3 Growth Beasts That Have Beaten the Market in 8 of the Past 10 Years

For a stock to routinely beat the market is no easy task. The S&P 500 is a collection of the leading 500 stocks in the U.S. markets, and mirroring the index has been a great way for investors to grow their portfolios steadily over the years. Many fund managers fail to beat the index.

Three stocks that have been among the best growth stocks to own over the past decade are Intuitive Surgical (NASDAQ: ISRG), Nvidia (NASDAQ: NVDA), and Axon Enterprise (NASDAQ: AXON). Not only have they achieved significant returns, but they've also outperformed the market in eight of the past 10 years. Here's why they've done so well, and if they are still worth investing in today.

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Intuitive Surgical

Intuitive Surgical makes robotic-assisted systems that help surgeons perform complex and difficult procedures. The end result is that they help reduce the risk that a surgeon makes a mistake and can improve outcomes for patients.

Over the past decade, shares of Intuitive Surgical have soared more than 887%. Excluding this current year, the two times in the past 10 years when the healthcare stock underperformed the S&P 500 were in 2022 and 2019. This year, it's up around 8.8%, which also trails the index's gains of 16% thus far.

Even if it does fall short of beating the market this year, Intuitive remains a promising long-term investment to hang on to as its da Vinci machines are potential game changers for the healthcare sector. This year, the company projects around 17% growth in the number of da Vinci procedures, signifying strong continued demand for its products.

With an excellent profit margin of around 29%, this is a stock that can continually become more valuable in the very long run. But with the stock trading at a price-to-earnings (P/E) multiple of 75, investors shouldn't be surprised if there are some more timid returns in the near term, as Intuitive's valuation is a bit high.

Nvidia

Chipmaker Nvidia has become the most valuable company in the world, as it has generated life-changing returns of more than 22,120% over the past decade. This year it's up 34% and the only two times it hasn't beaten the S&P 500 in the last 10 years came in 2018 and 2022.

There's some risk with Nvidia these days due to the potential for spending related to artificial intelligence (AI) to slow down. If that happens, the stock could be vulnerable to a hefty decline. In 2022, when the S&P 500 declined by 19%, and before all the AI-fueled growth, Nvidia lost half of its value. It's a stark reminder of how quickly tech stocks can crumble amid challenging economic circumstances. At a P/E of 44, Nvidia is also trading at a bit of a high valuation, but it is arguably justifiable given its solid growth.

Nvidia dominates the AI chip market right now, and with tremendous free cash flow totaling more than $77 billion over the trailing 12 months, the company should be in an excellent position to handle any near-term headwinds and continue to grow. Even if its returns slow down in the future, I think it can still outperform the market in the long run.

Axon Enterprise

Axon Enterprise sells body cameras and less-lethal weapons, including Tasers, which are crucial for law enforcement. Over the past decade, its valuation has risen by 2,860%. It had off years in 2015 and 2017, but other than that, it's been a solid market-beating stock. It's also the only stock on this list that generated positive returns in 2022 when the market was in turmoil due to soaring inflation.

This is a company that I see a lot of growth potential in, given the importance of its products in law enforcement, particularly at a time when the government is cracking down on illegal immigration. Axon should be in a terrific position to experience significant growth in both the short and long term. However, what could make things difficult is the stock's incredibly high valuation -- it trades at 171 times its trailing profits.

This year, it's down 10% as 2025 could prove to be another down year for the stock, and I think there could be more challenging years ahead. I'd hold off on buying Axon because it is extremely overpriced and is vulnerable to more of a drop-off in value. But with strong growth prospects, it's definitely a stock worth keeping on a watch list.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise, Intuitive Surgical, and Nvidia. The Motley Fool has a disclosure policy.