Over the past few years, the idea of 100-baggers has gotten popular. This is an amazing concept; making a 100-times return on your investment. Put another way, if you have $10,000 and get a 100-bagger, you’ll end up with a million dollars. What sorts of superstocks are capable of becoming 100-baggers?
In general, they start out fairly small, come up with some innovative product or greatly reshape/improve their industry. Another type of superstocks are the companies led by star management teams that are capable of deploying capital shrewdly, constantly making perfect mergers and acquisitions (M&As) deals.
The list below includes companies of both kinds. And, when calculating total returns, don’t forget the dividends. The calculations below include reinvested dividends over the years — which in many cases end up being a huge portion of one’s total investment gains.
One other important thing about superstocks: They’re not just tech companies either. As you’ll see, they can include more staid industries such as beverages, railroads and even banks. So now, let’s meet seven superstocks that generated at least 10,000% returns — 100-baggers — over the past 30 years:
- Monster Beverage (NASDAQ:MNST)
- Kansas City Southern (NYSE:KSU)
- Apple (NASDAQ:AAPL)
- Roper Technologies (NYSE:ROP)
- Microsoft (NASDAQ:MSFT)
- Texas Instruments (NASDAQ:TXN)
- Glacier Bancorp (NASDAQ:GBCI)
Superstocks : Monster Beverage (MNST)
$10,000 Invested In 1991 Is Now Worth: $32,250,000
Monster Beverage is the best-performing U.S. stock of the 2000s and quite possibly back to 1991 as well. The energy drink maker might seem like an extremely random company to end up being an all-time great investment.
However, it had several factors that gave it that honor. For one, it started off the 1990s with a microscopic market cap. It wasn’t until 2004 that the firm’s market cap topped $100 million. The firm is now worth $48 billion. However, if it had started off at a $5 billion initial public offering (IPO) — as is common for many hot companies today — investors would have only earned 10x instead of thousands of times return on their capital.
So that’s the first thing: When you’re shooting for the stars, try to buy some firms with a small enough market cap to have room to really grow.
For another, Monster is a fundamentally attractive business. It puts sugar, water and caffeine in a can and charges a huge profit margin for it. That’s the same classic tale as Coca-Cola (NYSE:KO), which also made a ton of people into millionaires. Monster’s unique edge was its superior branding and management’s unrelenting drive to keep growing the business. The investors that had the foresight to own MNST stock the whole way up have now earned returns beyond anyone’s wildest dreams.
Kansas City Southern (KSU)
$10,000 Invested In 1991 Is Now Worth: $13,660,000
Like Monster, Kansas City Southern is probably another surprise. What’s a railroad doing on the list of the top-performing stocks of the past 30 years?
Go back in time, however, and railroads were a dying industry. Passenger rail essentially collapsed in the mid-1900s with the advent of cheap cars and interstate travel. Meanwhile, freight was disadvantaged as the combination of long-distance truckers and air freight took away a lot of marginal business from rails. Throw in labor problems, bad balance sheets and headstrong management teams, and rail was viewed as a dead industry.
Then a series of reforms and modernizations occurred and rail regained the cost advantage against trucking. Rail volumes surged while overhead declined. Throw in a series of mergers to reduce competition and profits soared. Kansas City Southern was the biggest beneficiary of this, with its shares rising hundreds of times over.
The fun isn’t quite over yet. A private equity firm tried to acquired Kansas City Southern last year. It escalated into a bidding war but ultimately KSU shot it all down and remained independent. All this excitement led to a 70% run in the stock over the past year, and a 275% move over the past five years. Don’t let anyone tell you there isn’t money in “boring” industries. KSU stock is a striking counterexample to that notion.
$10,000 Invested In 1991 Is Now Worth: $8,543,000
Apple is the classic example of a buy-and-hold investment that worked out magically. The company has created life-changing wealth for investors.
It wasn’t always a sure thing, though. Indeed, Apple trailed the likes of Monster and Kansas City Southern because the 1990s was a wasted decade for the firm. It accomplished little and was in danger of bankruptcy at one point given the struggles of the Mac computer at the end of that decade. Even with huge long-term winners, there will still be crises of faith along the way.
For investors that held the line, however, they were richly rewarded once the iPod launched in 2001. That started Apple’s modern revival and then the iPhone went on and changed everything later that decade. The Apple of today has struggled to find the same growth opportunities it did ten or fifteen years ago, but it can now reward investors with dividends and big share buybacks instead.
Roper Technologies (ROP)
$10,000 Invested In 1991 Is Now Worth: $2,868,000
This one is probably a surprise to most readers. Roper Technologies isn’t even a household name yet. However the firm has been extraordinarily successful over the past 30 years. What accounts for that success?
Back in the early 1990s, Roper was a pretty humble, small, unexciting industrial business. It manufactured a variety of basic goods for industrial uses. However, it started to transform its business by making a series of acquisitions in more fast-moving areas. By the early 2000s, it started becoming a software conglomerate, buying up tech businesses serving non-glamorous uses left and right.
The Roper of today now has software for everything from power plant management to 3D graphics and animation, insurance brokers and supply chain management among many others. Roper is ruthless about managing its cash flow, only putting funds into businesses with strong growth opportunities while selling off assets that don’t keep up. The firm’s constant capital recycling, aggressive use of dealmaking and leverage has allowed it to rack up a stunning 28,000% return over the past 30 years.
$10,000 Invested In 1991 Is Now Worth: $2,736,000
It shouldn’t come as a surprise that the king of office software made this list. Microsoft has been a standout performer through multiple tech booms now.
What might come as a surprise is that the company had to make a big pivot. It actually wouldn’t have hit the 10,000% return threshold if it wasn’t for its cloud computing division. Indeed between 2000 and 2015, despite sharply rising profits, MSFT stock went absolutely nowhere. Investors weren’t willing to pay a big P/E ratio anymore for what was considered a staid, no-growth software business.
However, unleashing the Azure cloud division changed everything. Once again, Microsoft became a real growth company and its P/E ratio went from around 12 back up to 30. Throw in multiple expansion on rapid earnings growth and a healthy dividend over the years, and you have the makings of a 100-bagger stock.
Texas Instruments (TXN)
$10,000 Invested In 1991 Is Now Worth: $1,537,000
A big problem with investing in tech companies is picking winners from losers. For every Apple or Microsoft, there’s a dozen Palms, Blackberrys (NYSE:BB), and Lucents that looked like home run stocks for awhile but ended up being losers. So how to avoid that?
Instead of having the hot consumer product, instead, sell components that go into that products. Aside from Texas Instruments’ calculators, it has very few products of its own to sell to the public. Rather, it makes the chips that go into all sorts of modern electronic devices. Be it cars, mini-computers, appliances, Internet of Things devices and so on, it probably has Texas Instruments chips inside it.
The company’s platform-agnostic model has allowed it to thrive despite rapid technological change. The firm competes in more slow-moving markets rather than fighting to be the supplier for iPhones, for example. This allows the company to generate more return on its investments in R&D. Texas Instruments is also a skilled capital allocator, mixing share buybacks and acquisitions with great skill. Add it all up, and it’s amounted to a more than 15,000% return over the past 30 years.
Glacier Bancorp (GBCI)
$10,000 Invested In 1991 Is Now Worth: $1,130,000
Finally, we round out the list with a humble bank out of the Pacific Northwest. Hailing from Kalispell, Montana, Glacier has assembled a regional banking empire spanning many cities and towns across the Rocky Mountains.
What has made Glacier a more than 100-bagger over the years? The company earns extremely high returns on equity, and it engages in a ton of mergers and acquisitions. Because Glacier historically has performed well, people pay a premium for its stock. That premium, in turn, serves as currency for Glacier. It can issue its own high-priced shares, buy up a cheaper bank and add to its geographic reach.
Banks have tons of redundant costs in management, software and services, compliance costs, and the like. So just merging two banks together saves money in general, and Glacier’s particularly top-notch team wrings out more cost benefits. The Rockies tend to be less competitive than other markets as well due to the sparse population, giving Glacier another strategic edge. The banks serves as a good reminder that you don’t have to be a technology company to generate life-changing returns.
On the date of publication, Ian Bezek held a long position in ROP, GBCI and TXN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.