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Which Stocks Outperform The Highest And Why (#2) – Technology Dominates …

  • Examination of exceptionally outperforming stocks for the NYSE and NASDAQ exchanges over 10 and 25 year periods show trends and themes that are consistent with data from other time periods

This post is the second in a series that examines a subgroup of stocks that have outperformed the market over a number of different time periods - in this case, exceptional outperformers for the NYSE and NASADQ exchanges over 10 and 25 year time periods.

Our name for this subgrouping of stocks is exceptional stock market performers … because their outperformance, relative to the rest of the market, is genuinely exceptional in a number of respects.

(The data and analysis presented in this series of posts are an extraction of the larger data sets and illustrate a combination of trends and the main common factors that underlie exceptional stock market performers.

The full data sets from which these extracted tables are taken, and the accompanying more comprehensive analyses, are available at Exceptional Stock Performers.)

10 year data

The table below lists the top 10, out of 15, stocks that have been identified as the highest outperformers over the last 10 year period (up to 2015).

Ticker

Company Name

Sector

% Gain

CAGR*

GMCR

Keurig Green Mount.

Consumer / Food

7,729

54.66%

MNST

Monster Beverage

Consumer/Beverage

6,569

52.15%

PCLN

Priceline Group Inc.

Services / Online

6,277

51.52%

AAPL

Apple Inc.

Consumer / Tech

4,419

46.42%

ALXN

Alexion Pharmaceut.

Pharma / Biotech

4,265

45.88%

REGN

Regeneron Pharmac.

Pharma / Biotech

4,166

45.55%

NFLX

Netflix Inc.

Services / Internet

2,840

40.23%

ISRG

Intuitive Surgical

Healthcare /Robotics

1,796

34.21%

CRM

Salesforce.com Inc.

Technol /Cloud comp

1,687

33.43%

WDC

Western Digital Corp

Technol/Data storage

1,306

30.26%

 

Average

4,105%

43.43%

 

S&P 500 gain (same period)

74%

5.70%

* CAGR: Compound Annual Growth Rate

(Sources: Exceptional Stock Performers, Wall Street Journal-Used with permission)

Similar to the YTD and 1 and 2 year data, an initial analysis reveals a number of very obvious aspects about these 10 year data:

  • The mean 10-year gain across the extracted top 10 stocks for this period, that included the Global Financial Crisis, was 4,105% with an annualized [CAGR] increase of 43.43%. This was more than 7X the annualized return for the S&P 500.
  • The application of technology, again accounted for 80% of these stocks, which is consistent with the sector concentration that is also evident for other 10-year outperformers. Over this 10 year period, the main application of technology was in internet-related services.
  • 90% of the top ten outperforming stocks were not in the S&P 500 Index ten years ago [Apple (NASDAQ:AAPL) being the only exception). In other words, 90% of the top 10 stocks are relatively new, rather than long-established businesses.

NB: Google (NASDAQ:GOOG) was ranked at number 11 with a 10-year gain of 1,294% and an annualized rate of return over that period of (only) 30.15%. Data for other exceptional outperformers for this period are provided at Exceptional Stock Performers.

25 year data

The table below lists the top 6, out of 10, stocks that have been identified as the highest outperformers over the last 25 year period (up to 2015).

Ticker

Company Name

Sector

% Gain

CAGR*

BEN

Franklin Resources

Investment

64,224%

90.88%

DHR

Danaher Corp

Technol / Healthcare

47,913%

85.37%

EV

Eaton Vance

Investment

38,444%

81.34%

UNH

UnitedHealth Group

Healthcare / Technol

37,672%

80.97%

CSCO

Cisco Systems

Technology (ICT)

33,772%

79.0%

IGT

International Game

Gaming / Technol

33,436%

78.82%

 

Average

42,577%

82.73%

 

S&P 500 gain (same period)

501%

8.01%

* CAGR: Compound Annual Growth Rate

(Sources: Exceptional Stock Performers, DailyFinance-Used with permission)

Again, without going into the more detailed analysis, some very obvious trends and patterns are initially apparent from a broad analysis of these extracted data and include:

  • The percentage increases in stock price for all of these extracted outperforming stocks are truly quite exceptional, with a 25-year average of 42,577% which equates to an annualized return of 82.73%. This compares to an increase in the S&P Index of only 501%, at an annualized rate of 8%, over the same 25 year period.
  • These percentage increases for the exceptional outperformers are also quite astounding when we realize that this 25 year-period included the Global Financial Crisis, the Dot-com crash, and the Asian Financial Crisis.
  • While only 66% of the extracted 25-year stocks are related to technology, when we consider all of the top 10 outperformers for this period, 80% are associated with technology, especially in the context or IT / ICT.

NB: Microsoft (NASDAQ:MSFT) was ranked at number 7 with a 25-year gain of 29,266% and an annualized rate of return over that period of (only) 76.46%.

Trends and common themes across all time periods

Broad analysis of all the (extracted) data for exceptionally outperforming stocks over the five time periods of YTD, 1 year, 2 years, 10 years and 25 years shows a number of trends--including:

  1. The influence of technology is clearly dominant for the vast majority of these exceptionally outperforming stocks-across each of the YTD, 1 and 2 Yr, 10 Yr and 25 year time periods.
  2. This over-representation of technology stocks and technology-related stocks for exceptionally outperforming stocks over a 25+ year period is so strong that it's probably reasonable to consider this either a super-trend or even a megatrend.
  3. However, the type of technology stocks that are described as exceptional stock market performers has changed over the last 25 years;

From a 25-year trend or pattern of more standard IT/ICT and IT/ICT-related stocks [e.g. Cisco (NASDAQ:CSCO), Microsoft , Oracle (NYSE:ORCL) …

To a 10-year trend or pattern of more internet-based stocks [e.g. Priceline (NASDAQ:PCLN), Netflix (NASDAQ:NFLX), Salesforce (NYSE:CRM) …

To a noticeable trend or pattern over the last one to two years, and then continuing into the YTD outperformers, for stocks where technology is applied to medicine and healthcare [e.g. biotechnology / pharmaceutical and other healthcare-related technology stocks such as Radnet (NASDAQ:RDNT), Radius Health (NASDAQ:RDUS), Ovascience (NASDAQ:OVAS), Eagle Pharmaceuticals (NASDAQ:EGRX), Anacor Pharmaceuticals (NASDAQ:ANAC)

Other common underlying characteristics

In addition to this dominant, although changing, influence of technology, several other fundamental characteristics have been identified for these exceptionally outperforming stocks ... and they are again evident across YTD, 1 year, 2 yeas, 10 year and 25 year time periods.

These additional underlying factors and fundamental characteristics will be introduced and discussed in the next post.

Subsequent examination of these additional underlying fundamentals, combined with the trends and analysis from this article, will then provide some insights into the likelihood of substantial future price gains--for this subgroup of exceptionally outperforming stocks ...

Disclaimer: No guarantees or representations are made or intended from the information and analysis presented in this article. Exceptional Stock Performers is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor before making any investment decisions.