largely been treading water since the start of August. But that could soon change. Any signs that inflation is continuing to fall and the U.S. Federal Reserve’s interest rate hikes are coming to an end could lead to a major rally in the market. The fourth quarter of the year is traditionally the best for markets, especially as the year tends to close with what’s known as the “Santa Claus Rally.”
Of course, there are no guarantees. Things could take a negative turn should the economic picture get gloomy in coming weeks. But regardless of what the future holds, there are some stocks that investors should keep an eye on. Here are seven of the best S&P 500 stocks that should be on every investor’s radar this fall.
Alphabet (GOOG/GOOGL)
First on the list of the best S&P 500 stocks to buy now is Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), the parent company of Google. It’s gaining ground in AI, and quickly. The company just announced the release of a new generative AI software product called “Gemini” that is aimed at competing against OpenAI’s ChatGPT and GPT-4 chatbot models. According to Alphabet, Gemini is a large language software model that can summarize text and generate original content based on user voice and text prompts.
Gemini can also write and read back emails to users, compose song lyrics, and write journalism articles. The new software is widely expected to help engineers write code and generate original images for graphic designers and others. Early reviews claim that Gemini is as good or better than GPT-4, the most advanced AI model available from OpenAI. Perhaps most important, Alphabet is starting to monetize its AI products. Its AI tools will be available to enterprise customers for a monthly fee of $30 per user.
Alphabet’s stock is up 54% this year, but could have more room to run on its AI advancements.
Restaurant Brands International (QSR)
Restaurant Brands International (NYSE:QSR), the parent company of Burger King and Popeyes, just announced a new stock buyback program that will see it repurchase $1 billion of its common shares over the next two years. The new buyback plan follows the expiration of Restaurant Brands earlier stock buyback program for the same amount. The stock buyback announcement comes after the company, which also owns Firehouse Subs and the Tim Hortons coffee chain, reported strong second-quarter financial results.
In August, Restaurant Brands announced that its overall Q2 sales increased 10% from a year earlier. The company reported EPS of 85 cents versus 77 cents that was expected on Wall Street. Revenue totaled $1.78 billion, which was also ahead of the $1.75 billion forecast by analysts. Burger King, which the company has rebranded, saw particularly strong same-store sales in Q2, growing 10.2%, nearly double forecasts of 5.3% growth. QSR stock has gained 14% over the last 12 months.
Apple (AAPL)
What a difference a few days can make. A little over a week ago, it seemed liked Apple (NASDAQ:AAPL) couldn’t catch a break, what with China banning its iPhones and France raising concerns about radiation emitted from the smartphones. So how did it make the list of best S&P 500 stocks? Well, it appears that pre-orders of the company’s brand new iPhone 15 are better-than-expected and early reviews of the device are overwhelmingly positive. Reviewers claim the iPhone 15 is lighter, faster, and doesn’t cost any more than earlier versions of the phone. It’s being called a win for consumers.
The positive news is helping to lift AAPL stock and coming as a relief to shareholders who watched the price slide 10% over the summer on rising concerns about sales of the company’s devices that also include the iPad and Apple Watch. Those worries now seem overblown, especially with tensions in China subsiding. Looking ahead, Apple’s new augmented reality headset slated for release in early 2024 should provide a catalyst for the company’s stock, as should the continued growth of services such as Apple Pay.
AAPL stock is up 43% so far in 2023.
Lululemon (LULU)
You might be surprised to find a clothing store on the list of best S&P 500 stocks to buy now, but not all retailers are in the dumps these days. Take Lululemon (NASDAQ:LULU), which recently reported that its fiscal Q2 profit rose 18% from a year earlier due largely to increased sales in China. The company, which specializes in athletic apparel for women and men, said that its fiscal Q2 revenue in China rose 61% year-over-year (YOY), despite a rapid deceleration in that country’s economy. Lululemon currently has 107 stores in China. It plans to open 35 more stores internationally over the next year, with most of the new locations based in Asia.
For fiscal Q2, Lululemon announced EPS of $2.68 versus $2.54 expected on Wall Street. Revenue in the quarter totaled $2.21 billion compared to a consensus forecast of $2.17 billion. The company’s revenue rose 18% YOY in the quarter. The strong Q2 results led the company to revise up its full-year guidance. It now expects sales of between $9.51 billion and $9.57 billion, compared to a previous range of $9.44 billion and $9.51 billion. Profits for the current fiscal year are expected to be between $12.02 and $12.17 per share.
LULU stock is up nearly 20% this year.
Tesla (TSLA)
From solar panels to supercomputers, Tesla (NASDAQ:TSLA) is developing a lot more than just electric vehicles (EV). Right now, the company’s plan to build a supercomputer called “Dojo” is getting a lot of attention. Investment bank Morgan Stanley (NYSE:MS) recently said that Dojo could be a huge catalyst for Tesla moving forward, potentially boosting the company’s market valuation by as much as $500 billion. That report got a lot of attention and led TSLA stock to rise 15% over the last month alone. Year-to-date (YTD) the stock is up 146%.
The Dojo supercomputer will reportedly be used to train AI models for self-driving cars. Tesla CEO Elon Musk has said that the company plans to spend more than $1 billion on Dojo’s development in coming years. Morgan Stanley sees a big opportunity ahead, claiming that Dojo can open up new addressable markets for Tesla that go beyond selling EVs. Citing the potential impact of Dojo, the firm raised its recommendation on TSLA stock to “buy” from “neutral”. It raised its price target on Tesla’s shares by 60% to $400, the highest on Wall Street. That’s why it’s on this list of current best S&P 500 stocks to consider adding to your portfolio.
Arm Holdings (ARM)
If there’s a microchip and semiconductor company to keep an eye on this fall, it’s Arm Holdings (NASDAQ:ARM). After a successful initial public offering (IPO) that saw the British chip designer achieve a $54 billion valuation and its share price gain 25% on its first day of trading, news comes that the stock is now in decline. ARM stock has fallen each day since its market debut, dropping 20% from an intraday peak of $69 a share.
Some of the drop in ARM stock can be attributed to profit taking immediately after the IPO. However, there are also concerns about the company’s exposure to China, where it gets about a quarter of its annual revenue, and the current valuation of the stock. Following its market debut, Arm’s price-earnings (P/E) ratio was at 110, which is extremely high and above that of rival Nvidia’s (NASDAQ:NVDA) valuation, which sits at 105 times earnings. Should ARM stock fall further and the valuation come down, it might make for a good buying opportunity.
Intuit (INTU)
If the only two certainties in life are death and taxes, then Intuit (NASDAQ:INTU) is in the right business. The company behind TurboTax and other accounting software applications that help people manage financial matters has been outpacing the market lately, fueled by strong earnings. INTU stock is up 35% in 2023, bringing its five years increase to 140%. However, the share price is currently about 25% below its all-time high even as the 40-year old company remains in growth mode.
Most recently, Intuit has gotten on the AI train, announcing a generative AI assistant for its financial, tax, and accounting software. The new “Intuit Assist” is being rolled out across the company’s suite of software products, including TurboTax, Credit Karma, QuickBooks, and Mailchimp. The AI assistant will help users with everything from tracking the items they need to complete their taxes, to locating outstanding invoices, and highlighting unusual spending patterns. The AI product could be a catalyst that further boosts INTU stock.
On the date of publication, Joel Baglole held long positions in GOOGL, AAPL and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.