Wouldn't it be nice if you could invest $1,000 in a stock and watch it grow into a six-figure sum -- or even more -- over the years? Several stocks have done just that for their investors. Here are three good examples.
Recent Stock Price
$1,000 Invested in IPO (Approximate)
Welltower (WELL -0.44%)
Berkshire Hathaway (BRK.A 0.55%)
Amazon.com (AMZN 0.23%)
To be clear, this is just a sampling of the many stocks in the market that turned a small amount of early investors' money into a six-figure sum (or more). I chose these because they are three very different companies that took investors on three very different paths to wealth. Here's a little bit about each one and where they could be heading in the future.
Who says real estate is boring?
Many investors consider real estate investment trusts to be boring stocks, and there's some truth to that. After all, the whole idea is to acquire properties and collect rent -- not nearly as exciting as Amazon's business or Berkshire Hathaway's collection of subsidiaries. However, the returns that solid REITs are capable of producing over long periods of time are certainly not boring.
In a nutshell, Welltower invests in healthcare properties and has shifted its focus primarily to senior housing facilities over the past several years to capitalize on demographic trends and the current industry environment. Specifically, most of Welltower's properties now derive their income from private-pay revenue sources, which are generally more stable than those reliant on government reimbursements and are operated as partnerships with some of the best senior housing operators in the business.
Furthermore, the U.S. population is aging rapidly, which should create a steady rise in senior housing demand. In fact, the 85-and-older age group -- senior housing's primary demographic -- is expected to roughly double in size over the next 20 years.
Since its IPO in the early 1970s, Welltower has generated 15.6% average annualized total returns for its investors -- a remarkable level of performance to sustain for nearly five decades. Assuming reinvestment of dividends, a $1,000 investment in Welltower's IPO would be worth more than $900,000 today.
If you had invested in Warren Buffett in 1964...
To be fair, when Warren Buffett took control of Berkshire Hathaway in 1964, the company didn't bear any resemblance to its current state. Instead of a collection of subsidiary businesses and a massive portfolio of stocks, Berkshire Hathaway was a struggling textile company.
Today, Berkshire has more than 60 subsidiaries and a portfolio of stocks valued at $189 billion as of this writing. Among Berkshire's wholly owned subsidiaries are companies such as GEICO, Duracell, Fruit of the Loom, and The Pampered Chef, just to name a few, and the stock portfolio includes large positions in companies like Apple, Wells Fargo, Bank of America, and Coca-Cola.
Although Berkshire Hathaway didn't look anything like it does now, Buffett had already demonstrated the success of his investment philosophy at that point. Anyone who recognized Buffett's potential and had decided to invest alongside him 53 years ago would have seen their shares rise from about $14 in 1964 to more than $294,000 today. A $1,000 investment would be worth nearly $24 million based on the current stock price.
The e-commerce revolution made early investors millionaires
An investment in Amazon.com's IPO would have produced the lowest overall return of the three, but it would have also done so in a much shorter period of time. Since going public just over 20 years ago, Amazon stock is up 59,000% (split-adjusted).
Over the past two decades, Amazon has transformed itself from a simple online bookstore into an e-commerce powerhouse. And the company isn't done growing yet. Its recent acquisition of Whole Foods and its exploration of entering the pharmaceutical industry show that the company has no intentions of reaching "maturity" anytime soon.
To be fair, many tech companies went public around the same time, and Amazon is certainly the exception, not the rule. However, those with the foresight (or luck) to have chosen Amazon as their dot-com investment would be sitting on about $589,000 for every $1,000 they invested.
Should you expect the same going forward?
It depends on the situation. Berkshire has openly acknowledged that while the company is confident that it can continue to generate market-beating returns, the next 50 years' performance won't come close to that of the last 50. The company has simply gotten too big to sustain such high returns. If Berkshire were to grow at the same rate for the next half-century, its market cap would be more than $8,000 trillion dollars -- more than all of the money that exists in the world. In other words, it's simply not possible.
A similar argument could be made for Amazon, although it's certainly possible that the company could grow to several times its current size and produce strong returns for investors.
Welltower, on the other hand, is a different story. Assuming a 5% annualized dividend rate, it's not outside the realm of possibilities for Welltower's stock price to grow at a 10% clip going forward. Sure, this would be a better-than-average performance as far as stocks go, but it isn't entirely impossible.
The bottom line is that it's important to evaluate a business now, not just its track record of success. For example, don't invest in Berkshire because it made people millionaires. Invest in it because you think its current business model fits your investment objectives.