As every investor should know by now, past performance is not an indication of future returns. That said, looking back at what the market and individual stocks have done over the long haul can offer valuable lessons and insights for the future.
The S&P 500 is up 118% over the decade on a total return basis (ice appreciation plus dividends). Adjusted for inflation, that comes to an annualized return of 6%. Going back to the 1800s, the market has delivered an annualized gain after inflation of almost 7%.
The shortfall isn’t really a disaster, but it certainly set back any number of investors and retirees. It’s even more painful when considering the returns of the hottest stocks of the last 10 years. A sizable enough stake in any of these names a decade ago would have made an investor rich by now.
One takeaway from the list of hottest stocks of the last 10 years is the emergence of biotechnology. Fully half the top 10 are biotech stocks. On the other hand, the list also shows that it’s not absolutely necessary to be part of a high-growth industry to put up eye-popping returns.
Another takeaway is that with a few exceptions, today’s big stars are absent from the list. Apple Inc. (NASDAQ:AAPL), for example, has a total return of 2,184% over the last decade, according to S&P Capital IQ, but that doesn’t allow it to crack the top 10.
The lesson there is that the best-performing stocks of the future are likely to be names no one’s heard of or cares about now.
Here are the 10 best stocks of the last 10 years — stocks that would have made you rich by now — on a total return basis. (In order to avoid a list being dominated by one-time penny stocks, we limited our search to the Russell 1000.)
#10: Pharmacyclics, Inc. (PCYC)
10-Year Total Return: 3,346%
Thanks to its development of Imbruvica — widely expected to become the world’s top-selling cancer drug — PCYC first started to take off in 2011 when it entered into an collaborative developmental deal with Johnson & Johnson (NYSE:JNJ).
The rest, as they say, is history.
It’s a real gamble to try to pick the next blockbuster therapy, but as PCYC shows, if you get it right, you get rich.
#9: Alexion Pharmaceuticals, Inc. (ALXN)
10-Year Total Return: 3,366%
Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is another biotech, and its stock and story is similar to PCYC. Shares slinked along for years below $10 until a hit therapy made it a superstar over the last four years or so.
Thanks to the popularity of its drugs to treat genetic blood disorders, ALXN no goes for more than $180 a pop. Concerns about its pipeline however, have shares negative for the year-to-date.
Regardless, there’s no way ALXN has another 3,000% gain in it. It’s too big now.
If nothing else, the remarkable performance of ALXN and other biotechs sure goes a long way toward explaining the sector’s popularity with investors today.
#8: NewMarket Corporation (NEU)
10-Year Total Return: 3,433%
Amazing as it may be, NewMarket Corporation (NYSE:NEU), a firm founded in the 19th century that makes additives for petroleum products like gas and diesel, enjoyed one of the best stock performances of the last 10 years.
Shares really took off about five years ago after NEU made a couple of key acquisitions in as many years. In fairly short order, a stock that traded around $30 a share climbed its way up to nearly $200.
Perhaps most important, it’s not like NEU had a sudden explosion of revenue. It just steadily chugged along until the top line expanded 50% in five years.
NEU demonstrates that old economy companies can still have tremendous upside.
#7: Monster Beverage Corp (MNST)
10-Year Total Return: 3,959%
Monster Beverage Corp (NASDAQ:MNST) has become an unstoppable total-return machine. True, it started as a penny stock, which gives it a huge advantage in any price-appreciation race, but it been climbing like a rocket over the last year, too.
MNST received a lift when Coca-Cola (NYSE:KO) bought a 17% stake in the company last year, but the high-growth trajectory was established long before that.
The bottom line is that the market for energy drinks is growing, and demand for carbonated beverages is in decline.
Usually, when a stock delivers returns of such magnitude, the upside has been made. MNST, however, appears to have plenty of gains left to be made.
#6: Illumina, Inc. (ILMN)
10-Year Total Return: 4,579%
Illumina, Inc. (NASDAQ:ILMN) is another biotech stock that took off only in the last few years, but with a twist. Most biotechs depend on the development of new therapies. ILMN helps them do it.
The company makes systems that biotechs, pharmas, researchers and others rely on to perform genetic sequencing. Remarkable growth in that market — combined with a big price cut by ILMN of a key system — lit a fire under the bottom line. In four years, net income rose to $353 million from $72 million.
As amazing a run as it has had, ILMN stock hasn’t done much for the year-to-date despite beating Wall Street’s earnings estimates.
#5: Priceline Group Inc (PCLN)
10-Year Total Return: 4,763%
It took a few years for Priceline Group Inc (NASDAQ:PCLN) to recover from the dot-com market crash, but once it found its footing as an acquisition machine, the stock became a juggernaut.
PCLN started out as a simple online travel website. It has since grown to own six major brands, including Kayak, rentalcars.com, Open Table and Booking.com. Along the way, PCLN has become the world’s largest online travel company with operations in 200 countries.
Perhaps most amazing, PCLN has a high growth rate, but a more-than-reasonable valuation. That should allow PCLN stock to deliver even more upside ahead.
#4: Netflix, Inc. (NFLX)
10-Year Total Return: 4,860%
The incredible success of Netflix, Inc. (NASDAQ:NFLX) stock isn’t too hard to figure out. Even after a number of infamous flame outs along the way, NFLX has still made early investors very rich indeed.
NFLX has been so volatile over the last few years, it seems almost impossible for it to generate anything like its past gains ahead.
Yet as much as the market wrings its hands over the valuation and history of crashes, it’s still up another 37% in the last year alone.
It seems unlikely we’ll see NFLX on a list of best performing stocks of the next 10 years, but it doesn’t look like it will slow down soon.
#3: Medivation Inc (MDVN)
10-Year Total Return: 5,186%
It seems there’s no shortage of biotech stocks taking off in the last few years to mount truly heroic gains. Add Medivation Inc (NASDAQ:MDVN) to that group.
MDVN stock is in part supported by speculation that it could be an acquisition target, but most of the upside predates any outside interest in the company.
What MDVN really has going for it is a drug to treat prostate cancer that has strong growth prospects in large market opportunities.
With a more-than 5,000% return over the last 10 years, MDVN would have made any investor with a good-sized starting stake a heck of a lot richer.
#2: Keurig Green Mountain Inc (GMCR)
10-Year Total Return: 6,152%
In a break from a list littered with biotechs and Internet stocks comes a company in the humble coffee business, albeit with a technological twist. Like MNST, Keurig Green Mountain Inc (NASDAQ:GMCR) stock benefited from The Coca-Cola Co (NYSE:KO) taking a 16% stake in the company, but the stock was boiling over long before then.
The explosive popularity of its pod-based coffee brewing system propelled the stock for much of the last decade. Indeed, GMCR says its coffee brewers are found in more than 20 million U.S. homes.
It seems inevitable that Keurig’s growth track will have to slow down, but that doesn’t mean it’s over. The market has high hopes for Keurig’s launch of a cold beverage machine.
#1: Regeneron Pharmaceuticals Inc (REGN)
10-Year Total Return: 9,570%
The one stock that would have made you the richest over the last 10 years is — surprise, surprise — a biotech. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has been on such an epic run that $10,000 invested a decade ago would be closing in on $1 million today.
With a portfolio of drugs for diseases such as macular degeneration, macular edema and metastatic colorectal cancer, and a promising pipeline, it’s understandable that the market remains bullish on REGN, although it is lagging the red-hot biotech sector for the year-to-date.
It’s inconceivable that REGN could put up another 9,000% run over the next decade — it already has a market cap of $46 billion. But you don’t need 9,000% returns out of Regeneron to make it worth holding.
What stocks could compete with these over the next decade? Check out our list of the 10 best stocks for the next 10 years.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.