In investing, the biggest gains often come from the unlikeliest of places. But while huge rallies are usually a surprise, we do know that eye-popping returns take many years to develop.
Below, we'll look at three consumer-focused businesses, Amazon (NASDAQ:AMZN), Domino's (NYSE:DPZ), and Ross Stores (NASDAQ:ROST), which have each returned 900% or more as investments over the past decade -- at time over which the broader market rose by just 60%.
A decade ago, e-commerce accounted for just 3% of overall retail spending, compared to 9% today. As the market leader throughout that period, Amazon has won far more than its fair share of those gains. Amazon's sales in the most recent fiscal year were $136 billion, which is more than Costco can claim -- compared to $15 billion in 2007.
The phenomenal success of the stock has a lot to do with the company's reinventing itself through initiatives that CEO Jeff Bezos and his team allowed to develop into massive winners over the long term. From Amazon Prime, to hardware bets like the Fire device franchise, to Amazon Web Services, the e-commerce titan looks far different today than it did a decade ago. The company has many such projects in the works today, including (reportedly) augmented reality-fueled smart glasses, that should keep that streak of innovation going.
Discount retailer Ross Stores achieved its market-thumping growth the old-fashioned way: through a steadily rising revenue base and increasing profitability. It owned 900 locations in 2007 that helped it generate $6 billion in revenue. Its bottom-line profit margin at the time was 4%.
Today, the company operates over 1,500 stores across the country that produced $13 billion of sales in 2017. Ross Stores' profit margin last year was 8.7% -- more than double 2007's result.
The company's focus hasn't changed much in the past decade. It still aims to offer a mix of brand-name apparel, footwear, and home goods at between 20% and 60% below the prices its customers see at department stores. And as long as it can continue wowing shoppers with deals like that, it seems likely the business will succeed even as e-commerce soaks up a greater portion of the industry.
Domino's already had a few impressive assets a decade ago. It pioneered the pizza delivery business, after all, through a simple, focused menu and small stores that were easy to build, furnish, and maintain. It was the leading pizza delivery chain in 2007, too, responsible for 19% of the market.
Many things went right for this business in the intervening years, but the biggest key to its success has been a dramatic expansion of that market-share figure. Domino's now claims 27% of the pizza delivery industry, with its franchise-fee revenue reaching $2.5 billion last year, up from $1.6 billion in 2007.
More than half of its pizza orders come through digital platforms, which also makes this business one of the largest e-commerce specialists around. It has achieved that happy result by developing its own ordering platform, but also by integrating its functionality into every corner of the internet. Users today can customize their pizza through Facebook Messenger, by using an Apple Watch, or with a voice command to the Amazon Echo device.
There's no way to know which companies will trounce the stock market over the next decade. However, these three businesses share a few characteristics, including market leadership, a track record of innovation, and a focus on delivering unbeatable value to consumers, that investors can look for as they evaluate new stock ideas.
Demitrios Kalogeropoulos owns shares of Apple, Costco Wholesale and Facebook. The Motley Fool owns shares of and recommends Amazon, Apple, and Facebook. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.