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.)
Best Stocks of the Decade #10: Dollar Tree, Inc. (DLTR)
Price Change: 845%
Ultra-discount retailers like Dollar Tree, Inc. (DLTR) broke away from the pack thanks to the Great Recession, and they’ve been charging ever since. Even just in the past five years, dollar stores have exploded, with 2011’s figure of 24,512 locations in the U.S. expected to grow to 30,793 by the end of this year.
And dollar stores still have powerful demographic tailwinds.
Baby boomers — that cohort of nearly 80 million — are starting to retire. Sadly, too many Americans are financially unprepared for their later years, and that means more traffic for dollars stores.
Best Stocks of the Decade #9: CF Industries Holdings, Inc (CF)
Price Change: 850%
With the world struggling through a recession in agriculture, it’s hard to remember that sector names can still have bright futures. After all, the global population is only going up.
That benefits a fertilizer company such as CF Industries Holdings, Inc (CF) — as long as you can stick around through the business cycle.
CF stock has plunged along with commodity prices. Indeed, since mid-June, it has lost nearly 50% of its value.
Just remember that stocks represent a claim on future earnings, not what’s done and gone.
Best Stocks of the Decade #8: Edwards Lifesciences Corp (EW)
Price Change: 855%
You can’t get very far in any discussion of once — and possibly future — killer stocks before hitting the healthcare sector.
Edwards Lifesciences Corp (EW) makes heart valves and related technologies, which puts it in a prime position in a graying society.
Baby boomers are hitting those years when their bodies spend more time in the shop. Even the youngest Boomers are now in their early 50s.
But that’s not the only thing on EW’s side. Heart disease is the leading cause of death in the U.S., claiming 610,000 people every year, or 1 in every 4 deaths. That benefits EW, which has a host of products, including the Perimount family of surgical valves, as well as the Sapien valve platform.
Best Stocks of the Decade #7: Under Armour Inc (UA)
Price Change: 910%
Which came first, the designer or the craze?
No other stock has profited as much as Under Armour Inc (UA) in the age of athleisure wear. You’re just as likely to see Under Armour’s logo on a growing number of college football jerseys and professional sports stars’ gear as you are to see it on walking-around polos in closets across the country.
UA stock has absolutely exploded over the past five years or so, thanks to a combination of innovation, quality and — most importantly — marketing. Mega-brands aren’t built in a vacuum.
The real test for Under Armour lies in the years ahead. Fashion is fickle. Barriers to entry are almost nonexistent. Only time will tell if it can be the next Nike Inc (NIKE) — but a growing stable of superstars such as the Golden State Warriors’ Stephen Curry and PGA star Jordan Speith.
Best Stocks of the Decade #6: Apple Inc. (AAPL)
Price Change: 920%
It’s hardly surprising to see Apple Inc. (AAPL) on this list.
However, it will be astonishing if it shows up again 10 years from now.
The story of AAPL’s phenomenal performance can be told in a single word: iPhone. Although the idea of a touchscreen smartphone had been around, Apple pulled it off in a revolutionary way. The company now makes tens of billions of dollars every quarter, with the majority of that coming from the iPhone.
That could make AAPL a victim of its own success. What are the odds that it can innovate a repeat performance with a new gadget?
And Apple needs something. The stock is flagging as iPhone sales are slowing amid a lack of true innovation.
Best Stocks of the Decade #5: Amazon.com, Inc. (AMZN)
Price Change: 1,576%
In a development that shocks no one, Amazon.com, Inc. (AMZN) is the fifth-best stock of the last 10 years. And that’s despite pursuing a strategy that almost always prevents it from reporting a profit.
That’s because investors are betting on AMZN’s potential growth as it makes investments in seemingly everything, and as it grows its empire through the incredibly low-margin business of online e-commerce. And hey, Amazon has found at least one business that generates substantial profits.
There’s no telling where Amazon can go next or how big it can become, but the question will remain: How much will it let its margins suffer to keep growing?
AMZN might not be one of the top 10 stocks of the next decade, but it’s hard to believe it won’t be a massive market-beater.
Best Stocks of the Decade #4: Alexion Pharmaceuticals, Inc. (ALXN)
Price Gain: 1,656%
It’s not possible to find a hotter and more volatile sector than biotechnology stocks.
Just look at Alexion Pharmaceuticals, Inc. (ALXN) over the last couple of years.
Like pharmaceutical companies, biotechs soar and crash on their pipelines. A blockbuster therapy can easily carry a name for a decade. But patents expire, and when they do, times can get very tough.
There’s also the case that the healthcare sector is a playground for mergers and acquisitions. Alexion — which developed Soliris, used to treat a pair of rare, life-threatening diseases — might not even be independent in 10 years.
Best Stocks of the Decade #3: Netflix, Inc. (NFLX)
Price Gain: 1,970%
Talk about a revolutionary company. We’re really just at the beginning of our streaming media future, and Netflix, Inc. (NFLX) is at the forefront.
From a mail-based movie rental business, the company is now a big player in the TV and film industries. It spans the globe — the company launched in 130 new countries at the beginning of 2016, bringing its total reach to 190 countries — and it continues to innovate.
But serious competition might mean the easy times are behind it.
Putting Blockbuster out of business is child’s play compared with going up against Amazon, Apple and Alphabet Inc’s (GOOG, GOOGL) Google. Amazon is responsible for the most recent salvo, offering its Amazon Prime Video as a standalone service for just $10.99 per month.
Best Stocks of the Decade #2: Regeneron Pharmaceuticals Inc (REGN)
Price Gain: 2,490%
Regeneron Pharmaceuticals Inc (REGN) is another volatile biotech that surely shed panicked investors many times in the past. But the buy-and-holders have had a heck of a run.
The bull case for REGN is partly based on demographics. One of its top drugs is Eylea — a treatment for macular degeneration, which is a condition that typically causes blindness in the elderly. Regeneron also offers a number of treatments for other infirmities that catch up to us as we age.
REGN also has plenty in the pipeline, too. Right now, Regeneron is developing treatments for rheumatoid arthritis, atopic dermatitis in adults and pain from osteoarthritis.
Like other industry names, it’s something of a crap shoot if REGN can keep the hits coming, as well as avoid becoming an M&A target.
Best Stocks of the Decade: #1: Priceline Group Inc (PCLN)
Price Gain: 5,345%
Travel company Priceline Group Inc (PCLN) is the runaway winner for the best S&P 500 stock of the last 10 years. Heck, it has done twice as well as Regeneron and its 2,600% gain.
Interestingly, PCLN has been mostly range-bound for two years now. Torrid growth has left less market share to grab. At the same time, competition is intense, and barriers to entry aren’t all that high.
Of more recent concern is the rise of Airbnb, which helps list private homes as destinations for travelers — helping cut into Priceline’s core business.
But before Priceline can go higher, perhaps it needs to go lower. The incredible run in PCLN has shares trading at well more than $1,300 per share. This company could use a stock split, pronto.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.