An article in Advisor Perspectives details the 10 biggest winners of the past 3 decades, highlighting the fact that a majority of equity-market wealth is generated by just a small number of stocks. For those investors who chose these few “monster” stocks and stuck with them through bull and bear markets, they’ve certainly reaped the rewards.
- Broadcom: offers a very diverse portfolio across a range of markets, such as radio frequency filters and amplifiers, networking semiconductors, and connectivity chips that power Wi-Fi and Bluetooth. Since it’s inception in 2009, it’s had a 36.3% Compound Annual Growth Rate (CAGR).
- Amazon: we all know what Amazon provides, but this monster continues to grow, with a CAGR of 35.1% since its beginnings in 1997.
- Nvidia: the top designer of graphics processing units, with chips used in PCs for gaming and infotainment systems, as well as AI and autonomous driving, has had a CAGR of 33.2% since 1999.
- Salesforce.com: offers cloud-computing solutions for sales, customer support, marketing, and e-commerce and has had 28.3% CAGR since it began in 2004.
- Home Depot: the familiar brand has had a constant, upward trajectory since its founding in 1981, with 28.1% annual growth.
- Microsoft: yet another monster brand, Microsoft has climbed over the last decade after some previous dips during the Dotcom bust and the 2008 financial crisis. It still boasts a 27.3% CAGR since it began in 1986.
- Google (Alphabet): the eponymous search engine was founded in 2004 and has a 26.7% CAGR despite a dip during the 2008 financial crisis.
- Adobe: offers digital media content creation and marketing software, as well as a host of other services such as document management. Founded in 1986 (the same year as Microsoft), it has a 25.6% CAGR.
- United Health Group: since its inception in 1984, United Health has grown into the largest healthcare insurance provider in the U.S. Its Compound Annual Growth Rate currently stands at 24..8%.
- Tencent Holdings: the Chinese internet giant has businesses and investments in a large array of internet services. It’s the youngest company on this list; founded in 2010, its CAGR through 2021 is 24.2%.
One company not on this list: Tesla. That’s because with an annual growth rate of 60% it’s in a category of its own.
The biggest takeaway is that while these winning stocks can be expected to continue their streak for the foreseeable future, they likely won’t break their records. For the past 3 decades, the S&P 500 has had an average annual return of 9.5%, while these stocks have averaged 24.2%. That kind of outperformance isn’t likely to repeat itself in the next decade.
In conclusion, the article advises that investors hold a few broad-based ETFs as their core and choose a handful of specialized ETFs as satellite holdings, in sectors such as big data, AI, or cybersecurity—the type of companies that could very well find themselves on a list of winning stocks 10 years from now.