For most investors, the key to finding the best stocks is patience. Through both ups and downs, great stocks can generate truly spectacular price appreciation.
But it works only if you keep your head.
Selling into a crash is a sure way to scuttle your returns. By the same token, buying into market peaks is also going to cripple performance. Stick to a plan, however, and the best stocks will crush the broader market over the longer term.
That’s critical when the S&P 500 isn’t getting it done. Over the past decade, the U.S. benchmark delivered a nominal price gain of 60%. (With dividends and inflation, it comes to 67%.) Yup, it’s been a disappointing decade to say the least.
Past performance is not an indication of future returns, but looking at the S&P 500’s 10 best stocks over the last 10 years is instructive nonetheless. Brands, healthcare and technology dominate the list. Interestingly, good old fashioned retail does too.
Whatever the sector, the most important contributor to gains was staying the course. Have a look at how the S&P 500’s 10 best stocks over the past decade outperformed by a huge margin if you just held on — and how much juice these stocks might have left. (Data courtesy of S&P Capital IQ.)