I have thrift built into my DNA. I drive cars until they die, wear the same clothing for years, and even travel hack in order to save on vacations.
Given my value-seeking nature, it took a long time to embrace the investing maxim "winners tend to keep on winning." I found this saying to be so counter-intuitive to my nature that I resisted following this advice for years.
However, I've been investing long enough to realize that it can make a great deal of sense to buy stocks after they've gone on a huge run. The reason is that I've seen plenty of "expensive" stocks go on to double and triple in value even after they've made a hugely bullish move.
Knowing that, here's a list of 10 stocks that have been monster winners over the last decade:
|MarketAxess Holdings (NASDAQ:MKTX)||2,030%|
|Booking Holdings (NASDAQ:BKNG)||1,571%|
|Ulta Beauty (NASDAQ:ULTA)||1,319%|
Which of these top performers do I think can be safely purchased today? Here's why MarketAxess Holdings, Booking Holdings, and Ulta Salon are my top picks.
I've been buying and selling stocks online for more than 15 years, so I had long assumed that professional trading in the bond markets worked the same way.
It turns out that my assumption was dead wrong. Instead of being traded electronically with ease, the majority of institutional-level bond trading -- even to this day -- still occurs over email or the phone.
MarketAxess Holdings was founded in 2000 to fix this slow and inefficient process once and for all. The company's solution was to develop the world's first electronic bond-trading platform.
Given the advantages that come from trading online -- faster execution, better access to data, increased regulatory compliance -- Wall Street has started to embraced MarketAxess' platform. When combined with the company's first-mover advantage, MarketAxess has grown into the largest electronic bond trading platform in the world.
The company's scale has been hugely advantageous for investors because this is a winner-takes-most kind of market. Bond sellers naturally want to trade where the most bond buyers are, and vice versa. That fact has created a wonderful network effect that has allowed revenue, profits, and the stock price to soar.
Thankfully, I don't think the company's run will be ending anytime soon. MarketAxess is constantly adding new products and functionality to its platform. There's also a big push going on right now to expand into international markets. Both of those create long-tail growth opportunities for investors. When adding in the company's habit of returning capital to shareholders, I think this winner looks poised to keep on winning.
Booking Holdings, which was formerly known as the Priceline Group, is a leading provider of online travel services. The company owns a variety of travels brands that you have undoubtedly heard off -- Booking.com, Priceline.com, KAYAK, Rentalcars.com, and more.
While many of the company's brands have grown well over time, there's no doubt that this company's golden goose is Booking.com. Booking.com was the first mover in the lucrative European hotel market. The company painstaking built out a huge network of hotels in the region, most of which are small mom-and-pop type operations. These hotels often lack the resources and know-how to attract online shoppers, so they happily signed on to Booking.com's platform.
Those early investments in the platform turned out to be a stroke of genius because shoppers quickly learned that Booking.com had the largest selection of hotels. In turn, that drew in more shoppers who favor selection, which incentivized even more hotels to join the platform. This created a double-sided network effect that has fueled rapid revenue and profit growth for years.
While Booking Holding's performance has been extremely impressive for years, there's ample reason to believe this business still has a tremendous amount of room left to run. When combined with the company's long history of improving margins, buying back stock, and making smart acquisitions, I continue to believe double-digit profit growth is likely for the foreseeable future.
I'm not much of a beauty enthusiast myself, but I must admit that Ulta Beauty's stock looks quite attractive.
Ulta is the largest purveyor of beauty products in the U.S. The company sells a huge range of personal care products that include cosmetics, fragrance, skin care, and hair care products at more than 1,000 stores. What's more, each of its stores features a full-service salon that offers a variety of hair, skin, and brow services.
Ulta has attracted a cult-like following among beauty shoppers because it provides a shopping experience that isn't easily replicated elsewhere (including online). Shoppers can sample a wide range of beauty products in the store at a wide variety of price points. In addition, Ulta's employees do not operate on commissions, so customers do not have to deal with high-pressure sales tactics that have been employed at department stores for decades.
These factors help Ultra draw millions of repeat shoppers each year. More than 26 million beauty enthusiasts have also joined the company's loyalty program which earns them discounts and access to special promotions. When combined, it's no wonder Ulta has been gobbling up market share in the beauty industry for years.
So, what's the potential here? Ulta had 1,058 stores in its portfolio as of the end of September 2017, and the company believes this number will eventually top out at 1,700 in the U.S. To hit that number, management plans on adding about 100 stores per year for the foreseeable future. When combined with steady gains in same-store sales, international growth, stock buybacks, margin improvements, and growth in its e-commerce business, I think this business can continue to crank out double-digit profit growth for the foreseeable future.
And yet, despite its long-term history of success, Ulta's stock hasn't been immune to the fears that have gripped the retail industry at large. The pressure has compressed Ulta's valuation to levels we haven't been seen in years, which I think is affording opportunistic investors a great chance to get in.
The Foolish bottom line
All three of these companies are have delivered stellar results for their long-term investors over time and remain in great shape to continue doing the same for years to come. That's why I think all three of these winners are excellent places for investors to park their capital today.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Amazon, BofI Holding, MarketAxess Holdings, and Netflix. The Motley Fool owns shares of and recommends Amazon, BofI Holding, Booking Holdings Inc., Netflix, and Trex. The Motley Fool recommends Abiomed, Cantel Medical, MarketAxess Holdings, and Ulta Beauty. The Motley Fool has a disclosure policy.