The 2010s are coming to an end, but the market’s rally proceeds. All the major indices continue to hit new all-time highs daily. The past 10 years have been underlined by the longest economic expansion in US history, and it’s been a hell of a decade for the stock market. The S&P 500 rallied over 188% and the tech-driven NASDAQ index gained more than 290%.
Some stocks were able to return investors more than 10 times the major indices’ gains. I’m going to dissect the S&P 500’s winners of the decade in this article, discussing what these companies did right and how to find the top performers of the next decade.
Netflix (NFLX) was the strongest S&P 500 performer of the 2010s with gains of roughly 4150% since December 31st, 2009. It’s not hard to imagine why this stock saw such prolific returns. Netflix started a consumer shift that has since become a widespread industry. Video streaming has started the cord-cutting revolution, and every media company and its subsidiary are being forced to jump on the streaming bandwagon to remain competitive.
The competition in the streaming space is steepening quickly with Disney (DIS) just entering the market, and AT&T (T) and Comcast (CMCSA) anticipated to launch their own services next quarter. The rich growth that is currently being priced into Netflix may not come to fruition. I would not recommend any action on NFLX at its current forward P/E of 61x.
MarketAxess (MKTX) Holdings was the next top performer on our S&P 500 winners of the decade list with a 2615%-decade long rally. This firm revolutionized the bond markets taking these fixed income assets digital. There has been a massive shift in bond trading over the past decade, with 92% of investment-grade bond funds utilizing electronic trading in 2019 compared to 9% in 2009, according to WSJ article. MarketAxess controls 85% of this market and has been the leader in this revolutionary financial shift.
MKTX is a great story, and the company will continue to be the lead exchange for electronic fixed income trading. I think this stock may have runup past its intrinsic value. Considering its growth outlook is in the low double-digits for both top and bottom-line, I would not recommend a buy at its 61x forward P/E multiple.
The groundbreaking and lifesaving medical device company Abiomed (ABMD) has returned investors 1780% since the turn of the decade, despite its 50% breakdown this year. This company created the first FDA approved artificial heart and has since taken control of this market with its most recent Impella pump supporting over 100,000 lives. The 2019 pullback is due to increased competition in the space.
This company has been facing some steep competition, and in a recent test, it was shown as inferior to one of its competitor’s products. This has caused a lot of concern in the market about ABMD, pushing it down quite a bit. Analysts have remained marginally optimistic and believe this stock may have been pushed down below its intrinsic value. I still see this stock as a falling knife, but could present a buying opportunity if we see a sizable reversal or positive news coming out of this company.
Broadcom (AVGO) and its savvy management team have been able to drive a 1640% share price appreciation in the 2010s. The firm has gone from a pure-play semiconductor company to an infrastructure technology conglomerate with its strategic acquisitions allowing it to alleviate some of the cyclicality and risk of the semi space.
Broadcom’s recent acquisitions and robust synergies created by them have continued to push this stock’s intrinsic value higher and higher. AVGO is trading right off its all-time highs, but I am confident that this stock still has room to run, especially as a long-term play. The 5G rollout is going to give the firm’s handset semiconductor segment a big boost, and further integration of its recent acquisitions should progressively expand Broadcom’s margins.
The top three names on this list were all pioneers of a product or space and were able to leverage their first-to-market positioning. All four of these companies had shrewd management teams that allowed them to leverage their core competencies effectively.
When looking for this next decade’s winners watch for companies with a compelling product that offer the markets something new and caters to a substantial addressable market. A prudent management team is also essential. Weak management will begin to show the market their true colors when the economy slows down, and the easy money dries up.
Zacks’ proprietary ranking system and team of professionals are here to help you sort the studs from the duds. Look for our top picks as well as our portfolio services, as these will provide you with great picks that will boost your portfolio’s returns.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don’t buy now, you may kick yourself in 2020.
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AT&T Inc. (T): Free Stock Analysis Report
Netflix, Inc. (NFLX): Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX): Free Stock Analysis Report
The Walt Disney Company (DIS): Free Stock Analysis Report
Comcast Corporation (CMCSA): Free Stock Analysis Report
Broadcom Inc. (AVGO): Free Stock Analysis Report
ABIOMED, Inc. (ABMD): Free Stock Analysis Report
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