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The “Rule of 10” for Deciphering the Next Stock Market Champions
Finding the next big winners in the stock market can be a challenging task. Investors are always on the lookout for stocks that have the potential for significant growth and upside. Wall Street powerhouse Goldman Sachs Group, Inc. (GS) has a unique and straightforward approach to identifying future winners – the “Rule of 10”. This rule focuses on finding businesses that are able to consistently grow their revenues by at least 10%. In 2025, 21 S&P 500 companies met this criteria, including some of the fast-growing corporations we will highlight below.
Goldman Sachs developed the “Rule of 10” as a way to identify the next wave of stocks that are poised for growth in the market. Companies that are able to consistently achieve a 10% revenue growth and are expected to continue doing so in the future are the ones that pass the test. As of early 2025, 21 S&P 500 stocks met Goldman’s income requirements.
While the “Rule of 10” is a helpful screening tool, it should not be the only factor considered when making investment decisions. It is important to do thorough research and analysis before investing in any stock.
What is the Rule of 10?
To understand the Rule of 10, analysts at Goldman Sachs studied the success of some of the biggest winners in the market, including companies like Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Meta Platforms, Inc. (META), Microsoft Corporation (MSFT), NVIDIA Corp. (NVDA), and Tesla, Inc. (TSLA). By analyzing what made these companies successful, they were able to identify patterns and criteria that could help identify future outperformers in the market.
The Rule of 10 works by setting specific criteria for companies to meet in order to be considered as potential winners. Companies must:
– Be listed on the S&P 500 Index.
– Have achieved at least a 10% revenue growth in each of the last two years.
– Be expected to continue growing their revenues by at least 10% in the current year, the next fiscal year, and the fiscal year following that.
Stocks Approaching the Rule of 10 Criteria
Using the criteria set by the Rule of 10, Goldman Sachs screened the S&P 500 for companies that were projected to have at least a 10% revenue growth in the years 2024, 2025, 2026, and 2027. As of January 28, 2025, several stocks met the criteria and passed the test.
How Can One Find the Rule of 10 Stocks?
As analysts revise their estimates of income growth over time, the companies that meet the Rule of 10 criteria may change. By inputting the criteria into a screening tool, investors can identify which stocks are believed by Goldman Sachs to have the potential for market outperformance.
While this process may take time, it is possible for investors to compile the necessary information for all S&P 500 stocks and identify potential winners.
In conclusion, Goldman Sachs’s Rule of 10 is a tool designed to identify the next wave of S&P 500 stocks that have the potential for significant capital appreciation. It is important to note that this is a screening tool and not a definitive list for making investment decisions. Investors should conduct their own research and analysis before making any investment decisions.
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