The Best Performing Stocks in History
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When evaluating the best performing stocks, we need to look at whether the company is a blue-chip stock and take into account its price/earnings ratio (PE). Blue-chip stocks represent companies that are financially stable, well-established and provide good returns, making them desirable investments.
The price/earnings ratio points to how many years of earnings it actually takes to pay back the price. For example, a company with the price/earnings ratio of 14 means it takes 14 years of earnings to repay the price. (Earnings is the amount that a company earns in one year.) Normally this ratio ranges around 12-18, and the higher it is the more overvalued the stock is in current earnings terms. During a recession, the PE ratio can drop below 10.
One thing traders should pay attention to is the general positive correlation between all equities indices, but also the negative correlation between the Central Banks, e.g., European Central Bank or Federal Reserve Bank, and the DAX30 or the SP500. Should the FED signal hawkish tones or rate hikes, it would mean that investors can put their money into Bonds/Fixed Income for higher returns than before, causing investors to leave risky assets such as stock markets in response.
Weather Impact, Mining Cycles, War
Sometimes, aside from Central Bank interventions, the weather can impact the value of soft commodities in particular, as it impacts crop yields, e.g., wheat, corn, or oats. Livestock can be affected as it can fluctuate in weight, but to a lesser extent. Other commodities, like energy and metals, tend to be influenced by various phases of the production cycles, along with the current demand for products.
For base metals like copper, demand depends on how strong the production demand is in electronics, cars, and construction; other metals such as iron are mainly linked to construction. With lower prices for metals and commodities, exploration may lower, leading to supply shortages in the future and thus impacting the prices later in the cycle.
Higher prices, on the other hand, may give rise to more exploration and development, and lead to an increase in supply in the future. Oil and gas demand depends on vehicle usage statistics and heating. In addition, instability in the Middle East can affect the future supplies of oil and gas, and drive prices high when there is war or geopolitical uncertainty in the region.
The Best Performing Stocks in History
Coca-Cola has become one of the best-performing stocks of all time because the company has developed a number of competitive advantages. The brand in itself has become one of the most recognisable in the world, mainly as a result of smart advertising, as well as unique original formula. Coca-Cola used the same strategy to build other successful brands like Sprite and Fanta, along with the more recently acquired Vitamin Water.
In addition, Coke's distribution chain enabled it to go global and boost smaller beverage brands after acquiring them. Coke's largest investor, Warren Buffett of Berkshire Hathaway, once said, "If you gave me $100 billion and said, "Take away the soft drink leadership of Coca-Cola", I'd give it back to you and say it couldn't be done." Despite this, the stock has struggled as fizzy drinks started to decline in popularity in the U.S, and elsewhere due to public health concerns.
The parent company of Marlboro, spun off from Philip Morris International (NYSE:PM), has had similar success to Coca-Cola. Marlboro is by far the most popular cigarette brand in the world: having sold 472 trillion cigarettes last year, compared with its main competitor, Lucky Strike (owned by British American Tobacco) who sold 107 trillion. In the U.S alone, Marlboro sales are greater than those of the most prominent competitor brands combined.
This has been the best stock on the market over the past 50 years (if we include reinvested dividends). A dollar invested in Altria in 1968 would've turned into $6,638 by 2015; with dividends reinvested, this amounts to a mere 663,700% of total return, or 20.6% annually. The addictive nature of tobacco has made Altria so profitable that even despite dwindling smoking rates, the company has continued to grow by raising its prices.
The tech giant has capitalized on being a pioneer in e-commerce, cloud computing, Kindle e-books, e-readers, and voice-activated technology with Alexa and Echo. Like Altria and Coca-Cola, Amazon built a global brand with a strong reputation for low prices and excellent customer service. Amazon's success is evidence of how a disruptive company in a fast-growing market can deliver excellent returns for its shareholders.
Several similar companies in the technology sector including Netflix, Apple, Alphabet, and Facebook, have yielded great returns, but Amazon tops this elite group. Investors are able to see its competitive advantages, its fast-growing revenue, and its ability to enter new markets.
Top Five Stocks In The Last Twenty Years
During the last twenty years, different sectors and industries have transcended to new levels, mostly through merger and acquisition strategies. The two most prominent segments are biotechnology and technology, both of which have significantly expanded over the last twenty years. Here is the list of five stocks that have been the best long-term investments, yielding high returns.
Celgene Corporation is among the world's largest biotech firms. Their market capitalisation is 61,586 billion USD. CELG shares were worth around $99.59 in February 2016, but after the adjustment for dividends and stock splits, their worth was only 70 cents in February 1996. Bringing compounding returns into the equation, it amounts to 28.1% in compounding app returns.
The company sells popular medications such as Revlimid and Thalomid. Through research and development (R&D) and acquisitions, the organisation has been building a large drug portfolio. They also receive royalties on some of their products, in addition to their sales revenue.
The giant computer company known as Apple experienced an initial growth in the 1970s and 1980s. However, in 1996 Apple experienced a rapid decline. The company's shares were worth only 91 cents, after adjustment for dividends and stock splits.
After a great re-design and effective marketing of their most popular products (MacBook, iPhone, iPad, iOS), combined with the creation of the App Store and iTunes, their shares rose to 93.99 USD in 2016. As of September 2018, their share price is worth 221.14 USD, making it one of the top paying dividend stocks.
Google's owner, Alphabet, is one of the biggest companies that exists today, with a market cap of $1,05 trillion. It is the market leader of the Internet search market. Google has also added a vast number of different products to its business portfolio, for example, Android OS. Android OS is one of the most - if not the most popular - mobile operating system in the world.
During its initial public offering (IPO) in 2004, when adjusted for splits and dividends, its shares were worth 50.22 USD. In 2016, stocks were worth 706.36 USD, which created a compounding annual return of 25.6, placing Google high among the best performing stocks of all time.
In February 1996, the shares of Gilead Sciences were worth $1.10 (adjusted for dividends and stock splits). However, in February 2016, the share price was $87.36 in relation to the app, and 24.5% in compounding annual returns. Their extensive drug portfolio has been built through internal research and disparate acquisitions. The company today is one of the biggest biotechnology firms in the world. Its most popular products are Atripla, Sovaldi, Truvada and Harvoni.
In 1975, now-famous Bill Gates and his friend Paul Allen started a computer company called Microsoft. Ten years later, the world witnessed the birth of the first Windows operating system (1985). Just a year later, Microsoft shares reached 21 USD per share, which equates to 6 cents a share, if we account for dividends and stock splits. The company truly made a revolution in the digital and PC business. Its stock has grown 116% since 2015 security R&D announcement.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.