Let’s be honest; the only reason to buy stocks is to create wealth. Investors can say they buy stocks to “diversify” or “preserve wealth,” but no one is going to be upset about a multifold return on their investment.
If you’ve been investing for a while, you already know that a multifold return isn’t unusual. Plenty of stocks double or triple in value. Some even deliver 10-fold returns. However, a 100-fold return is exceedingly rare. In fact, most investors can spend a lifetime diligently saving and picking the best stocks without experiencing such a colossal return.
Here’s a look at some well-known stocks that have delivered this unbelievable return recently.
To turn $1,000 into $100,000 requires a 10,000% total stock price return.
That might sound ludicrous, but there are plenty of recognizable stocks that have delivered this performance. In fact, all of the stocks I’m about to mention below took fewer than 20 years so deliver this return. In other words, you don’t need to wait till you’re old to be rich.
The two obvious 100-baggers are Amazon and Apple. If you’d bought these technology juggernauts in 2003 and 2004, respectively, your $1,000 investment would be worth $100,000 today. In fact, Apple has been a dividend stock for the past few years, so your total return would have actually been far higher than $100,000.
Fortunately, you don’t need to look south of the border for such returns. Canada’s own Constellation Software has delivered a 8,126% return since it was publicly listed in 2006. If Constellation Software stock jumps just 21% more, it will reach that coveted 10,000% total return benchmark.
You might have noticed that all three stocks have something in common: technology. The cost to distribute software is next to zero. Meanwhile, consumers and enterprises are willing to pay a premium for genuinely useful software and technology devices. This is a recipe for long-term wealth creation.
However, occasionally a non-tech stock delivers a stunning 10,000% return as well. Dollarama, in fact, has done this in just 10 short years. That means $1,000 in Dollarama stock in 2010 would be worth $100,000 today. That’s a faster pace than any of the tech stocks I mentioned above.
Buy stocks with potential
Looking back at these impressive results is one thing. Finding the next big 100-bagger is a whole other story. If I knew which company would be the next Apple or Amazon, I wouldn’t be writing this article today.
However, there is one key characteristic all these 100-baggers have in common: a gap between their present value and market size. The industries all these stocks operate in — retail, enterprise software, and consumer technology — are all worth several trillions of dollars. Meanwhile, these companies were worth less than a billion in the 2000s.
In other words, there needs to be a 100-fold gap between the size of the market and the company’s present-day market value. I would keep an eye on trillion-dollar industries such as retail (Shopify), healthcare (Well Health Technologies), space (Maxar), or real estate (Airbnb) for the next 100-bagger.
So, it could take fewer than 20 years to turn $1,000 into $100,000 with the right investment.