What a List of the Best-Performing Stocks of the Past Century Tells Us

Tech has offered investors immoderate of nan biggest returns complete nan past fewer decades—and particularly nan past fewer years—but complete nan agelong run, investors person seen monolithic gains from each complete nan market.

A caller study from Arizona State University interrogator Hendrik Bessembinder, who analyzed nan value history of much than 29,000 U.S. stocks that traded betwixt 1925 and 2023, reveals nan scope of companies that person made up nan astir successful investments of nan past period based connected their total return.

Seven of nan 30 best-performing stocks successful nan Center for Research successful Security Prices (CRSP) database that Bessembinder studied beryllium to healthcare firms including Abbott Laboratories (ABT), Johnson & Johnson (JNJ), and Pfizer (PFE). Aerospace and defense stocks, including General Dynamics (GD), Boeing (BA), and Northrop Grumman (NOC), were besides among nan astir lucrative investments of nan past century.

Coca-Cola (KO) and PepsiCo (PEP) were nan ninth and tenth-best performers. They’ve returned investors much than 12 cardinal percent and 8 cardinal percent, respectively, complete nan past 98 years. Hershey (HSY) and Tootsie Roll Industries (TR) besides made nan apical 30.

But of nan products that made investors rich | successful nan past century, 1 stands retired arsenic king: cigarettes. A personification who invested $1 successful Marlboro shaper Altria Group (MO) astatine nan extremity of 1925—the balanced of astir $18 today—and reinvested each their dividends, would person had $2.66 cardinal astatine nan extremity of past year. That's astir 7 times nan return for nan second-highest returning stock, building materials supplier Vulcan Materials (VMC). Tobacco seller Universal Corp. (UVV) and smokeless baccy elephantine UST Inc., which Altria bought successful 2009, were besides successful nan apical 20.

Investors typically don't clasp stocks for astir 100 years. But nan information illustrates nan effect a agelong clip sky tin person connected a portfolio—as good arsenic nan opportunities that tin originate each complete nan banal market.

Where Does Tech Land?

Bessembinder divides nan CRSP’s stocks into 4 categories characterized by nan long of their value history: stocks pinch astatine slightest 1 twelvemonth of data; stocks pinch much than 1 twelvemonth but little than 5 years of data; stocks pinch much than 5 but little than 20 years of data; and those pinch much than 20 years of data.

Of nan U.S. stocks pinch much than 20 years of trading history, Nvidia (NVDA) has nan highest annualized return (33.38%)—and that’s excluding its much than 130% capacity truthful acold this year. In nan apical 30, it’s joined by 4 different large tech companies—Netflix (NFLX; 32.06%), Amazon (AMZN; 31.78%), Microsoft (MSFT; 26%), and Adobe (ADBE; 23.93%). 

But mixed successful pinch these marketplace darlings are nan likes of Plenum Publishing Corp., a subsidiary of world patient Springer Nature, which delivered investors annualized returns of 32.09% betwixt 1972 and its acquisition by Dutch patient Wolters Kluwer successful 1998. Taser shaper Axon Enterprise (AXON), which debuted successful 2001 and still trades connected nan Nasdaq, has returned 31.13% a twelvemonth connected average. 

U.S. building and lodging person besides been a boon to investors. Shares of Home Depot (HD) person returned much than 1.6 cardinal percent successful nan 42 years that they’ve traded publicly. That translates to an mean yearly return of astir 26%. Pool materials supplier Pool Corp. (POOL) and homebuilder NVR (NVR) are besides among nan 30 best-performing stocks pinch 20-year histories.

Time successful nan Market Beats Timing nan Market

One of nan clearest takeaways from Bessembinder’s study whitethorn beryllium that “time successful nan market” is 1 of nan astir important determinants of an investor’s success. Of nan 30 CRSP stocks pinch nan highest cumulative return, Northrop Grumman, pinch 72 years of value history, is nan youngest. The median “age” of Bessembinder’s top-performing stocks is much than 92 years.

And conscionable a fewer other years of vulnerability tin swell an finance portfolio's value. Since debuting successful May 2002, Netflix has delivered an mean annualized return of 32.06%. If you had bought $1 of Netflix banal astatine its IPO price, that dollar would person been worthy $406.94 astatine nan extremity of 2023.

The aforesaid $1 IPO finance successful Amazon, which debuted 5 years earlier Netflix but has a somewhat little mean yearly return, would person been worthy $1,551.73—nearly 4 times your Netflix stake. 

Still, nan cohort of stocks pinch much than 20 years of value history was nan only bunch successful Bessembinder’s study successful which much than 50% of stocks delivered affirmative returns. The median return among each 29,087 stocks was -8%. 

Having 1 aliases 2 winners successful your portfolio tin make each nan difference: The afloat information set’s mean return, successful which nan monolithic gains of Altria and America’s snacking giants person other weight, was 22,840%.