The 3 Best S&P 500 Stocks to Buy Now

The S&P 500 includes a wide selection of world-class businesses that can help you build wealth for retirement. The best stocks to consider are those that combine a durable competitive advantage with clear growth catalysts.

I'm not going to pretend that the following stocks are the absolute best buys from the index right now, because investing is subjective. But Amazon (NASDAQ: AMZN), Visa (NYSE: V), and Eli Lilly (NYSE: LLY) each serve a different sector of the economy, currently trade at reasonable valuations, and should compound in value for years to come.

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1. Amazon

Amazon combines one of the strongest competitive advantages in retail with durable technological advantages through its cloud services and artificial intelligence (AI) infrastructure. Every $1 invested in Amazon stock 20 years ago would be worth $155 currently, and it's not done growing.

The investment case starts with the momentum in AI cloud services. Amazon Web Services (AWS) is seeing accelerating revenue growth, up 28% year over year in Q1. It recently signed new cloud agreements from OpenAI, Anthropic, Uber Technologies, and other industry leaders. AWS remains the leading cloud services provider and generates most of the company's profit.

Meanwhile, e-commerce is Amazon's biggest revenue contributor, and it still offers a lot of growth potential. This business just posted its highest unit sales growth since the pandemic, with grocery gross sales exceeding $150 billion.

Customers are increasingly choosing Amazon for everyday essentials. It is leaning further into this by investing in drone delivery and expanding its same-day delivery network to reach deeper into rural areas. Long term, this should unlock more e-commerce growth.

A slowdown in consumer spending or in the data center market would pressure Amazon's growth. However, the stock appears reasonably priced based on operating cash flow. Amazon trades at a multiple of 20 on trailing cash from operations per share. This figure may undervalue its opportunities in cloud and e-commerce.

2. Visa

Major credit card brands have been rewarding investments for many years. Visa is one of the best stocks to own because it doesn't issue cards and take on credit risk. It operates one of the largest payment networks, essentially serving as a tollbooth for billions of transactions across the global economy.

In the recent quarter, Visa processed 66 billion transactions, up 9% year over year. Strong growth in value-added services, including AI-powered fraud detection, boosted total revenue by 17% year over year. Its profitable network converted this top-line growth into a robust 20% increase in adjusted earnings.

Visa calls itself the "hyperscaler of payments." It is positioned to see payment volumes grow as AI agents create millions more transactions over its network.

However, management believes its AI-powered value-added services could represent an even bigger opportunity. These services, including security, already account for 30% of its revenue. It benefits from massive amounts of transaction data, which will be valuable for maintaining secure transactions in agentic AI commerce.

Obviously, a worsening economy or competition from alternative payment methods would pressure Visa's growth. But the stock offers attractive return prospects, trading at 24 times forward earnings. Given the company's current momentum and AI opportunities, this valuation may underestimate Visa's prospects.

3. Eli Lilly

Investing in leading pharmaceutical companies is another smart long-term bet. Healthcare spending usually holds up during economic downturns. Eli Lilly is tapping into the growing demand for innovative treatments for obesity, type 2 diabetes, immunology, oncology, and neuroscience.

In the first quarter, revenue surged 56% year over year. The company received FDA approval for Foundayo, a GLP-1 pill that can be taken on an empty stomach at any time in the day. This should fuel more growth in obesity products. The company is also seeing strong momentum across immunology, oncology, and neuroscience. Product revenue from these categories grew 160% year over year.

Driving these impressive gains is the company's research and development spending. R&D spending has accelerated in the last five years, growing 112% to over $14 billion on a trailing-12-month basis. This points to a deep pipeline of treatments to fuel long-term growth.

While an aging population is a long-term tailwind for Eli Lilly, there are risks even for a top healthcare stock, including competition in GLP-1s and the potential failure to secure approvals for future pipeline products.

Still, Eli Lilly will likely continue to ride these megatrends in healthcare and deliver market-beating returns for investors. Analysts expect the company's earnings to grow at an annualized rate of 21% in the coming years, yet investors can buy the stock for just 26 times forward earnings.

John Ballard has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Eli Lilly, Microsoft, Uber Technologies, and Visa. The Motley Fool has a disclosure policy.