Large-cap U.S. stocks have been performing exceptionally well over the past two years, defying challenges such as inflation and geopolitical turmoil. One standout in this space is Eli Lilly (NYSE: LLY), a leading company in metabolic disorders, cancer, immunology, and neuroscience, whose shares have surged by nearly 60% in 2024.
On the other hand, the Vanguard Growth Index Fund ETF Shares (NYSEMKT: VUG), which focuses on large-cap U.S. stocks, has also seen a strong performance this year with a 25% gain at the midway point.
Eli Lilly’s stock is currently trading at a high forward earnings multiple of 68, reflecting investor optimism about its growth potential. The company offers a modest dividend yield of 0.58% but has consistently increased its dividend by over 15% annually for the past five years. With a relatively low payout ratio of 69%, Eli Lilly is poised for significant top-line growth, with sales expected to grow by over 26% in 2024 and 23.3% in 2025, driven by its weight loss drug Zepbound.
On the other hand, the Vanguard Growth Index Fund ETF is a passively managed fund that tracks the CRSP US Large Cap Growth Index, providing exposure to top-performing U.S. large-cap growth stocks. With an attractive expense ratio of 0.04% and a 10-year average annualized return of 15.3%, this ETF offers a diversified approach to capturing growth trends across sectors.
While both Eli Lilly and the Vanguard Growth Index Fund ETF show potential for further gains, the choice between them ultimately depends on individual risk tolerance and investment goals. Eli Lilly offers the potential for higher returns but comes with greater single-stock risk, while the Vanguard Growth Index Fund ETF provides a more diversified approach to capturing growth trends.
In conclusion, both options have their merits, and investors should consider their risk tolerance and investment objectives before making a decision. Eli Lilly is likely to experience larger declines in a marketwide sell-off but could outperform the Vanguard Growth Index Fund ETF in current market conditions. Investors should weigh the risks and rewards of each option before making an investment decision.