3 Stocks That Turned $3,000 Into $33,000
Former Microsoft CEO Bill Gates has said that, "Most people overestimate what they can do in one year and underestimate what they can do in 10 years."
Gates was talking about accomplishments in people's careers or their philanthropic pursuits, but the prediction bias applies just as well to stock market returns. Many investors are too confident about short term gains while dramatically underestimating what they can earn through a buy-and-hold approach that stretches into a decade or more.
In support of that point, let's look at a few large, well-known stocks that have returned at least 1,000% since early 2008.
Cheers to profits
A decade ago, Constellation Brands (NYSE: STZ) was a modestly successful marketer of alcoholic beverages. Most of its products came from the 40 wineries it operated across California, Canada, Australia, and New Zealand, but the company's 2008 annual report contained an observation by the management team that would eventually transform its business. Within the beer category of the alcoholic beverage industry, executives noted, "high-end beer[s] (imports and crafts) [are] growing faster than domestic beer."
A few years later, the company acted on that industry reading by shelling out over $4 billion to obtain exclusive rights to sell the premium Corona and Modelo beer brands in the U.S. It turned out to be a smart bet. Demand for these franchises has dramatically outpaced the industry, which led to market-thumping sales growth. Constellation Brands just wrapped up its fifth straight fiscal year of 20% or better earnings gains.
The company continues to eye acquisitions that could keep it ahead of major consumer trends like the shift toward imported beers. It recently edged into the marijuana market, for example, in hopes of being an early leader in the cannabis beverage business.
From video games to big data
NVIDIA (NASDAQ: NVDA) was already the global leader in visual computing technologies in 2008, but its chips were mainly found in consumer-focused devices like PCs and video game consoles. In fact, a sharp drawback in PC demand caused net income to dive into negative territory in fiscal 2009 from $800 million in the previous year.
The chip giant's business has become far more diversified since that time, with emerging tech applications like autonomous vehicles and artificial intelligence (AI) driving blistering gains in both sales and profits. Revenue for the past 12 months spiked 40%, in fact, as net income roughly doubled to $3 billion.
NVIDIA has spent over $15 billion on research and development since its inception, and the company will need continued successes in this field to hold on to its early lead in promising industries like AI. That's a real challenge as its engineers grapple with fundamental constraints to computing speed. But there's a huge payoff available for the company that can keep driving the industry forward.
A beautiful retailing story
A decade ago, beauty products specialist Ulta Beauty (NASDAQ: ULTA) was in a bit of a funk. The economic downturn had convinced management to slash its store growth plans in half, to target an 11% square footage increase, compared to around 25% in prior years.
Management was optimistic that this was just a speed bump, though. "As the economy stabilizes," it predicted, "our successful track record of opening new stores in diverse markets across the United States will allow us to increase our new-store growth rates back to historical levels." The company still believed the market could support as many as 1,000 shops, up from 249 at the end of fiscal 2008.
Ulta went on to blow past that optimistic prediction over the next few years. In fact, the store base approached 1,100 locations last year even as the retailer managed a double-digit sales increase at existing locations.
Executives now believe they can reach as many as 1,700 locations across the country. A slowdown in its core makeup industry has pinched sales growth recently while contributing to a slight reduction in profitability. However, Ulta remains one of the nation's highest-performing retailers. Its expected 20% earnings increase in 2018, meanwhile, might make it an attractive buy following its recent stock price decline.
These stocks are admittedly cherry-picked and are notable mainly for their success at trouncing the market's 94% return over the past decade. Yet their rallies also demonstrate that eye-popping long-term gains are possible, even if you're shopping among firmly established companies.
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Ulta Beauty. The Motley Fool has a disclosure policy.