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Investing Lessons: The 10 Best Stocks of the Past 20 Years
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“There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.” - Legendary speculator Jesse Livermore.
Investing should be viewed similarly investors. While there is no guarantee of success or sure-fire proof method of avoiding the risk of ruin on any given trade, investors can find success by studying past winners and their similarities. Doing so can dramatically increase the odds of investing success in the long run.
The Search for True Market Leaders
When I think of a true stock market leader, I envision a stock with stellar fundamentals, price action, and the ability to multiply over five years. Below are the top 10 performing stocks over the past 20 years:
Image Source: Zacks Investment Research
Understanding the Ingredients of Stock Market Winners
With thousands of publicly traded stocks for investors to choose from, finding the next big winning stock is no easy task. Because of this, most investors are best off “indexing” their money into the S&P 500 Index. However, outperforming Wall Street in the long run is possible. That said, investors must study the past and understand the ingredients and attributes that make up these monstrous stocks. After all history doesn’t always repeat, but it does tend to rhyme.
Sector & Industry Analysis
If you’re looking for the next big stock market winner, look at the technology sector. The tech-heavy Nasdaq 100 Index ETF (QQQ) is up more than double the S&P 500 Index over the past 15 years.
The evidence is conclusive that the tech sector breeds the most winners, and winning stocks are often part of a strong industry group, such as semiconductors.
Disruption, Innovation, & Moat
Monster stocks always fall under one or all of the three categories above. Streaming giant Netflix flipped the movie industry on its head by offering a DVD-by-mail service and, ultimately its wildly popular streaming service. Netflix’s disruptive business led to the demise of former movie rental leader Blockbuster.
Intuitive Surgical ((ISRG - Free Report) ), arguably a tech stock, built its innovative “da Vinci” surgical robot which conducts minimally invasive surgery for various surgeries such as cardiac valve repairs. The system has a million-dollar price tag because da Vinci is so innovative and unique.
Apple is the best example of a “moat.” Apple’s product line includes, computers, iPads, iPhones, the app store, and watches that provide a seamless, interconnected experience. The company’s vast ecosystem is the secret ingredient to its success.
Triple-Digit Earnings Growth
Stock price appreciation is directly correlated with earnings growth in the long term. Because Winning stocks typically have robust EPS growth before their big moves, investors should search scan for these attributes.
Image Source: Zacks Investment Research
The Zacks Rank, which provides investors with a glimpse into how a company will grow in the future based on consensus Wall Street analyst estimates, is a must-use tool.
Momentum & Share Price
Amateur investors often make two false assumptions about finding profitable investments:
1. Buy low, sell high: Though this method is possible, it’s much easier to latch onto a big winner by buying momentum. In fact, the easiest way to find the next stock to double is to look for one that already has.
Image Source: Zacks Investment Research
2. More Shares of a Low-Priced Stock is More Optimal than Fewer Shares of a High-Priced Stock: Travel booking website Booking ((BKNG - Free Report) ) traded for a seemingly lofty $500 per share in 2011. Today, BKNG stock trades at around $4,000. Like the real world, you get what you pay for on Wall Street
Institutional Backing
Mutual funds, hedge funds, and banks have the lion’s share of assets on Wall Street. Because institutions have such vast sums of money, it can take months or years for them to accumulate shares in a position. A sound method of tracking institutional accumulation is to check in on 13F disclosures (a disclosure money managers with greater than $100 million must file quarterly) of the best investors such as Stanley Druckenmiller or David Tepper.
Bottom Line
The ten best performing stocks over past two decades share several similar attributes. To find these winners in the future, investors should study and understand the common traits of true market leaders.
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Investing Lessons: The 10 Best Stocks of the Past 20 Years
“There is nothing new on Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.” - Legendary speculator Jesse Livermore.
Investing should be viewed similarly investors. While there is no guarantee of success or sure-fire proof method of avoiding the risk of ruin on any given trade, investors can find success by studying past winners and their similarities. Doing so can dramatically increase the odds of investing success in the long run.
The Search for True Market Leaders
When I think of a true stock market leader, I envision a stock with stellar fundamentals, price action, and the ability to multiply over five years. Below are the top 10 performing stocks over the past 20 years:
Image Source: Zacks Investment Research
Understanding the Ingredients of Stock Market Winners
With thousands of publicly traded stocks for investors to choose from, finding the next big winning stock is no easy task. Because of this, most investors are best off “indexing” their money into the S&P 500 Index. However, outperforming Wall Street in the long run is possible. That said, investors must study the past and understand the ingredients and attributes that make up these monstrous stocks. After all history doesn’t always repeat, but it does tend to rhyme.
Sector & Industry Analysis
If you’re looking for the next big stock market winner, look at the technology sector. The tech-heavy Nasdaq 100 Index ETF (QQQ) is up more than double the S&P 500 Index over the past 15 years.
Image Source: Zacks Investment Research
Of the top ten performing companies over the past 20 years, five are tech stocks, including, Nvidia ((NVDA - Free Report) ), Apple ((AAPL - Free Report) ), Netflix ((NFLX - Free Report) ), Booking ((BKNG - Free Report) ), and Amazon ((AMZN - Free Report) ).
The evidence is conclusive that the tech sector breeds the most winners, and winning stocks are often part of a strong industry group, such as semiconductors.
Disruption, Innovation, & Moat
Monster stocks always fall under one or all of the three categories above. Streaming giant Netflix flipped the movie industry on its head by offering a DVD-by-mail service and, ultimately its wildly popular streaming service. Netflix’s disruptive business led to the demise of former movie rental leader Blockbuster.
Intuitive Surgical ((ISRG - Free Report) ), arguably a tech stock, built its innovative “da Vinci” surgical robot which conducts minimally invasive surgery for various surgeries such as cardiac valve repairs. The system has a million-dollar price tag because da Vinci is so innovative and unique.
Apple is the best example of a “moat.” Apple’s product line includes, computers, iPads, iPhones, the app store, and watches that provide a seamless, interconnected experience. The company’s vast ecosystem is the secret ingredient to its success.
Triple-Digit Earnings Growth
Stock price appreciation is directly correlated with earnings growth in the long term. Because Winning stocks typically have robust EPS growth before their big moves, investors should search scan for these attributes.
Image Source: Zacks Investment Research
The Zacks Rank, which provides investors with a glimpse into how a company will grow in the future based on consensus Wall Street analyst estimates, is a must-use tool.
Momentum & Share Price
Amateur investors often make two false assumptions about finding profitable investments:
1. Buy low, sell high: Though this method is possible, it’s much easier to latch onto a big winner by buying momentum. In fact, the easiest way to find the next stock to double is to look for one that already has.
Image Source: Zacks Investment Research
2. More Shares of a Low-Priced Stock is More Optimal than Fewer Shares of a High-Priced Stock: Travel booking website Booking ((BKNG - Free Report) ) traded for a seemingly lofty $500 per share in 2011. Today, BKNG stock trades at around $4,000. Like the real world, you get what you pay for on Wall Street
Institutional Backing
Mutual funds, hedge funds, and banks have the lion’s share of assets on Wall Street. Because institutions have such vast sums of money, it can take months or years for them to accumulate shares in a position. A sound method of tracking institutional accumulation is to check in on 13F disclosures (a disclosure money managers with greater than $100 million must file quarterly) of the best investors such as Stanley Druckenmiller or David Tepper.
Bottom Line
The ten best performing stocks over past two decades share several similar attributes. To find these winners in the future, investors should study and understand the common traits of true market leaders.