Tech has offered investors some of the biggest returns over the last few decades—and especially the last few years—but over the long run, investors have seen massive gains from all over the market.
A recent study from Arizona State University researcher Hendrik Bessembinder, who analyzed the price history of more than 29,000 U.S. stocks that traded between 1925 and 2023, reveals the range of companies that have made up the most successful investments of the last century based on their total return.
Seven of the 30 best-performing stocks in the Center for Research in Security Prices (CRSP) database that Bessembinder studied belong to healthcare firms including Abbott Laboratories (ABT), Johnson & Johnson (JNJ), and Pfizer (PFE). Aerospace and defense stocks, including General Dynamics (GD), Boeing (BA), and Northrop Grumman (NOC), were also among the most lucrative investments of the past century.
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Coca-Cola (KO) and PepsiCo (PEP) were the ninth and tenth-best performers. They’ve returned investors more than 12 million percent and 8 million percent, respectively, over the last 98 years. Hershey (HSY) and Tootsie Roll Industries (TR) also made the top 30.
But of the products that made investors rich in the last century, one stands out as king: cigarettes. A person who invested $1 in Marlboro maker Altria Group (MO) at the end of 1925—the equivalent of about $18 today—and reinvested all their dividends, would have had $2.66 million at the end of last year. That’s nearly seven times the return for the second-highest returning stock, construction materials supplier Vulcan Materials (VMC). Tobacco seller Universal Corp. (UVV) and smokeless tobacco giant UST Inc., which Altria bought in 2009, were also in the top 20.
Investors typically don’t hold stocks for nearly 100 years. But the data illustrates the effect a long time horizon can have on a portfolio—as well as the opportunities that can arise all over the stock market.
Where Does Tech Land?
Bessembinder divides the CRSP’s stocks into four categories characterized by the duration of their price history: stocks with at least one year of data; stocks with more than one year but less than five years of data; stocks with more than five but less than 20 years of data; and those with more than 20 years of data.
Of the U.S. stocks with more than 20 years of trading history, Nvidia (NVDA) has the highest annualized return (33.38%)—and that’s excluding its more than 130% performance so far this year. In the top 30, it’s joined by four other big tech companies—Netflix (NFLX; 32.06%), Amazon (AMZN; 31.78%), Microsoft (MSFT; 26%), and Adobe (ADBE; 23.93%).
But mixed in with these market darlings are the likes of Plenum Publishing Corp., a subsidiary of academic publisher Springer Nature, which delivered investors annualized returns of 32.09% between 1972 and its acquisition by Dutch publisher Wolters Kluwer in 1998. Taser maker Axon Enterprise (AXON), which debuted in 2001 and still trades on the Nasdaq, has returned 31.13% a year on average.
U.S. construction and housing have also been a boon to investors. Shares of Home Depot (HD) have returned more than 1.6 million percent in the 42 years that they’ve traded publicly. That translates to an average annual return of nearly 26%. Pool materials supplier Pool Corp. (POOL) and homebuilder NVR (NVR) are also among the 30 best-performing stocks with 20-year histories.
Time in the Market Beats Timing the Market
One of the clearest takeaways from Bessembinder’s analysis may be that “time in the market” is one of the most crucial determinants of an investor’s success. Of the 30 CRSP stocks with the highest cumulative return, Northrop Grumman, with 72 years of price history, is the youngest. The median “age” of Bessembinder’s top-performing stocks is more than 92 years.
And just a few extra years of exposure can swell an investment portfolio’s value. Since debuting in May 2002, Netflix has delivered an average annualized return of 32.06%. If you had bought $1 of Netflix stock at its IPO price, that dollar would have been worth $406.94 at the end of 2023.
The same $1 IPO investment in Amazon, which debuted five years before Netflix but has a slightly lower average annual return, would have been worth $1,551.73—nearly 4 times your Netflix stake.
Still, the cohort of stocks with more than 20 years of price history was the only bunch in Bessembinder’s analysis in which more than 50% of stocks delivered positive returns. The median return among all 29,087 stocks was -8%.
Having one or two winners in your portfolio can make all the difference: The full data set’s mean return, in which the massive gains of Altria and America’s snacking giants have extra weight, was 22,840%.