Goldman Sachs is betting on stocks with high revenue growth to perform well, while the broader stock market grinds slowly higher over the next two years.
"The path to 2,600 at the end of 2019 will be driven by top-line sales growth," David Kostin, chief U.S. equity strategist at Goldman, said in a Friday report. "Sustained modest economic growth will support top-line revenue growth."
"Stocks with the best sales growth will outperform," he said.
Goldman's 2019 forecast of 2,600 for the S&P 500 is just 3.6 percent above the index's record high of 2,508.85 hit Wednesday. The S&P 500 traded about half a percent lower Monday, holding gains of about 11 percent for the year.
In contrast, Goldman's basket of 50 stocks with high revenue growth has returned about 20 percent this year, the report said. The stock basket is forecast to post a median sales growth of 14 percent next year, versus 5 percent for the S&P 500.
Goldman Sachs' high revenue growth stock basket performance (Dec. 2014 - Sept. 2017)
Source: Goldman Sachs Global Investment Research
Nine of the stocks in Goldman's basket have a consensus forecast for sales growth of more than 20 percent next year: Amazon.com, Netflix, EQT, Concho Resources, Align Technology, Rockwell Collins, Facebook, Autodesk and FMC.
"Those companies tend to have a competitive advantage in the current landscape with automation, robotics, technology," said Larry McDonald, author of investing newsletter The Bear Traps Report and a "Trading Nation" contributor.
But "to me, those stocks look tired," he said, noting the tech-heavy Nasdaq 100 has struggled for significant gains since early June. Rising interest rates should also put pressure on profit margins, McDonald said.
Major tech stocks were among the greatest decliners Monday, with Facebook 4 percent lower.