As a whole, investors have vastly underperformed the market. According to the most recent Quantitative Analysis of Investor Behavior survey, the average equity investor has only seen a 6.2% annualized return over the last 30 years. That vastly trails the S&P 500's 10.7% annualized return.
The issue is more human nature than stock picking ability. We often let emotion get the best of us, buying when momentum is high and selling when stock prices are low. If investors take a more patient approach and hold on to stocks that have consistently beaten the market, they'd have a much better chance of outperforming. Here are five stocks that have outpaced the market by a wide margin over the last 10 years. All are in the same sector -- real estate investment trusts (REITs) -- which shows that even lower-risk investments like commercial real estate can beat the market.
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Cashing in on storing stuff
Extra Space Storage (EXR -0.60%) has delivered a nearly 900% total return over the last 10 years. That roughly 25.9% annualized return has significantly outperformed the S&P 500's 295% total return (14.7% annualized).
The self-storage REIT has a straightforward business model. It leases space in its mini storage units to people who need extra space to store their stuff. It also manages these facilities for third-party owners. Extra Space Storage has generated such amazing returns by steadily raising rental rates and expanding its portfolio. That's given it the cash to pay a growing dividend. With demand for storage space remaining strong, the REIT should be able to continue growing in the future.
Towering growth
SBA Communications (SBAC -0.54%) has delivered a nearly 630% total return over the last decade (22% annualized). The infrastructure REIT has provided those fantastic returns by steadily expanding its cell tower portfolio. That has allowed it to benefit from the growing demand for communications infrastructure.
Last year, SBA Communications bought cell towers in Tanzania and started building new ones in the Philippines, adding two more growth markets to its portfolio. It now operates in North, Central, and South America, South Africa, Tanzania, and the Philippines. With demand for data infrastructure expected to keep growing, SBA Communications should be able to continue expanding in the coming years.
Building value
First Industrial (FR 0.02%) has generated a nearly 550% total return over the last 10 years (20.5% annualized). The industrial REIT has benefited from growing demand for logistics real estate like distribution centers.
Development has been a significant contributor to First Industrial's ability to create shareholder value. It has invested over $1.1 billion to develop roughly 15.2 million square feet of warehouse space over the last six years. These investments have created an estimated $868 million in value for shareholders. With an extensive development pipeline, First Industrial should be able to continue growing value for its investors in the coming years.
Homing in on consolidated fragmented industries
Sun Communities (SUI -1.15%) has delivered a more than 510% total return in the last decade (19.9% annualized). The residential REIT has grown shareholder value by acquiring and developing non-traditional residential real estate like manufactured home communities, RV resorts, marinas, and holiday parks. It has purchased $9.6 billion of these properties since 2010.
Sun Communities' consolidation strategy saw it invest $1.5 billion to acquire 11 manufactured home communities, 24 RV resorts, and 21 marinas last year. The REIT also unveiled a $1.3 billion deal to acquire the second-largest holiday park owner in the U.K. The company sees an enormous opportunity to continue consolidating those fragmented sectors, which should drive steady growth for years to come.
Dialed into the data infrastructure boom
Equinix (EQIX -2.44%) has produced a more than 500% total return in the last decade (19.7% annualized). The data center REIT has benefited from the growing demand for infrastructure to store data.
Equinix has invested billions of dollars in building and buying new data centers. The company recently entered Africa by acquiring MaineOne in a $320 million deal and expanded into Chile and Peru by acquiring four data centers from Entel for $705 million. It also plans to invest more than $2 billion in 2022 to develop additional data centers worldwide. With demand for data infrastructure expected to continue growing, Equinix should have no shortage of expansion opportunities.
Lots of ways to win
Many REITs have beaten the market by steadily expanding their portfolios and dividends. The key for investors is to find a great REIT and then hold on and let it grow shareholder value over the long term. These five are an excellent place to start. They all have a history of creating value for investors and have a long growth runway still ahead.