The U.S. stock market posted a stellar performance in 2024, with the benchmark S&P 500 index reaching an all-time high closing value of 6,090.27 on Dec. 6.
But things may turn even better in 2025. According to Charles Schwab, based on 14 interest rate cycles since 1929, the S&P 500 index has posted positive returns 12 months from the first rate cut in the cycle 86% of the time. The benchmark index posted negative returns after rate cuts in 2001 and 2007, attributed mainly to the recessionary environment.
In September 2024, the Federal Reserve commenced the ongoing rate cut cycle by reducing benchmark interest rates by 50 basis points. Subsequently, since the current economic environment does not appear recessionary, it may be prudent to expect the index to continue growing till September 2025. Many analysts seem to agree with this projection. UBS expects the S&P 500 to reach 6,400, while Oppenheimer Asset Management's chief investment strategist, John Stoltzfus, expects the index to reach 7,100 in 2025.
Against this backdrop, it makes sense for retail investors to pick up small positions in high-quality stock riding secular tailwinds. Here's why these two companies picks fit the bill.
1. Oracle
When investing in database software and cloud services stocks, Oracle(NYSE: ORCL) is an obvious choice. The company's second-quarter fiscal 2025 top- and bottom-line performance missed consensus estimates by a slight margin (for the period ended Nov. 30). Despite this, the company's prominent role in the ongoing AI revolution and its strength in traditional databases make it a worthwhile pick in December 2024.
Oracle's cloud services and licensing support revenue accounts for almost 77% of the company's total revenue. The cloud business is expected to rake in $25 billion in revenue in fiscal 2025. Oracle's prominence in providing artificial intelligence (AI)-optimized data center infrastructure is the main factor fueling the growth of its cloud business. The company's Oracle cloud infrastructure is used by major AI companies such as Nvidia, Meta Platforms, xAI, OpenAI, and Cohere to train their most important generative AI models.
Oracle is also focused on further improving the performance of its cloud infrastructure and recently released the largest and fastest supercomputer in the world, which uses up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle cloud infrastructure faster and cheaper than many competing infrastructure clouds, helping it win large AI training workloads. The company's GPU usage also jumped by a stunning 336% year over year in the second quarter.
Oracle differentiates itself from many other cloud infrastructure players with its unique cloud architecture. The company has opted for a modular design approach where only six standardized data racks are needed to build a cloud region that provides all services to clients. The company can easily scale the data center infrastructure from 50 kilowatts to 1.6 gigawatts in line with the demand cheaply and efficiently. The standardization in racks and services has also helped Oracle effectively deploy automation tools in its cloud infrastructure.
Oracle has also established a broad geographical footprint with 98 cloud regions. The company has entered into multi-cloud agreements with Microsoft's Azure, Alphabet's Google Cloud, and Amazon's AWS, which further allows customers high flexibility to deploy their systems in the cloud.
Admittedly, Oracle does not seem to be the hottest stock on Wall Street. However, the company recently was trading at just 8.43 times trailing-12-month sales -- better than the software industry median price-to-sales (P/S) ratio of 10.4. As multiples expand in line with robust growth, Oracle may see significant share price gains in the coming months.
2. MongoDB
The second database specialist worth investing in is MongoDB(NASDAQ: MDB). Although the company managed to handily beat consensus revenue and earnings estimates in the third quarter of fiscal 2025, shares have tanked on unexpected news of longtime CFO and Chief Operating Officer Michael Gordon leaving at the end of January 2025. The subsequent price correction has presented an excellent entry opportunity for retail investors.
MongoDB added nearly 1,900 new customers sequentially and ended the third quarter (ended Oct. 31) with a total customer count of more than 52,600. Furthermore, the company catered to 2,314 high-value customers (those generating at least $100,000 in annual recurring revenue) in the third quarter, up from 1,972 customers in the same quarter of the prior year.
Atlas, a cloud-native and integrated suite of database tools and services, accounts for nearly 68% of MongoDB's total revenue. The cloud platform's revenue grew 26% year over year in the third quarter, driven by robust adoption by enterprises for running mission-critical projects. Atlas catered to more than 51,100 customers at the end of the third quarter, up from over 44,900 in the same quarter of the prior year.
MongoDB is focusing on reallocating some of its go-to-market resources from mid-market to large enterprise channels. While the funds' reallocation from the mid-market segment to the enterprise channel is expected to reduce the pace of direct sales customer growth in the short run, it should drive higher revenue growth in the long run.
MongoDB uses AI tools and professional services to modernize customers' legacy applications. Since many of these applications are based on relational databases, the company also deploys a relational migrator to migrate them to MongoDB's platform (suitable for documents and other complex data structures). This modernization reduces cost, time, and risk of data loss or corruption. Hence, MongoDB sees a solid long-term growth opportunity in the legacy application modernization market.
Finally, MongoDB is also poised to benefit from enterprises increasingly focusing on AI-powered applications, which mostly require querying complex and rich datasets. The company says its unified platform approach (combining source data, metadata, operational data, and vector data) is superior to using multiple complex databases.
Considering its several growth tailwinds and strong financials, MongoDB seems a compelling buy now.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, MongoDB, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
