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This elite group of global equities created the most wealth for shareholders over the past three decades.
Advocates of buy-and-hold index investing have a fresh batch of powerful evidence supporting the wisdom of their ways, new research shows.
Not only do the majority of stocks deliver long-term underperformance vs. pretty much the least risky asset you can find, but the great bulk of equity-market wealth is created by just a tiny percentage of the very best stocks.
A study of the performance of more than 64,000 global stocks from January 1990 to December 2020 revealed that the compound returns of 55.2% of U.S. stocks, as well as 57.4% of non-U.S. stocks, underperformed essentially risk-free one-month U.S. Treasury bills. Moreover, the entirety of the $75.7 trillion in net global stock market wealth created over the past 30 years was generated solely by the top-performing 2.4% of stocks.
The findings are courtesy of Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University, and they underscore the importance of diversification.
Accurately identifying the precious few “home run” stocks amid the many thousands of underachieving names is extremely difficult. Your portfolio is more likely to suffer because you guessed wrong and failed to invest in the market’s best stocks over the long term. (A better alternative to trying to find a needle in a haystack? To paraphrase Jack Bogle, the Vanguard founder and pioneer of index investing: Just buy the haystack.)
But to be fair, those who guessed right and bet big have accumulated truly transformational wealth.
Here are the 20 best stocks of the past 30 years, measured by wealth created between January 1990 and December 2020. A quick note on wealth creation: The stocks below didn’t necessarily deliver the highest percent changes in share price. Rather, they created the most shareholder wealth, which is essentially the increase in market value adjusted for cash flows in and out of the business, such as dividends and share repurchases.
Think of it this way: A microcap penny stock that grows into a small-cap stock after delivering a 10,000% price increase rewards anyone lucky enough to have bet on that name – but it adds very little to equity investors’ overall collective wealth. It doesn’t drive the major indexes higher, fill the coffers of pension funds or enrich anyone beyond a comparatively small number of traders and investors involved in the stock.
However, these 20 top stocks – a fairly familiar collection of Dow stocks, longtime dividend growth stocks, and mostly well-known foreign firms – have generated massive wealth for a great many investors over the decades.
20. Nvidia
- Wealth created: $309.4 billion
- Annualized dollar weighted return: 27.5%
- Country: U.S.
Nvidia (NVDA) only recently muscled its way into the best stocks of the past three decades. Indeed, although the maker of graphics processing units (GPUs) was founded in 1993, it didn’t go public until 1999. And although NVDA was a longtime market beater over the next decade-plus – and by a wide margin at that – shares went truly ballistic only in the past few years.
So what changed?
Back in the day, NVDA’s primary market consisted of PC and console video game enthusiasts. Happily for Nvidia, it just so happens that the power and architecture required to drive video games is also perfect for applications such as artificial intelligence (AI), data servers, supercomputers, mobile chips and even cryptocurrency mining.
Few blue chips offer so much exposure to so many emerging endeavors and technologies, which explains the semiconductor stock’s relatively recent meteoric rise – and the outsized wealth it created for shareholders.
19. Walt Disney
- Wealth created: $311.6 billion
- Annualized dollar weighted return: 10.6%
- Country: U.S.
Walt Disney (DIS) isn’t just one of the best stocks of the past 30 years; it’s also one of the top stocks of all time.
Shareholders can thank Disney’s adaptability to an ever-changing media landscape for their outsized returns. In the past 20 years alone, Disney has gobbled up Pixar Animation Studios, Marvel Entertainment, Lucasfilm (of Star Wars fame) and much of 21st Century Fox. ESPN and the Disney Channel are just two of its many cable properties. The company’s Disney Plus streaming platform debuted as a smashing success. And let’s not forget to mention Disney’s theme parks, which remain global attractions.
Disney – a component of the Dow Jones Industrial Average since 1991 – has had its pandemic ups and downs recently, but you can’t quibble with the stock’s past performance. Shares in the sprawling entertainment conglomerate have delivered outstanding multi-decade returns.
18. Oracle
- Wealth created: $318.5 billion
- Annualized dollar weighted return: 19.5%
- Country: U.S.
Founded in 1977 and publicly traded since 1986, Oracle (ORCL) got its start as a provider of database management software.
As much as any high-tech company of the era, it rode the late-1990s tech bubble to lofty heights … and then crashed. A long, slow recovery followed – it took about 14 years for ORCL to regain its pre-crash peak – driven by a wide portfolio of software aimed at corporate customers.
But what really changed the company’s fortunes was its often painful transition away from traditional software licensing to providing cloud-based services. It took a while for the market to buy into Oracle’s transformation story, but once it did, the stock returned to its market-beating ways.
Whether that’s enough to drive further share-price outperformance remains to be seen.
17. LVMH Moet Hennessy Louis Vuitton
- Wealth created: $327.3 billion
- Annualized dollar weighted return: 12.4%
- Country: France
LVMH Moet Hennessy Louis Vuitton (LVMUY) is proof positive that luxury pays.
The French conglomerate’s operations comprise a sort of who’s who in luxe living: fashion house Louis Vuitton; prestige brands such as Givenchy and Marc Jacobs; Bulgari and TAG Heuer watches; Christian Dior perfumes; Tiffany & Co. jewelry; Moët et Chandon champagne … the list goes on and on.
The company was formed in 1987 via the merger of fashion house Louis Vuitton with Moët Hennessy. The combined company continued on its acquisitive path, and today claims a total of 75 prestige brands (or maisons, as the company calls them) organized into six business groups.
The pursuit of diversification through acquisitions – and the fact that luxury goods tend to hold up comparatively well during economic downturns – has allowed LVMH to create outsized wealth over the past three decades. It also doesn’t hurt that luxury brands command fat profit margins.
Need proof? LVMH boasts a gross margin – or the difference between sales and cost of goods sold – of 64.5%. At the other end of the spectrum, discount retailer Walmart’s (WMT) gross margin sits at 24.8%.
16. Coca-Cola
- Wealth created: $329.5 billion
- Annualized dollar weighted return: 12.9%
- Country: U.S.
Tech stocks have been the market darlings of the past three decades, but that doesn’t mean classic consumer brands have automatically gone out of fashion.
Witness Coca-Cola (KO), a member of the Dow Jones Industrial Average, a dividend stalwart and one of Warren Buffett’s all-time favorite stocks.
KO has maintained its edge over the decades by adding teas, coffee, sports and energy drinks, bottled waters, juices, and dairy and plant-based beverages to its traditional portfolio of fizzy refreshments. The company’s ever-expanding lineup has allowed it to remain relevant as one of the world’s most recognizable brands, even as consumers’ thirst for carbonated beverages has cooled.
Another key to KO’s wealth-creation record is its generous and rising dividend. Coca-Cola has paid a quarterly dividend since 1920, and that cash payout has increased annually for 61 straight years.
15. Intel
- Wealth created: $340.2 billion
- Annualized dollar weighted return: 16.0%
- Country: U.S.
Intel (INTC) has been one of the best stocks of the past 30 years, but it’s hard to see the semiconductor maker extending that record for another 30 years.
Founded in 1968, INTC is an old-timer among technology companies, and the chipmaker’s longevity has paid off handsomely for shareholders. Its early start positioned the company to run away with the market for the chips that serve as a computer’s brain. Intel had close to 100% market share in central processing units (CPUs) for personal computers at one point. It continues to claim around 80% today. Intel also remains the biggest player in making CPUs for back-end servers, which are very much in demand to power the rapid shift to cloud-based computing.
What’s troubling is that Intel missed opportunities in mobile and numerous other applications. As a result, the Dow stock has been a market laggard for quite some time and has never recaptured its 2000 tech-bubble levels.
14. Altria
- Wealth created: $364.6 billion
- Annualized dollar weighted return: 17.0%
- Country: U.S.
Altria (MO) is another stock whose greatest days of wealth creation are probably behind it.
But, hey, you never know.
The tobacco company doesn’t have the greatest earnings growth prospects given ever-growing restrictions against its primary product. But it does generate a river of reliable free cash flow, which it returns to shareholders in the form of generous dividends. And MO’s strategy of diversification and innovation has allowed it to deliver steady, if incremental, top-line growth.
Best known for its iconic Marlboro brand of cigarettes, Altria’s operating businesses continue to focus on tobacco: namely, cigarettes and heated tobacco products (Philip Morris USA), smokeless tobacco (U.S. Smokeless Tobacco) and cigars (John Middleton). Altria also owns St. Michelle Wine Estates, a major wine producer.
As a reminder: Altria changed its name from Philip Morris Cos. in 2003. Philip Morris International (PM) is a separate publicly traded company that was spun off from Altria in 2008 to sell cigarettes outside the U.S.
13. UnitedHealth Group
- Wealth created: $370.2 billion
- Annualized dollar weighted return: 21.2%
- Country: U.S.
A string of acquisitions has helped make UnitedHealth Group (UNH) the largest health insurance company by market value and revenue – and by wide margins at that. It’s also the most influential stock in the price-weighted Dow Jones Industrial Average.
The company was incorporated under the UnitedHealthcare name in 1977 and went public in 1984. Since then, it hasn’t looked back. Along the way, it beefed up its businesses by buying or merging with MetraHealth, HealthWise of America and AmeriChoice, among many others.
The company’s Optum business is one of the largest pharmacy benefits managers in the U.S. and has been a main driver of UNH’s share-price outperformance over the past few years. Indeed, UNH stock has beaten the broader market by substantial margins over the past five-, 10- and 15-year periods.
And Wall Street expects more good times ahead. In fact, UnitedHealth Group routinely ranks among analysts’ favorite blue-chip stocks to buy.
12. Alibaba
- Wealth created: $374.1 billion
- Annualized dollar weighted return: 17.2%
- Country: China
Although it has cooled off over the past few years, China’s economy experienced a kind of explosive expansion over the last three decades that has rarely been seen on the world historical stage. The Middle Kingdom’s e-commerce growth has been equally stunning.
So it should come as no surprise that Alibaba (BABA) makes an appearance on this list.
The e-commerce giant is often called the Amazon.com (AMZN) of China, and although there are important differences between the two, they do share a number of enviable traits. Alibaba – just like Amazon – has never shied away from investing heavily in itself to both build out its existing businesses and enter new ones. As a result, BABA also finds itself spreading its tentacles far beyond its core e-commerce business into cloud computing, digital payments and much, much more.
Chinese policymakers are cracking down on the country’s tech sector, and that has caused considerable pain for BABA shareholders since late 2020. Nevertheless, the company remains a top name in total wealth creation.
11. Mastercard
- Wealth created: $374.9 billion
- Annualized dollar weighted return: 33.0%
- Country: U.S.
Payments processors are hot properties these days. And analysts, hedge funds, billionaires and even Warren Buffett single out Mastercard (MA) in particular as one of their favorite stocks to buy.
Buffett’s Berkshire Hathaway owns 4.6 million shares in Mastercard – a position initiated by lieutenant portfolio managers Todd Combs and Ted Weschler. Buffett has said he wishes he had pulled the trigger sooner, but if MA’s future performance is anything like its past, the Oracle of Omaha will stop kicking himself soon enough.
Analysts credit MA’s long-term outperformance to its “powerful brand, vast global acceptance network and strong business model.” Substantial barriers to entry, thanks to Mastercard’s massive scale, global reach, security and data management skills, information intelligence and trust, have also served it well.
Bulls say the relentless global adoption of digital transactions should keep Mastercard’s record for wealth creation on track for the foreseeable future.
10. Roche
- Wealth created: $377.3 billion
- Annualized dollar weighted return: 14.1%
- Country: Switzerland
Swiss healthcare giant Roche (RHHBY) is the world’s largest pharmaceutical company by market value, and the second-largest by trailing 12-month revenue. The holding company also has a large diagnostics business, but it’s the pharma division – and its leadership in cancer treatments – that gets the most attention from global investors.
A series of acquisitions and partnerships have been critical to driving the company’s outsized wealth creation over the past three decades. The company’s holdings and investments are vast, and include U.S. biotechnology company Genentech, Hoffmann-La Roche France, Ventana Medical Systems and Disetronic Holding AG.
A strategy of acquisitions, strategic alliances and investments has helped keep Roche’s pipeline full of blockbuster drugs. The firm counts oncology treatments Avastin, Perjeta and Herceptin among its bestsellers.
Roche also stands out – and does well by its shareholders – as a dividend machine. Indeed, the company is a European Dividend Aristocrat, having maintained or increased its dividend annually for more than three decades.
9. Visa
- Wealth created: $385.0 billion
- Annualized dollar weighted return: 23.8%
- Country: U.S.
Visa (V) wasn’t even known as Visa when the company got its start in 1958 after Bank of America (BAC) launched its BankAmericard credit card program. But as the card gained popularity abroad, the name was changed in 1976 to Visa because it was easier to pronounce.
Today, Visa operates the world’s largest payments network. Despite its short life as a publicly traded company and the ill timing of its IPO – Visa went public in March 2008 during the global financial crisis – the stock has already created $385.0 billion in wealth for shareholders. Heck, including dividends, Visa’s stock has returned 861% over the past 10 years. That beats the S&P 500’s total return by nearly 490 percentage points.
And analysts expect more of the same going forward, thanks to the ongoing revolution in digital transactions. Visa, like rival Mastercard, is a favorite name with analysts, hedge funds and billionaires, including Warren Buffett. Berkshire Hathaway owns more than 9.5 million shares in the payments processor.
8. Kweichow Moutai
China’s growth over the past three decades into the world’s second-largest economy has made fortunes across a range of industries. And that definitely extends to booze. As much as has been made about the Middle Kingdom’s unbalanced economy – that it depends too much on investment and too little on consumption – don’t tell that to shareholders in Kweichow Moutai (SHSE:600519).The company, which trades only on the Shanghai Stock Exchange, is the world’s largest beverage company, with a market value of roughly U.S. $345 billion. Diageo (DEO) is a distant second with less than half its Chinese counterpart’s market cap.In addition to being the largest beverage company in the world, Kweichow Moutai is also China’s most valuable non-technology company.Prodigious consumption of Kweichow Moutai’s spirits and wines helped create nearly $400 billion in wealth over the past three decades – albeit with much of that wealth piling up rather recently. The pandemic, you see, was particularly kind to the company. Lockdowns led to a surge in demand for spirits, which in turn sent shares soaring nearly 70% in 2020.
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