The stock market has roughly doubled in the five years that ended in mid-June 2021. Despite some big slumps in that period, it has been a fantastic ride for well-diversified investors who've been in the market since 2016.
Some individual stocks performed far better, though, and delivered life-changing returns for people who simply held on to shares. Let's look at why Crocs (CROX +1.89%), Tesla (TSLA +2.45%), and Wayfair (W 12.75%) each trounced the market in the past few years.
Image source: Getty Images.
1. Crocs are back in fashion
Crocs' weak stock price in 2016 was no fluke. The resin footwear specialist was in the middle of a three-year sales slump that had sent shares below $10. The business was struggling to find the right channels to market its products, and it wasn't consistently releasing hit footwear either.
But things have changed. In 2020 Crocs reported an impressive 13% sales increase to $1.4 billion (annual revenue was $1 billion in 2017). The company generated plenty of profits from those sales, too. Gross profit margin surged to 56% of sales for its molded products, far higher than Nike's 45%.
CROX Gross Profit Margin data by YCharts
The good times kept rolling into early 2021, when Crocs reported big gains in sales, profitability, cash flow, and earnings. Executives are betting that the global growth story is only starting, especially in China. Crocs may have a big opportunity expanding beyond its signature clogs, too, into areas like sandals. Keep an eye on this colorful stock.
2. Tesla is big business
Five years ago, Tesla was putting the finishing touches on the Model 3, its important step into the mass market of electric vehicles. Despite encouraging early signs of demand, investors faced a staggering list of questions around whether the company could produce quality cars at high volumes, service them efficiently, and maintain a recharging infrastructure that worked for drivers.
Fast forward to today, and most of those concerns have been left in the dust. Tesla produced and delivered 500,000 vehicles in 2020. Annual revenue was over $30 billion, compared to just $11.8 billion in 2017.
A Tesla investment today still promises significant volatility thanks to its high valuation and CEO Elon Musk's unorthodox approach to capital allocation. But most shareholders are happy to endure those swings in the hopes of watching the business build a massive global sales base while disrupting the wider automobile and home electricity markets.
3. Wayfair is way more than a website
As a leading online retailer of home furnishings, Wayfair was ideally positioned for the consumer demand shifts that marked 2020. Sales rose by $5 billion, or 55%, last year.
That's just part of the story for this impressive stock, though. Wayfair also swung to profitability for the first time following a new emphasis on cost cuts by CEO Niraj Shah and his team. The company is expecting to stay in the black long after the pandemic-related growth lift fades, too.
In the meantime, encouraging growth metrics like shopper engagement, repeat order volume, and gross profit margin all imply that Wayfair has unique competitive advantages in the attractive home furnishings niche. It owns its fulfillment platform, for example, controls a huge portfolio of brands, and maintains a strong connection to over 30 million active customers.
These assets should serve the company well as it pushes into new categories like home improvement and enters additional international markets. Wayfair's best days, like Tesla's and Crocs', appear to be ahead of it.
