An object in motion stays in motion until acted upon by an unbalanced forced. Sir Isaac Newton posited that in the 1600’s as the first law of motion, and it has since become a fundamental building block of physics.
As it happens, Newton’s first law of motion also has applications to the stock market. Traders just don’t call it the first law of motion. They call it momentum. But, the idea is broadly similar. Stocks that are on an uptrend/downtrend, will stay on an uptrend/downtrend, until some external catalyst reverses the direction of the stock.
As such, when looking for stock market winners, it is appropriate to look at the basket of stocks which are already winners. That is, look for stocks that are already on an uptrend, and have a track record of beating the market.
When doing so, there are two important things to remember to mitigate risk: longer is better, and bigger is better. The longer the stock’s track record of market out-performance, the safer it is to assume the stock will keep outperforming for the foreseeable future. Also, the bigger the stock’s market cap, the safer the stock is given its presumably already dominant positioning.
With that in mind, I’ve come up with a list of seven “invincible stocks” that are leading this bull market higher. These are stocks that have consistently generated huge alpha over the past decade, and which have become titans in their industry today. As such, these stocks are proven winners that project as winners for the foreseeable future, too.
Which stocks belong to this list? Let’s take a look.
Past Decade Performance (Alpha): 2,360% (over 2,000%)
Market Cap: $830 billion
Perhaps the godfather of invincible stocks is e-commerce and cloud giant Amazon (NASDAQ:AMZN). There was a point in time where no one really knew if the Amazon e-commerce business model was going to work. That point in time was long ago. Over the past decade, Amazon has increasingly proven the effectiveness of its e-commerce business model, while adding multiple other verticals, leading to Amazon stock generating over 2,000 points of alpha during that stretch.
This stock is only going higher. The theme of Amazon over the past decade has been robust revenue growth and rapid market share expansion. Over the next decade, the theme will be robust profit growth and margin expansion, thanks to growth in higher-margin businesses like digital ads and cloud. Both of those themes are really positive. One has already done its work and generated huge alpha. The next is about to.
Long story short, Amazon stock is one to buy and hold for the long run.
Past Decade Performance (Alpha): 6,280% (over 6,000%)
Market Cap: $150 billion
Right next to Amazon in the Mount Rushmore for invincible stocks is streaming giant Netflix (NASDAQ:NFLX). Just like many people doubted the e-commerce business model, many people likewise doubted the streaming business model. Those doubters were wrong. Streaming has become the biggest trend in video today, and Netflix has led the way. In doing so, Netflix has generated an amazing 6,000-plus points in alpha over the past decade.
This trend of out-performance will continue. In the streaming wars, all that matters is content, since better content drives sub growth and price hikes, which leads to revenue growth, margin expansion, and profit growth. Netflix has already won the content game. It has more reach than any other streamer, so it has more data to produce better content and it can justify spending more money to produce better content, too. Considering no one else will likely get to Netflix’s size any time soon, that means Netflix has a huge advantage in streaming that isn’t going away any time soon.
So long as the ultra-critical content advantage doesn’t go away, Netflix stock will remain on an uptrend.
Past Decade Performance (Alpha): 1,860% (over 1,500%)
Market Cap: $125 billion
One of the biggest themes in the business world over the past several years has been the migration of enterprise processes from on-premise to the cloud, and the company leading that secular transition has been Salesforce (NYSE:CRM). Over the past decade, the cloud has gone from niche to mainstream, as enterprises have increasingly realized its cost and convenience benefits. When these enterprises turned to the cloud, the first company greeting them was Salesforce, and that’s largely why CRM stock has generated over 1,500 points of alpha over the past decade.
The stock will continue to be a big winner for the next several years. This is a high-growth, high-margin company that is both supported by secular trends and attacking some very large markets. The valuation underlying CRM stock is rich. But, that’s always the case for big growth stocks, and those big growth stocks always grow into those rich valuations so long as the growth trajectory remains healthy. It will for CRM stock, mostly because the cloud and data revolutions are still in their early innings (only about 20% of enterprise workloads have migrated to the cloud).
All in all, because of its leadership position in a market that projects to be a big grower for a lot longer, CRM stock likewise projects to a big winner for a lot longer.
Past Decade Performance (Alpha): 1,330% (over 1,000%)
Market Cap: $130 billion
Another cloud giant that has won big over the past several years is Adobe (NASDAQ:ADBE). Over the past decade, Adobe has gradually shifted its business model from one-off, on-prem sales to recurring, cloud subscriptions and in so doing, it has significantly improved revenue predictability and profitability. It has also expanded its business to include enterprise-level cloud solutions. This combination of tailwinds has led to ADBE stock generating over 1,000 points of alpha over the past ten years.
Adobe stock will generate big alpha over the next ten years, too. At its core, this company is the visual cloud leader. That is, it dominates in delivering cloud solutions focused on storing, organizing, analyzing and creating visual-heavy experiences. The world is pivoting towards both producing and consuming these visual-heavy experiences in greater volume, perhaps most broadly evidenced by the rise of photo and video sharing apps like Instagram. As this pivot continues to play out, the visual cloud will only become more important to enterprises, and Adobe will only win over more customers.
As they do, the stock will keep heading higher in a long-term window.
Past Decade Performance (Alpha): 680% (410%)
Market Cap: $136 billion
The only non-tech stock on this list is athletic apparel giant Nike (NYSE:NKE), and that’s because Nike’s sustained dominance in the athletic apparel market is largely unmatched in any other non-tech industry. It seems like that ever since the mid-1990’s and Michael Jordan, Nike has been top dog in the athletic apparel market. Impressively, over the past ten years, that dominance has only grown, as the company has continued to attract the best athletes, create the best shoes, roll out the best marketing and do all three of those things far more quickly than peers. Consequently, Nike stock has generated an impressive 410 points of alpha over the past decade.
There were signs that the Nike stock uptrend was going to end in 2017. That was just a head fake. Nike fell asleep at the wheel. Competition gained ground. The sleeping giant woke up. Nike doubled down on innovation, speed to market and marketing. They’ve since crushed the competition, and are now as dominant as they’ve ever been in the athletic apparel market. This example proves that Nike is king in this market and that the company will remain king so long as management keeps executing.
They’ve been executing almost flawlessly for over twenty years now. There’s no reason to believe that, after already squashing threats in 2017, this great execution won’t continue. As such, Nike stock will remain a long-term winner.
Past Decade Performance (Alpha): 635% (365%)
Market Cap: $830 billion
What is the internet without search? Nothing. That’s exactly why, as global internet penetration rates have more than doubled over the past ten years, global digital search giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has turned into a global utility. Internet consumers don’t just want Google. They need it. This need has been the fuel for GOOGL stock’s 365 points of alpha over the past decade.
Because the internet is still growing, Alphabet will continue to grow, too. The global internet penetration rate is still just over 55%, and that rate is growing by several points every year. Thus, within the next decade, we are likely to see 70%, 75% and even 80%-plus internet penetration rates. As the global digital economy grows from a 55% penetration rate to a 70%-plus penetration rate, the number of users on Alphabet’s suite of platforms (most notably, Google and YouTube) will continue to rise. As will ad dollars and profits. There’s also the cloud, AI and self-driving businesses, which in it of themselves are big-growth businesses oozing with long-term potential.
In other words, the Alphabet growth narrative is far from over. That means the uptrend in GOOG stock is also far from over.
Intuitive Surgical (ISRG)
Past Decade Performance (Alpha): 1,530% (over 1,000%)
Market Cap: $65 billion
Another major secular growth trend during the 2010’s was automation, and one major company at the heart of this trend has been Intuitive Surgical (NASDAQ:ISRG). Intuitive Surgical creates robots called da Vinci that assist with medical surgeries and procedures. As the automation trend has made its way into the medical world, adoption of da Vinci robots has skyrocketed. This surging adoption has led to a 1,500%-plus rally in ISRG stock over the past decade.
The exciting part of Intuitive Surgical is that this medical robot growth narrative is still in its early innings. There are over 400,000 operating rooms in the world. Only around 5,000 have a da Vinci operating system. That means there’s lots of room for da Vinci to grow globally as the automation wave becomes more broadly adopted in the medical sector.
The implication for ISRG stock? Sustained big growth over the next several years will keep ISRG stock on a winning path.
As of this writing, Luke Lango was long AMZN, NFLX, ADBE, NKE and GOOG.