These 3 Stocks Have Been the S&P 500's Hottest Buys This Year. Can They Still Go Higher?

The S&P 500 has risen 16% this year, as it flirts with a third-straight year of 20% gains. It would be an impressive feat for the market. But that still pales in comparison to how well three of the hottest stocks on the index have performed.

Robinhood Markets (NASDAQ: HOOD), Seagate Technology (NASDAQ: STX), and Western Digital (NASDAQ: WDC) are the top three performers on the index during the past 10 months. Are they still good buys? Let's take a look. Here are the stocks, ranked in order from highest to lowest gains.

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Robinhood Markets: up 275%

The best-performing stock on the S&P 500 is online brokerage Robinhood Markets, which nearly quadrupled in value. The high-flying stock has been generating strong growth while also pursuing new opportunities to expand its business.

It's the most expensive stock on this list, trading at a forward price-to-earning (P/E) ratio of 71. Investors are bullish on the long-term opportunities for its platform in prediction markets, crypto, and stock trading. I see it as potentially being an all-in-one option for retail investors who want to buy, trade, or gamble. That's worth paying a premium for; the big question is just how much. The company has been expanding and launching new prediction markets and recently said it would also consider acquisitions within the sector.

The analysts covering the stock are skeptical that it can go much higher in the near term, as its average analyst price target is $125 -- roughly 12% lower than where it trades today. But if you're investing for the long term and are looking beyond just the next couple of years, the upside may be significant given the promising opportunities Robinhood is expanding into, including offering tokenized shares of private companies. Although this may seem controversial, it's just one example of how the company is innovating and seeking out new opportunities, which can be a recipe for strong long-term gains for shareholders.

Western Digital: up 265%

It's little wonder that the second spot on this list belongs to Western Digital, which is up about 265% this year. It has also benefited from an uptick in spending in the data storage market. It recently reported its latest quarterly earnings numbers.

For the fiscal first quarter, which ended Oct. 3, Western Digital's sales 27%, with revenue coming at $2.8 billion, which could explain the stock's superior performance. Management remains optimistic about strong growth for its high-capacity drives. It expects that for the current quarter, the growth rate will remain about 20%, based on its projections.

Western Digital generates slightly higher operating margins than the next stock on this list does, and at a lower forward P/E multiple of about 20, this could make for a more compelling investment overall. Although it's up big this year, the stock may still have room to rise, given its enhanced growth opportunities due to AI.

Seagate Technology: up 225%

Shares of computer hardware and data storage company Seagate have more than tripled this year. The company is known for its reliable storage devices. They can be used for expanding the capacity of computers or to simply make it convenient to transport data from one location to another.

The tech company posted its latest earnings numbers last week, with revenue climbing by 21% to $2.6 billion for the fiscal first quarter ended Oct. 3. Its products have been in high demand from companies due to artificial intelligence (AI) and businesses expanding their computing capabilities and doing more in the cloud. A standard data security practice involves not only backing up data to the cloud, but also having multiple copies of the data, including a local copy that doesn't rely on internet connectivity -- hence the need for physical storage.

Seagate has clearly benefited from this demand, which is a great change of pace from previous years when the company struggled to generate any type of growth. The stock currently trades at a forward (P/E) of 25, which may be a bit high for the company. But if you're optimistic about continued AI-powered spending, particularly on infrastructure, Seagate could still make for a good long-term buy.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.