NVIDIA and Two Other S&P 500 Stocks to Watch in 2025

Following two consecutive years of impressive performance, the S&P 500 index is set for more growth in 2025. This positive outlook is driven by expected pro-growth policies under the Trump administration, the Federal Reserve's balanced interest rate strategies, and the underlying strength of the U.S. economy.

In 2024, the S&P 500 experienced a rise of over 20% for the second year in a row. With further increases expected, investors are encouraged to capitalize on this bullish momentum by focusing on robust momentum stocks within the S&P 500. One effective approach is the investment strategy introduced by Richard Driehaus, often referred to as the "buy high and sell higher" approach.

In line with this strategy, stocks like NVIDIA Corporation (NVDA), Brown & Brown, Inc. (BRO), and Chipotle Mexican Grill, Inc. (CMG) have been identified as top momentum picks for 2025 using the Driehaus methodology.

Understanding the Driehaus Strategy

Richard Driehaus articulated a fundamental belief regarding investment: "I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around." This principle drives his investment philosophy. The American Association of Individual Investors (AAII) utilizes several criteria, such as the percentage of the 50-day moving average, when constructing a portfolio based on Driehaus's insights.

This metric is calculated by subtracting the 50-day moving average of the stock's price from its month-end price, then dividing that result by the 50-day moving average. A crucial momentum indicator in this strategy is positive relative strength, which reflects that the stock is trading above its 50-day average—a sign of an upward trend.

Furthermore, the AAII highlights the importance of robust earnings growth rates and strong future earnings projections when selecting stocks that have the potential for superior performance. This strategy aims to deliver attractive long-term returns and emphasizes companies that consistently exceed earnings estimates.

Screening Criteria for Stock Selection

To ensure profitability, only stocks that meet specific criteria have been considered. These include a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and a Momentum Score of A or B. Research indicates that these combinations tend to present the best appreciation potential.

• Zacks Rank must be #2 or better: Stocks with Zacks Rank #1 or #2 historically outperform the market regardless of economic conditions.

• Five-year average EPS growth rates must exceed 2%: A strong history of earnings growth indicates a healthy business.

• Trailing 12-month EPS growth must be positive and above the industry median: Superior earnings performance is indicated by higher EPS growth than industry competitors.

• Last four quarters should have an average EPS surprise greater than 5%: Consistent positive surprises in EPS signal good price performance.

• Positive changes in the 50-day moving average and relative strength over four weeks: These indicators confirm that a stock is trending upwards.

• Momentum Score of B or better: This score is crucial for selecting stocks with the highest probability of success in a bullish market.

These stringent criteria refined a vast universe of over 7,743 stocks down to just 47 contenders.

Here are the three standout selections:

NVIDIA

NVIDIA specializes in graphics, computing, and networking solutions. It holds a Zacks Rank of #2 and boasts a strong Momentum Score of A. The company has shown an average trailing four-quarter earnings surprise of 9.8%.

Brown & Brown

Brown & Brown is involved in marketing and distributing various insurance products and services. With a Zacks Rank of #2 and a Momentum Score of B, the company has delivered an average trailing four-quarter earnings surprise of 6.9%.

Chipotle Mexican Grill

Chipotle Mexican Grill operates a chain of quick-casual fresh Mexican restaurants. It carries a Zacks Rank of #2 and a Momentum Score of B, posting an average trailing four-quarter earnings surprise of 9.8%.

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NVIDIA, Stocks, Strategy