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The “Rule of 10” for Deciphering the Next Stock Market Champions
Choosing growth stocks with the potential for significant returns can be a challenging task for any investor. If you’re looking to identify tomorrow’s top-performing companies, you may want to consider taking a page from the playbook of Wall Street’s best minds. Goldman Sachs Group, Inc. (GS) has developed a straightforward approach that involves targeting companies that consistently grow their revenues by at least 10% annually. This strategy, known as the “Rule of 10,” has been used by Goldman Sachs to identify potential market champions, with 21 S&P 500 firms meeting the criteria in 2025.
The “Rule of 10” was created by Goldman Sachs as a method of identifying companies that have the potential to see significant growth in their stock value. In order to pass the test, companies must demonstrate consistent revenue growth of at least 10% over the past two years and be expected to maintain that growth trajectory going forward. As of early 2025, 21 S&P 500 stocks have met Goldman’s income requirements and are considered potential market leaders.
While the “Rule of 10” can be a useful tool for identifying high-growth stocks, it’s important to remember that it shouldn’t be the sole factor in your investment decision-making process. It’s always a good idea to conduct thorough research and consider various factors before making any investment decisions.
So, what exactly is the Rule of 10 and how does it work? By analyzing the success of today’s top-performing companies, including Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and Apple Inc. (AAPL), Goldman Sachs has identified a pattern of consistent revenue growth as a key factor in driving stock market success. Taking this knowledge into account, Goldman Sachs analysts have developed a screening tool to identify companies that have the potential to outperform the S&P 500 in the future.
To pass the Rule of 10 exam, companies must meet the following criteria:
– Be listed on the S&P 500 Index.
– Have achieved at least 10% revenue growth in each of the past two years.
– Be projected to continue growing revenues by at least 10% in the current year, the following fiscal year, and the fiscal year after that.
Using these criteria, Goldman Sachs has identified a number of S&P 500 stocks that have the potential to see significant growth in the coming years. By projecting sales growth of at least 10% in the years ahead and screening companies based on their past performance, Goldman Sachs has pinpointed a select group of companies that meet the Rule of 10 criteria.
If you’re interested in finding stocks that meet the Rule of 10 criteria, you can use screening tools to identify companies that are projected to achieve significant revenue growth in the future. While the specific companies that meet the Rule of 10 criteria may change over time as analysts revise their revenue estimates, using screening tools can help you identify potential market leaders that have the potential to outperform the market.
In conclusion, the Rule of 10 developed by Goldman Sachs is a valuable tool for identifying companies with the potential for significant capital appreciation. While it’s important to conduct thorough research and consider various factors before making investment decisions, the Rule of 10 can serve as a starting point for identifying high-growth stocks in the market.
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