Every investor dreams of finding an underestimated megawinner, and then reaping a big reward for seeing something most others didn’t. Such trades are few and far between, however. Most stock picks end up being merely average performers.
Nevertheless, there’s something to be learned by studying the few stocks that have turned fairly modest investments into seven-figure sums.
Here’s a rundown of three names that have turned a $1,000 investment made at the right time into $1 million, if not more. See if you can identify what made these stocks such big winners, and then apply those ideas to your hunt for the market’s next big winner.
It’s not surprising that Amazon(NASDAQ: AMZN) earned top billing on this list. A $1,000 investment in its initial public offering (IPO) back in 1997 would be worth roughly $2.5 million today. That’s huge, although rightfully earned. In many ways the company defined the e-commerce industry as it’s known today, and with domestic market share on the order of 40%, it’s still the name in the business to beat. It’s doing OK overseas, too.
Just be sure to recognize the unique circumstances in place at the time it got going. Back in 1997 the internet was still relatively new. At-home computers were something of a luxury. You were almost certainly still using a dial-up connection, as broadband didn’t become commonplace until the early 2000s. And even then, most websites were a bit clunky.
Amazon founder and then-CEO Jeff Bezos still saw the potential of an online mall, though, and was brilliant enough to accept ongoing losses in exchange for growing market share that eventually led to outright dominance of the North American e-commerce market. The company’s also been consistently profitable since 2016, and increasingly so.
Granted, most of its recent profit growth stems from its foray in the lucrative cloud computing market. That’s something of another bullish point, however. Amazon is willing to evolve over time, adding businesses that make sense to enter. Moreover, it’s demonstrated that it’s capable of doing so.
Almost as much as Amazon, Apple(NASDAQ: AAPL) is another name that’s made a few millionaires out of small, patient investors. A $1,000 investment in the consumer-tech company’s IPO back in 1980 would be worth a tad more than $2.4 million today.
Most people probably wouldn’t have been so patient, of course. Apple was hanging by a thread back in 1997, when the late Steve Jobs took the helm again and began working some of his magic. That said, the bulk of this stock’s incredible gain has only materialized since 2007, when the company introduced the first iPhone, beginning a race to empower the world with mobile, web-connected computers. The popular smartphone still accounts for about half of Apple’s revenue.
It’s not been a great growth engine of late. Indeed, iPhone revenue has been mostly stagnant since 2015, only growing in 2021 during and mostly because of the COVID-19 pandemic. (Consumers had time and reason to buy them then, and the company masterfully navigated supply chain challenges.) Apple’s overall revenue and earnings have been similarly stagnant in the meantime. There’s just nothing that’s been able to replace this smartphone’s historic growth — except for maybe artificial intelligence.
Although arguably late to the party, its recently launched Apple Intelligence puts the power of AI in peoples’ pockets in the usual seamless Apple-esque fashion. Given technology market-research outfit IDC’s prediction that generative-AI-capable smartphone sales will swell from 234 million units this year to 912 million in 2028 as the world embraces this new kind of digital empowerment, perhaps the iPhone is quickly becoming a growth engine again.
Last but not least, just to prove that stocks outside of the technology sector are capable of being megawinners, know that Tractor Supply(NASDAQ: TSCO) has also turned a few small investors into near-millionaires.
It’s a bit surprising, really. The brick-and-mortar retailing landscape is not only saturated, but all of these players are struggling to compete with the aforementioned Amazon while also competing with one another. It seems unlikely that a relatively small chain of small-footprint stores would be able to survive such a challenge.
That line of thinking ignores a couple of important details about this farm and garden supply company, though.
First, in that Tractor Supply has been built from the ground up with people in mind, its customers truly enjoy the in-store shopping experience. (Most of its 2,200+ stores are also located in more rural settings where folks are more likely to farm, and where more generalized competitors aren’t likely to set up shop.)
And second, Tractor Supply offers a lot of specialty items that are often otherwise tricky to obtain.
Whatever the reason for its growth, reinvesting any dividends paid out by a $1,000 investment in Tractor Supply made in its 1994 IPO would be worth just under $1 million today.
That’s obviously nowhere near the sort of gains that Apple and Amazon have dished out in roughly the same time frame. It’s impressive all the same though, and especially so given the non-tech nature of its business. It certainly merits a mention, if only to highlight the fact that a wide range of businesses are capable of driving incredible gains. The key is just being able to offer something that consumers want but can’t readily find, and deliver it in a way your rivals can’t.
These companies are great because they each offer something that’s not only unique, but also practical in perpetuity.
Take Apple’s iPhone as an example. There are other smartphones, but its iOS is easy to use, and a pocket-size computer that can do almost anything could almost be considered a personal assistant. Tractor Supply helps consumers live a particular lifestyle, and does so in an intimate way that no rival can quite copy. People have a limited amount of time to shop, let alone shop around for the perfect purchase at a good price. No platform other than Amazon lets them browse a universe of options in a matter of seconds.
This in contrast to once-lauded names like meal kit company Blue Apron or action camera outfit GoPro. Sure, people appreciate easy-to-make meals like the ones Blue Apron offers, but they’re something of a commodity in a (very) crowded market. They’re not unique. Meanwhile, although few would dispute that GoPro makes the world’s best action cameras, the world just doesn’t need that many of them. Most folks are too busy to do film-worthy activities, and the ones who aren’t too busy can shoot good enough video with their smartphones.
Bottom line? If any stock is going to be a potential millionaire-maker, it must offer something practical for the long haul, but it must also be something decidedly better than any competitor’s alternative.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool recommends Tractor Supply. The Motley Fool has a disclosure policy.
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