Joe McConnell
Stay informed with free updates
Just register at Actions myVscek Digest: Delivered straight to your inbox.
Keith Gill’s return to the Internet has revitalized r/superstonk, the Reddit forum for those who think r/wallstreetbets is too serious and not interested enough in GameStop, a stock they believe will eventually lead to financial nirvana.
At the time what made Vscek Alphaville ask was: what are the current “superstonks,” the billionaires who could turn even your lunch money into obscene wealth if only you’d bought in early and held onto it in their wallets for better or worse?
Luckily for VscekAV, Arizona State University’s Hendrik Bessembinder dug back into his long-term stock market return data to find the best-performing stocks of the past century. The results may surprise you.
When reinvested dividends are included, Altria, the cigarette maker formerly known as Philip Morris, is a contender for the title of best-performing stock of all time, generating cumulative returns of more than 265,528,900 percent since 1925, the year in which the Center for Research in Security Prices began collecting data.
In other words, a single dollar invested at the start of the CRSP data in December 1925 would have turned into a reserve of $2.6 million by the end of last year.
That performance trounces the next unlikely frontrunners, Alabama gravel giant Vulcan Materials and Kansas City Southern, a railroad operator that was absorbed by Canadian Pacific last year. A dollar invested in those would be worth “just” $393,492 and $361,757 today.
One rather obvious factor emerges from Bessembinder’s list of superstories: they are all old companies that exist or have existed for a long time, and few (none?) operate in what today would be considered glamorous sectors.
This highlights the power of longevity and consistent returns over bolder stocks. Of the nearly 30,000 U.S. stocks listed in the CRSP database, the average duration is just 6.8 years. Only 31 companies are listed in the 98 years it covers.
Of the 30 largest compounders compiled by Bessembinder, nearly all have more than 90 years of stock market history behind them. The youngest is Northrop Grumman, which went public in 1951.
While the Mean the result obtained in that almost century of data is a gain of 22,840 percent, median The result is a loss of 7.4 percent, because more than half of all common stocks recorded by CRSP burned money. And as Bessembinder’s previous work has shown, most of the remainder underperformed Treasuries.
This latest paper is not a major breakthrough, but it does underscore that the small circle of wealth machines that have driven the U.S. stock market over the past century have tended to do so through consistent returns over long periods of time.
Even the 17 U.S. stocks that generated cumulative returns of more than 5,000,000 percent over their lifetimes produced compound annual returns of only 13.47 percent on average.
As you can see, the table of highest compound annualized returns looks a little different, as we take into account the different longevity of the companies. Altria still leads, but the sprightly septuagenarian Northrop Grumman jumps to second place, followed by Johnson & Johnson and safety-averse Boeing.
But what are the biggest ones? annualized returns produced by any publicly traded company with at least 20 years of history in the stock market? If you’ve been paying attention to the markets over the past couple of years, the winner won’t surprise you.
Nvidia’s lead is actually even bigger than this table suggests, given that the CRSP data Bessembinder uses only goes to the end of 2023. Nvidia is up another 111 percent this year despite the recent stock market vomit, while Netflix and Amazon, the most credible surviving rivals, are up 30.2 percent and 9.87 percent, respectively.
This table does, however, have some strange inclusions, such as the scientific journal publisher Plenum, acquired by Wolters Kluwer for $258 million in 1998, and POOLCORP, the world’s largest swimming pool distributor.
But the strangest has to be Time Warner, which makes the top 30 despite its 2000 merger with AOL, memorably described by BuzzFeed’s Tom Gara as:
…a glorious, disastrous mess that marked the height of the first dotcom bubble and that still sets the standard for bad decisions made under the influence of the Internet. FiVscekeen years later, it’s still the stupidest thing anyone’s ever done with money and a web browser, which is pretty amazing when you think about it.
Its presence presumably reflects rising prices since 1992, the eventual spin-off of Time Inc. in 2014 and subsequent sale to AT&T for $85 billion in 2018, as well as dividends paid over time.
It’s a good example of Warren Buffett’s aphorism about only investing in businesses so wonderful that an idiot can run them, because sooner or later, one will. It seems that even AOL’s idiocy could not help but dent Time Warner’s claim to greatness in the stock market.
