What Will You Regret Not Buying in 20 Years?

Feel like crying over missed opportunities? Check out the following returns for some stocks over the past two decades:

Company

Average Annual Return

Dell (Nasdaq: DELL  )

29%

Valero Energy (NYSE: VLO  )

17%

Precision Castparts (NYSE: PCP  )

15%*

Nucor (NYSE: NUE  )

15%

Automatic Data Processing (NYSE: ADP  )

12%

Smithfield Foods (NYSE: SFD  )

12%*

Chevron

12%

Southwest Airlines (NYSE: LUV  )

9%

S&P 500

5%

Source: Yahoo! Finance.
*Over past 19 years.

A $5,000 investment in steel company Nucor 20 years ago would be worth nearly $70,000 today. The same investment in Dell would be worth more than $900,000! Truly, one stock can change everything.

So, why didn't you buy them 20 years ago? Why aren't these amazing returns yours? Why isn't your portfolio home to a few millionaire-maker stocks?

What stopped you?
There are lots of reasons you might not have bought these companies 20 years ago. Maybe you weren't yet awake to the promise of the stock market. (I know I wasn't.) Maybe you didn't have money to invest, even if you wanted to. But even if you wanted to invest and had the means to do so, you probably still didn't buy these companies for your portfolio. Why?

Well, with some of them, you didn't expect them to keep generating strong returns. With others, though, you probably didn't see their promise -- because you weren't imagining a future very different from the present.

You weren't appreciating that Southwest Airlines would buck the money-losing tradition of so many airlines, or that a company like Dell would make billions building computers to order. You weren't aware of how Nucor was succeeding by inventing a new steel-making business model and becoming a top national recycler.

Many of these companies succeeded in large part because they changed the status quo and broke the rules about "how things are done" along the way. Southwest, for example, chose to fly only one kind of airplane, instead of maintaining and flying many kinds.

And now -- when those innovations are apparent to even the dimmest of us -- those companies are household names. Their very ubiquity means they won't be maintaining those stratospheric growth rates going forward because now they're established. They may still serve your portfolio well, but they aren't likely to blow its doors off anymore.

Don't kick yourself
But even though these companies are well past their rule-breaking stage, there are a bunch of small, growing ones poised to do the same thing -- ones that are breaking the rules, moving first in exciting new arenas, and creating new ways of doing things. Some of them even stand a decent chance of delivering out-of-sight returns for you over the coming 20 years.

So, how can you tell the difference between the companies that will deliver those out-of-sight returns and companies that will sink, well, out of sight? Fool co-founder David Gardner looks for companies that offer "the highest possible returns" -- companies that are top dogs in important and emerging industries, and that have sustainable advantages, strong past price appreciation, good management, and more.

Take video gaming, for example, which, as an industry, has been experiencing explosive growth -- up 19% in 2008 and generating $21 billion. Both Activision Blizzard and Take-Two Interactive have been busy changing the rules of the game -- and setting new standards.

So, what will you regret not buying today?
David and his team have found, among many exciting companies, a specialist in surgical robots, a company that runs China's premier search engine, and one involved in commercial space systems. They each have some key traits in common with the powerful performers in the table above.

If you'd like to see what they're spotting today, I invite you to take advantage of a free 30-day trial of our Motley Fool Rule Breakers service, including full access to all past issues and every previous recommendation, many of which are in cutting-edge fields such as biotech, alternative energy, and nanotechnology. Click here to learn more.

So give it some thought. You might want to park a little money in some rule-breaking companies that could serve you well for a long time.

Already subscribe to Rule Breakers? Log in at the top of this page.

This article was originally published March 4, 2009. It has been updated.

Longtime Fool contributor Selena Maranjian owns shares of Activision Blizzard. Take-Two Interactive Software is a Motley Fool Rule Breakers recommendation. Activision Blizzard and Precision Castparts are Stock Advisor selections. Dell is an Inside Value pick. The Motley Fool is Fools writing for Fools.


Read/Post Comments (2) | Recommend This Article (7)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 08, 2009, at 8:25 AM, catoismymotor wrote:

    Mine might be IRBT. I like their military bots a great deal. In order to rake in the big bucks they need to take aim at the private sector, both in terms of home and industrial use. As of this moment I have no idea what the longterm goals are for this company.

  • Report this Comment On July 08, 2009, at 8:31 AM, catoismymotor wrote:

    I know they have the vacuum and gutter cleaning bots. I don't know what their additional plans are for the home or office environments. I would like to see them do something for paraplegics or team up with a prosthetics manufacturer. I really want them to build an R2-D2 for me. A boy can dream.

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