The Best Performing Stock of All Time!

Today we want to talk with you about the best performing stock of all time.?

Alongside this, we also want to use it as another example of why we avoid investing in individual stocks for our clients at Presilium.

To help with this, we used the data from Hendrik Bessembinder’s fantastic July 2024 research report titled, “Which U.S. Stocks Generated the highest Long-Term Returns?

Ok, first, the best performing stock since 1926 is Altria, the tobacco company, with an annual return of 16.29% per year for the past 98 years. That was a cumulative return of more than 265 Million percent!

It beat out the other 29,078 publicly listed common stocks over that time for the largest cumulative return.

So with star performers like that one out there, why should you avoid individual stocks?

Simply, because the odds are against anyone choosing the right ones. 51.6% of all stocks actually had a negative lifetime return and 58% of stocks did not outperform 1 month treasury bills during that time. In fact, the median cumulative lifetime return of a U.S. stock from 1926 until 2023 was negative 7.41%

Bessembinder’s research also showed that $35 Trillion in wealth has been created by stocks from 1926-2016 over and above treasury bill returns. However, almost all those gains were generated by just the top 4% of stocks. In fact, more than half of that wealth came from just 90 companies, or less than 1/3 of 1 percent.

The exceptional long-term average return of stocks came from just a relatively few high performers.

Consequently, at Presilium, we feel that the best way to help our clients to reach their goals is by using broadly diversified index based portfolios and not choosing individual stocks. The S&P 500 has had an average annual return of 10.3% since 1926, most investors would have been much better off earning that rather than trying to consistently pick the few stocks that will outperform over the long-term.

Thank you and we look forward to talking with you next Friday.?

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