S&P 500 Stocks With the Potential to Outperform in 2026

For the third consecutive year, I am sharing a list of S&P 500 index stocks with the potential to outperform in the coming year. These stocks were identified by a screen based on Martin Fridson’s book “The Little Book of Picking Top Stocks: How to Spot Hidden Gems” (Wiley, 2023). This week, I present this year’s list and provide a little added insight about specific stocks with potential catalysts for an upside run.

First, a bit of background. Fridson analyzed the S&P 500’s previous best-performing stocks to determine if there were common traits among them. He identified five such traits: a high level of dispersion in analysts’ estimates, a size below the median of all S&P 500 stocks, relatively high levels of volatility, below-top-notch credit ratings and a catalyst to cause the price to move.

I screened for dispersion in earnings estimates, size and volatility. Dispersion was measured using the Fridson-Lee statistic, which is the highest estimate minus the lowest estimate, divided by the lowest estimate. Credit ratings were pulled from Moodys.com. There isn’t a way to quantitatively screen for catalysts.

Last year’s list found several big winners, including Western Digital Corp. (WDC), up 146.7% over the past 12 months, Warner Bros. Discovery Inc. (WBD), up 139.5%, Expedia Group Inc. (EXPE), up 40.3%, and EQT Corp. (EQT), up 36.3%. (My wife has owned shares of Expedia for several years.)

Fridson cautioned that stocks with the potential to have a great year also have the potential “to have a very bad year.” Last year’s list included LyondellBasell Industries N.V. (LYB), Builders FirstSource Inc. (BLDR) and Zebra Technologies Corp. (ZBRA). The three stocks have lost 45.5%, 37.1% and 34.2%, respectively, over the past 12 months.

The screen’s use of earnings estimate dispersion can lead it to identify both big winners and big losers. Disagreement among analysts increases the likelihood of surprises, but those surprises can be either positive or negative.

Overall, 10 of the 24 stocks listed in the December 12, 2024, Investor Update have outperformed the S&P 500 over the past 12 months. The average price return for the passing stocks was 14.3%, versus the S&P 500’s price return of 13.5% through Monday, December 9, 2025. As noted above, we could not screen for catalysts. Including this step from Fridson’s list may have weeded out some of the underperformers.

Candidates Poised to Outperform in 2026

I reran the screen this week to identify stocks with the potential to be the S&P 500’s top performers in 2026. Stocks with Moody’s credit ratings of A or better and stocks without a credit rating were removed.

I then took the extra step of asking both ChatGPT and Claude to analyze the 45 remaining stocks for qualitative traits that Fridson found past S&P 500 top performers to have.

The artificial intelligence (AI) chatbots identified the following two companies as having new products that could potentially serve as positive catalysts.

• Insulet Corp. (PODD): Its Omnipod automated insulin system is expected to achieve full integration with continuous glucose monitors (CGMs) across all major sensors.
• GE HealthCare Technologies Inc. (GEHC): The company is producing innovations in diagnostic imaging equipment, radiopharmaceuticals, AI, cloud and software for medical imaging. (My wife inherited shares of GE HealthCare.)

Exposure to commodities is also a catalyst, as there is a strong link between shifts in commodity demand and earnings of companies tied to those commodities. Claude and ChatGPT identified Albemarle Corp. (ALB), Ball Corp. (BALL), International Paper Co. (IP), NRG Energy Inc. (NRG), Smurfit WestRock PLC (SW) and Weyerhaeuser Co. (WY) as all having high commodity exposure.

According to Fridson, another potential catalyst is operating in an industry with a proverbial 800-pound gorilla—that is, a dominant firm. If the dominant firm falters, it could create an opportunity for a smaller competitor to grow revenues quickly. The AI chatbots identified several companies passing the screen that compete against dominant firms, including Citizens Financial Group Inc. (CFG), Fifth Third Bancorp (FITB), KeyCorp (KEY) and Invesco Ltd. (IVZ).

The strategy behind this screen is speculative. Fridson suggested putting no more than 1% or 2% of your portfolio into a stock you believe could be next year’s top performer in the S&P 500. Make sure to do your own research before buying any of these stocks.

Alternatively, you could use the list as a starting point to identify stocks that may be worth holding for the long term. This would require spending time examining the stocks’ underlying fundamentals and valuations—factors that the screen does not consider.