The Best Performing Stocks of the Last Century
Tech stocks have been the darlings of investors in recent years, offering substantial returns and capturing the attention of market enthusiasts. However, a recent study by Arizona State University researcher Hendrik Bessembinder sheds light on the most successful investments of the last century, revealing a diverse range of companies that have delivered massive gains over the long run.
Healthcare firms such as Abbott Laboratories, Johnson & Johnson, and Pfizer have emerged as top performers, with seven of the 30 best-performing stocks belonging to this sector. Aerospace and defense stocks like General Dynamics, Boeing, and Northrop Grumman have also proven to be lucrative investments over the past century.
Interestingly, two iconic beverage companies, Coca-Cola and PepsiCo, secured spots among the top performers, returning investors more than 12 million percent and 8 million percent, respectively, over the last 98 years. Additionally, Hershey and Tootsie Roll Industries made their mark in the top 30 list of best-performing stocks.
However, one industry stands out as the king of returns in the last century – cigarettes. An investment of $1 in Marlboro maker Altria Group in 1925 would have grown to $2.66 million by the end of last year, making it the highest returning stock. Tobacco seller Universal Corp. and smokeless tobacco giant UST Inc., acquired by Altria in 2009, also featured in the top 20 list of best-performing stocks.
The Power of Long-Term Investing
While investors typically do not hold stocks for nearly a century, the data highlights the significant impact a long-term investment horizon can have on a portfolio. It underscores the diverse opportunities that exist across various sectors of the stock market, showcasing the potential for substantial gains over time.
Tech Titans and Other Market Leaders
Bessembinder’s analysis categorizes stocks based on their price history duration, with companies like Nvidia leading the pack in annualized returns among stocks with more than 20 years of trading history. The tech giant has delivered impressive returns, excluding its stellar performance this year. Other tech behemoths like Netflix, Amazon, Microsoft, and Adobe also feature prominently among the top performers.
However, amidst these tech giants are lesser-known companies that have delivered exceptional returns to investors. Plenum Publishing Corp. and Axon Enterprise have demonstrated strong annualized returns over their trading history, showcasing the diversity of high-performing stocks in the market.
Investing in sectors like construction and housing has also proven to be lucrative, with companies like Home Depot, Pool Corp., and NVR delivering significant returns to investors over the years.
Time in the Market vs. Timing the Market
One key takeaway from Bessembinder’s analysis is the importance of “time in the market” in determining an investor’s success. The data reveals that stocks with longer price histories tend to deliver higher cumulative returns, emphasizing the value of a long-term investment approach.
The study also highlights the impact of having a few winners in a portfolio, as evidenced by the substantial gains achieved by top-performing stocks like Altria and America’s snacking giants. While not every stock may deliver positive returns, having a diversified portfolio with a mix of long-term winners can significantly boost overall returns.
In conclusion, the best performing stocks of the last century showcase the power of long-term investing and the diverse opportunities that exist across various sectors of the market. By adopting a patient and disciplined approach to investing, investors can potentially unlock substantial gains and build wealth over time.
