Generating a 10x return in under a decade isn't normal, even for growth stocks. But the investors who find these companies can generate market-crushing returns in the long term.
As I looked back on the stocks that generated returns of over 1,000% in the past 10 years, a theme stuck out to me. These companies are some of the most critical hardware and software providers in technology today and they are disrupting the status quo in one way or another. Here's how Netflix (NASDAQ:NFLX), Apple (NASDAQ:AAPL), Adobe (NASDAQ:ADBE), and NVIDIA (NASDAQ:NVDA) turned $1,000 into at least $10,000 over the past decade.
Netflix didn't invent streaming in the past decade, but this is the decade it went mainstream. You can see below that revenue jumped more than 10x in the past decade and Netflix is now solidly profitable.
It's hard to understate how disruptive Netflix has been in the media industry. The company went from an upstart to arguably the most powerful content producer in the industry. Netflix can acquire almost any movie or show that it wants, and it gives creators additional freedom to make content without the constraints of television schedules or the big screen economic model.
But the reason Netflix has performed so well on the stock market over the long term goes beyond just its revenue and earnings growth. Investors love the stock because the company has 193 million subscribers who pay automatically every month. That momentum is incredibly valuable, and it's why Netflix has turned $1,000 into $25,500 over the past 10 years.
Like Netflix, Apple didn't invent its most important product (the iPhone) in the past decade. But it has generated hundreds of billions in cash by expanding the installed base of iPhones and growing the product line with new hardware like Apple Watch and AirPods, and services like Apple Music, Apple Pay, and iCloud.
What Apple has managed to do is turn the popular iPhone into a cash-generating machine. It may have seemed crazy a decade ago, given how big Apple already was then, but revenue and earnings have more than quadrupled in the past decade, as you can see below.
Apple is now worth over $2 trillion, and it's hard to imagine it returning another 10x in the next decade. But over the last 10 years it's turned $1,000 into $12,900 and it's not a stock I'm selling today.
One of the more impressive business transitions over the past decade has been that of Adobe. It was once a seemingly outdated software company not built for an increasingly mobile world. But that thesis couldn't have been more wrong.
Adobe has leveraged its leading design software like Photoshop and Illustrator into a valuable subscription business for professionals. And Adobe Acrobat and the PDF format is arguably more ingrained as a standard file type than ever before. Overall, Adobe has made a swift move to the cloud and investors are cheering the strategy.
While growth hasn't been as strong as that of Netflix or Apple, with revenue up just over 200% in the past decade, investors are putting a lot more value on the revenue Adobe generates. The cloud business is high margin and could be highly lucrative long term, and that's why we see the price-to-sales ratio climbing.
Without further multiple expansion, it may be tough to turn $1,000 into $12,500 like Adobe stock did in the last decade, but this is still a well-positioned tech stock long term.
Last but not least is NVIDIA, which has turned $1,000 into a whopping $49,300 over the past decade. The company has become a hot chipmaker because graphics cards have become valuable for everything from virtual reality to autonomous driving to generating bitcoin.
You can see below that while growth is impressive with sales more than tripling in 10 years, the real reason the stock is up is margin expansion.
Investors are putting a lot of hope on future adoption of NVIDIA's chips for some of the nascent industries I mentioned above. Whether or not that happens is yet to be seen, but if you owned shares of this company 10 years ago, you would be sitting on a major winner in the booming graphics business.
Big stock winners are out there
What you'll notice above is that these companies weren't unknowns 10 years ago. Netflix and Apple were household names even a decade ago, while Adobe was a common software maker. Even NVIDIA was in many computers, even if consumers didn't know it was there.
Finding 10-bagger stocks doesn't have to mean looking on the market's scrap heap -- the big winners may be right in front of us. In the last decade, they were right in front of our eyes.