Investing is a long-term game, and while the temptation may be to try and find a quick profit here or there, a short-term strategy can often yield the worst results. Everyone wants to find the next tech giant like Shopify Inc (TSX: SHOP)(NYSE:SHOP) in hopes that it’ll lead to eternal riches, but it rarely works out that way.
Shopify hasn’t even been around a decade, much less two. It’s still a young company with loads of potential, especially as the world of e-commerce continues to get bigger and bigger. At a price of about $1,400 today, the stock is worth more than 46 times its original value of around $30. That means a $10,000 investment on day one could have earned you $450,000 in profit if you held on to the stock until today.
But many initial public offerings (IPOs) fail — and the Shopify story is the exception, not the norm. Investing $10,000 into every IPO would require deep pockets with no guarantee of any long-term success from doing so. A new tech issue is exciting, but that doesn’t mean it’ll translate into growth. And it still requires patience. A year after its IPO, Shopify was still trading at around the $33 to $35 range, likely frustrating early investors.
An even better return than Shopify
While Shopify’s returns are incredible and could grow even higher, one stock that’s generated even greater returns is Alimentation Couche- Tard Inc. (TSX:ATD.B). The Quebec-based company first began trading on the TSX in 1999. And if you were to buy shares of the company on January 1, 2000, you would’ve paid the equivalent of approximately $0.40 after accounting for stock splits. At more than $46, the stock’s now 115 times what it was worth at that time.
That means if you invested around $9,000 in Couche-Tard back then, your investment — assuming you hung on to it for so many years — would now be worth over $1 million. This is, of course, an extreme example, but it shows how even a non-tech stock like Couche-Tard can perform so well over the long term. Within one or two years, it’s not likely going to generate the returns of Shopify, but over the long term, it can lead to significant riches.
Given that it took Couche-Tard over 20 years to reach its current level, the +10,000% returns aren’t as impressive as Shopify’s +4,000% returns over five years. But it’s hard to imagine any investor being upset with either return. And there are no guarantees that Shopify will continue on its incredible trajectory and surpass Couche-Tard.
Bottom line
Not every stock is going to do well as Couche-Tard or Shopify. But even a stock like Rogers Communications is up 200% over two decades, plus all the dividend income you would’ve earned over those years. If you’re looking for a shortcut to investing, you’ll have to take on significant risk in return. Often, it’s just not worth it.
If you’re patient and willing to hang on to your investment for years rather than weeks or months, odds are you’ll do well as long as you’ve invested in a business with strong fundamentals and good growth opportunities ahead of itself. If you do that, you won’t have to try and swing for the fences in search of the next Shopify. You may be even luckier and find the next Couche-Tard.
