Top 20 Most Profitable Stocks of the Last 20 Years

Being part of the investing community means that, at some point in your life, you’ve probably heard or seen things like “I wish I had bought Apple (AAPL, Financial) or Amazon (AMZN, Financial) back it the early days” more times than you can count. You may have even said the same thing once or twice, though perhaps with different stocks.

It’s a common sentiment to wish that you could have had the luck or foresight to bet correctly on a stock that would go on to make millions, even if at the time, you had no way to differentiate it meaningfully from competitors that eventually became obsolete.

However, when we take a look at the stocks that had the highest potential to bring wealth to investors over the past 20 years, we find that the list does not consist solely of tech giants like Amazon and Apple. In fact, some of them might surprise you, and some of them you might never have even heard of before.

GuruFocus calculated the stocks trading on U.S. stock markets that would have multiplied investors’ funds the most if they had been able to purchase them at the lowest price they traded at over the last 20 years and held the shares through today. The results are shown in the chart below, with all purchase prices properly split-adjusted:

Top five in review

Amazon makes it into the top five in fifth place, which probably comes as a surprise to no one. It is the undisputed leader in quick-delivery e-commerce, with the speed and reliability of its delivery networks resulting in considerable customer stickiness.

In fourth, we have Monster Beverage, which investors may be familiar with but which may not have immediately jumped to mind as a stock that multiplied more than 1,000 times. This company is a prime example of rebranding gone right in the retail sector. After a rocky history as Hansen’s, the company rebranded to the Monster name in 2012 and sold its non-energy drink brands, and the new focus helped slingshot it to success.

In third place, Netflix is also an unsurprising contender, breaking the 1,000 times mark following its 44% year-to-date gain in 2020. For much of the past couple of decades, it was the go-to online streaming subscription, though its position is being challenged nowadays by the likes of Amazon Prime and The Walt Disney Co.’s (DIS) Disney+.

In second place is SBA Communications, a real estate investment trust that owns communications infrastructure primarily in the U.S. American Tower, in eighth place, is another communications infrastructure REIT. These companies have achieved consistently high earnings multiples through the stability of their businesses; as long as the people that live near the towers they own continue to need smartphones, landlines, internet of things applications and other communications tools, they are expected to continue generating reliable and growing income, leading to a high degree of investor confidence.

First place goes to NetEase Inc. (NTES, Financial), a leading Chinese internet technology company centered on gaming content, internet community, communications and e-commerce applications. An investment of $1,000 in NetEase on the purchase date of July 25, 2001, when it was trading for 13 cents per share split-adjusted, would have multiplied by 3,448 times and be worth nearly $3.5 million today. The company’s success comes mainly from PC and mobile online games, which contribute 79% of revenue and place the company as China’s second-largest gaming company after Tencent (HKSE:00700).

A common thread

There are a number of reasons why investors may overlook companies with high potential or be surprised that they turned out to be good investments. For instance, U.S. investors might have overlooked NetEase due to the risk of it falling outside of their circle of competence as a non-U.S. company, and it is all too common for a “boring” business like Old Dominion, which placed 19th on the list, to be overlooked simply because many investors don’t find its core business of truckload shipping to be attractive. Nevertheless, as more goods were transported, Old Dominion’s income grew.

Another name some may not have expected to see on this list is Tractor Supply, which came in ninth place. The American retail store, which caters to rural markets with its selection of agriculture, ranch and home improvement products, may not strike investors as a company that could achieve outsized returns. However, it has carved itself a niche and become by far the largest rural-focused retail chain store in the U.S.

So, with the most profitable U.S. common stock investments over the past two decades covering such a wide range of industries, is there anything they have in common that made them so successful? It’s had to find one on the surface, as these companies also run the gamut from financially stable to highly leveraged, and from new upstarts to longtime players changing up their game.

The only real commonality seems to be that they identified, appealed to and won over a specific target audience that had not yet been won over by a single player. For example, Booking Holdings, which ranks 15th on the list, focused more on the European and Asian markets to avoid the existing online booking competition in the U.S. Apple became a pioneer in the smartphone market, while SBA bought up communications real estate to ensure that any company wanting to use its towers would become a captive customer.

Conclusion

Unfortunately, the similarities between these successful investments do not make it any easier to identify the future top gainers in today’s market. These 20 companies have made it through the stock market’s version of natural selection and are thus viewed with survivorship bias. Investors aiming to make it big can do well by keeping up to date with potential disruptors, but two things should be kept in mind while doing this.

The first is that true disruptors will almost never be subject to a high price right out of the gate – such occurrences are typically artificially inflated by hype about the distant future as well as by the underwriters and insiders, who can (in the case of IPOs) use that hype to bag a hefty profit and cause share prices to drop dramatically. Note that they highest buy price of all the stocks in the list above was Amazon at a whopping $5.97.

The second is that the less competition there is, the easier it is for a company to capture market share at a relatively low cost. A new player entering a crowded and long-established market will have to spend more on advertising and research to fight for market share, and while new tech can sometimes make a big enough splash to overcome this and create a new market for itself (after enough money is spent on research and development), tech-adjacent and non-tech businesses may find it more of an uphill battle.

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