These Are the 3 Hottest Stocks in the S&P 500 Heading Into the New Year. Should You Invest in Them?

There are many strategies for investing in stocks and (hopefully) outperforming the broader market.

One well-known approach is to find a stock that has been beaten down or stagnated, but is suddenly rebounding due to a new development or an unexpectedly good quarter. That may indicate that management is getting the business back on track, and that the stock could be poised for an extended rally.

I've identified three stocks in the S&P 500 index that look like variations on that narrative, and they happen to be the three best performers in the index over the past month. They are Albemarle (NYSE: ALB), Solventum (NYSE: SOLV), and Merck (NYSE: MRK). Investors looking for fresh ideas for the new year should take a look at all three.

Source: Getty Images.

Of course, as with all performance metrics, the parameters you set for time frame and other factors matter. Here, I chose to limit my search to the S&P 500 because those 500 large caps represent about 80% of the total market capitalization of U.S. companies, and they tend to be well-established companies with real revenues and profits, rather than flash-in-the-pan microcaps.

And I went with a one-month performance time frame because it's short enough to show recent upward momentum due to new developments or financial results, but not so short that the price movement could be based on factors that have a high chance of reversing overnight and wiping out all gains.

A lithium producer sees growing demand

First up is Albemarle. The stock is up 39% over the past month (as of Dec. 4), which makes it the best-performing stock in the S&P 500 over that period. The North Carolina-based company is a specialty chemicals and materials manufacturer. It's also a major extractor and refiner of lithium, which is used in a bunch of applications. It's in particularly high demand for the rechargeable batteries used in electric vehicles and large-scale power storage systems.

Albemarle's stock slid to a multiyear low in early June in response to slower-than-expected EV sales over the past few years, and has been climbing since then. But it really took off in mid-November after several Wall Street analysts increased their price targets on the stock in response to the company's strong third-quarter earnings report, which it delivered on Nov. 5. The company beat Wall Street estimates for both revenue and earnings.

And while EV sales remain sluggish around the globe (the Chinese market is the exception), in other segments -- such as battery storage, retail electricity, and solar energy systems -- demand is increasing for the types of lithium products that Albemarle makes.

If demand for lithium products continues to grow, expect Albemarle's stock to do likewise in 2026.

A recently created company that may be finding its footing

Next up is Solventum. The stock is up almost 25% over the past month, making it the second-best performing stock in the S&P 500. The Minnesota-based firm is fairly new, having been spun off from 3M in April 2024. It makes a range of medical products, including medical and surgical devices, dental solutions, health information systems, and purification and filtration systems.

Solventum's share price had been moving along more or less sideways since its debut, but it began to surge dramatically in late October. In early November, the company reported third-quarter sales and profits that beat Wall Street's forecasts. Management also boosted its full-year earnings guidance.

Later in November, the company announced a $1 billion share repurchase program. Such stock buybacks often give share prices a lift. All that good news has convinced some analysts that the young company has found its footing and is poised to grow.

Strong results and a blockbuster drug

Finally, there's Merck. The pharmaceutical giant's stock was moving horizontally this year through the end of October. But a solid quarterly report on Oct. 3, in which the company exceeded forecasts on both earnings and revenue, gave it a boost. Quarterly sales of Keytruda, its blockbuster cancer drug, rose 10% from the same period a year ago and topped $8 billion for the first time. The company is also having real success in slashing costs. As a result, management increased its earnings outlook for 2025.

The stock is up nearly 22% over the past month.

All three of these stocks, which struggled for most of 2025, seem poised for strong outperformance in 2026.

Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck. The Motley Fool recommends Solventum. The Motley Fool has a disclosure policy.