Uncovering Tomorrow’s Market Leaders: The Rule of 10 Strategy – TK

Uncovering Tomorrow’s Market Leaders: The Rule of 10 Strategy

Investing in growth stocks with the most potential upside is a challenging task. However, Goldman Sachs Group, Inc. (GS) has a unique and straightforward approach to identifying tomorrow’s market champions – the “Rule of 10”. This rule is based on finding companies that can consistently grow their revenues by at least 10%, a criteria that only a select few companies within the S&P 500 are able to meet.

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The “Rule of 10” was developed by Goldman Sachs as a way to identify the next generation of high-flying stocks that have the potential to outperform the market. By analyzing companies that have consistently grown their revenues by 10% or more, Goldman Sachs aims to uncover the hidden gems in the stock market that may have been overlooked by other investors.

In early 2025, 21 S&P 500 companies met Goldman Sachs’ income requirements and were considered as potential candidates for future growth. These companies have demonstrated a track record of consistent revenue growth and are expected to continue to do so in the coming years.

The so-called “Magnificent Seven” – which includes companies such as Alphabet Inc. (GOOGL), Amazon.com Inc. (AMZN), and Apple Inc. (AAPL) – have been used as a blueprint for identifying companies with the most potential for future growth. By analyzing the success of these companies, Goldman Sachs is able to create a screen that highlights the future engines of stock market development.

To meet the criteria of the “Rule of 10”, companies must be listed on the S&P 500 Index, have experienced at least 10% revenue growth in the last two years, and be expected to continue growing their revenues by at least 10% in the current year and the following two fiscal years. Companies that meet these strict requirements are considered as potential candidates for future outperformance.

As of January 28, 2025, several S&P 500 companies have passed the “Rule of 10” test, including companies like Alphabet, Amazon, Synopsys Inc. (SNPS), Visa Inc. (V), and Intuitive Surgical (ISRG). These companies have demonstrated a strong track record of revenue growth and are expected to continue their upward trajectory in the coming years.

In conclusion, Goldman Sachs’s “Rule of 10” is a valuable tool for identifying the next wave of market champions within the S&P 500. While it is not a definitive list for making investment decisions, it serves as a starting point for investors looking for promising growth stocks. By focusing on companies that have a history of consistent revenue growth and strong future prospects, investors can potentially uncover the next big winners in the stock market.

Picture of Aarushi Sharma
Aarushi Sharma

an editor at TK since 2024.

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