3 Market-Beating Stocks with Competitive Advantages

Stocks that outperform the market usually share key traits such as rising sales, expanding margins, and increasing returns on capital. The select few that can do all three for many years are often the ones that make you life-changing money.

It’s clear there’s a strong connection between sustained earnings growth and hall-of-fame returns. On that note, here are three market-beating stocks that could turbocharge your returns.

Monolithic Power Systems (MPWR)

Five-Year Return: +342%

Founded in 1997 by its longtime CEO Michael Hsing, Monolithic Power Systems (NASDAQ:MPWR) is an analog and mixed signal chipmaker that specializes in power management chips meant to minimize total energy consumption.

Why Should You Buy MPWR?

1. Market share has increased this cycle as its 25.9% annual revenue growth over the last five years was exceptional
2. Performance over the past five years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 27.7% outpaced its revenue gains
3. Stellar returns on capital showcase management’s ability to surface highly profitable business ventures

At $1,564 per share, Monolithic Power Systems trades at 56.7x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Caterpillar (CAT)

Five-Year Return: +363%

With its iconic yellow machinery working on construction sites, Caterpillar (NYSE:CAT) manufactures construction equipment like bulldozers, excavators, and parts and maintenance services.

Why Should CAT Be on Your Watchlist?

1. Highly efficient business model is illustrated by its impressive 16.9% operating margin, and its rise over the last five years was fueled by some leverage on its fixed costs
2. Free cash flow margin grew by 4.9 percentage points over the last five years, giving the company more chips to play with
3. ROIC punches in at 36.6%, illustrating management’s expertise in identifying profitable investments

Caterpillar’s stock price of $987.01 implies a valuation ratio of 37.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

LPL Financial (LPLA)

Five-Year Return: +109%

As the nation's largest independent broker-dealer with no proprietary products of its own, LPL Financial (NASDAQ:LPLA) provides technology, compliance, and business support services to independent financial advisors and institutions who manage investments for retail clients.

Why Are We Bullish on LPLA?

1. Market share has increased this cycle as its 32.1% annual revenue growth over the last two years was exceptional
2. Share buybacks catapulted its annual earnings per share growth to 27.2%, which outperformed its revenue gains over the last five years
3. ROE punches in at 37.3%, illustrating management’s expertise in identifying profitable investments

LPL Financial is trading at $293.85 per share, or 12.4x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don’t just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn’t over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.