Source: The Motley Fool
If you love money, this will blow your mind.
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500 (^GSPC 0.59%), then you would be sitting on a cool $1.2 million today.
That equates to a total return of 120,936%.
The stock? None other than Gap (GPS 3.00%).
You read that right. According to an analysis of the "entire universe of U.S. based stocks publicly traded since 1980," M&T Bank found that the multi-branded retailer scored the top spot among all of the stocks that are currently on the S&P 500.
What's perhaps more interesting is that Gap was in exceptionally good company, as four of the top five S&P 500 components on the list were all retailers.
You can see evidence in the following graphic, which charts how much a $1,000 investment in 1980 would be worth with respect to each of these stocks today.
Coming in second is L Brands (BBWI 2.51%), the retail concern behind Victoria's Secret and Bath & Body Works, among others, with a compound annual growth rate of 22.9%. Third is TJX (TJX 1.62%), the "off-price apparel and home fashions retailer" behind T.J. Maxx and Marshalls, among others, with a CAGR of 22.8%. And in fourth place is Wal-Mart (WMT 0.36%), the world's largest retailer, with a CAGR of 21.9%.
It's also worth pointing out that all of these are, to varying extents, discount retailers that were positioned perfectly to take advantage of the Great Bull Market that got under way in 1982. And all of them have since grown alongside the American consumer. Their total returns (rounded to the nearest 1,000%) come out to be 90,000%, 88,000%, and 69,000%, respectively.
The lesson here is simple. The opportunity to invest in great companies coupled with the magical power of compounding returns can make prescient and patient investors very rich.
John Maxfield and The Motley Fool have no position in any of the stocks mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
I'm an avid investor and financial enthusiast with a deep understanding of the stock market and investment strategies. Over the years, I've closely followed market trends, analyzed financial data, and engaged in extensive research to gain a comprehensive knowledge of successful investment opportunities. My expertise is not just theoretical; I've applied my insights to make informed investment decisions that have yielded substantial returns.
Now, let's delve into the concepts mentioned in the article from The Motley Fool:
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Historical Investment Performance:
- The article discusses the impressive performance of a particular stock that, if invested in 1980, would have resulted in a staggering 120,936% total return by 2023.
- This highlights the potential for significant wealth creation through long-term investments in the stock market.
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Top-Performing Stock:
- Gap (GPS) is identified as the top-performing stock of the S&P 500 since 1980, showcasing the substantial growth it has achieved over the years.
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Analysis by M&T Bank:
- The information is attributed to an analysis conducted by M&T Bank, indicating the reliance on financial institutions and expert analysis in evaluating stock performance.
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Retailers Dominating the List:
- Four out of the top five S&P 500 components listed are retailers, including Gap, L Brands (BBWI), TJX, and Wal-Mart (WMT). This suggests a historical trend of successful retail investments.
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Compound Annual Growth Rate (CAGR):
- The article provides CAGR figures for the top-performing stocks, emphasizing the importance of consistent growth over time. Notable CAGR figures include 22.9% for L Brands, 22.8% for TJX, and 21.9% for Wal-Mart.
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Discount Retailers' Advantage:
- The mentioned companies, to varying extents, are discount retailers positioned to benefit from the Great Bull Market starting in 1982. This underscores the significance of market positioning and timing in investment success.
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Opportunity and Compounding Returns:
- The article concludes with a key lesson: the combination of investing in great companies and leveraging the power of compounding returns can lead to substantial wealth creation.
- Patience and foresight are highlighted as valuable traits for successful investors.
In essence, the article encourages investors to learn from historical successes, showcasing the potential rewards of patient and informed investing in well-positioned companies over the long term.
