If there were a reliable way to predict which growth stocks are on their way to hundredfold returns, we'd all be millionaires already. Most of our portfolios are considerably less than $1 million because there just isn't a discernable combination of factors that allows us to predict monster-sized gains with complete accuracy.
Picking stocks that can win big over the long run will never be an exact science. That said, there are some important lessons all of us can learn from millionaire-maker stocks like these.
|Total Return Since IPO
|Recent Value of $10,000 Invested
|Amazon (AMZN 0.83%)
|Nvidia (NVDA 4.00%)
|Apple (AAPL -0.60%)
|Netflix (NFLX 2.72%)
|Microsoft (MSFT 0.45%)
None of us are going to hit a bulls-eye every time, but we can improve our aim by learning some of the important lessons these stocks have taught us through the years.
Don't get rattled
The first and perhaps most important lesson we can learn from these millionaire-maker stocks is just how disastrous knee-jerk reactions to market meltdowns can be to your portfolio's long-term performance. For example, the biggest performer on this list, Microsoft, fell by more than half during the dot-com crash of 2000.
Microsoft had it easy compared to Amazon. Back in the early 2000s, shares of the e-commerce giant were beaten down more than 90% from the peak they reached in 1999.
There's an old saying that goes, "Nobody ever went broke taking a profit." This may be true, but investors who took a small profit on these stocks a couple of decades ago missed out on truly life-changing gains.
How to stay confident
Saying you're going to hold a stock for the long run is easy when it's on the rise, but how do you avoid panic-selling when a stock tanks? With the benchmark S&P 500 index down 24.9% this year, discerning which businesses are likely to survive difficult conditions and thrive over the long run is more important than ever.
The best way to remain confident about the stocks in your portfolio is by choosing ones with durable competitive advantages. For example, Microsoft's dominance in the personal computer market during the 1990s led to a network effect that remains unshakable to this day.
Amazon's enormous fulfillment network has some excess capacity now. Its market-leading size, though, gives the company an advantage over would-be competitors such as Shopify. It's going to be a long time before anyone can match the speed and reliability Amazon's customers and its merchant partners have come to expect.
Apple's ubiquitous devices give the company a network effect that it's leveraging to diversify its revenue stream. Only a handful of companies in the U.S. have the means to launch a successful streaming service. Apple doesn't share subscriber numbers, but JustWatch measured a 6% share for Apple TV+ during the second quarter.
Stocks to buy now?
Netflix is far and away the smallest of these companies, with a market capitalization of $95.7 billion. From this starting point, the company needs to grow to more than $9 trillion in order to turn a $10,000 investment into $1 million. Unfortunately, the rapid proliferation of streaming services is making it hard to grow at all. With this in mind, this probably isn't the best time to buy Netflix stock.
With a market capitalization that has already swelled past $2.2 trillion, it's hard to imagine a $10,000 investment in Apple turning into $1 million. If you're looking for a stock that can beat the performance of the overall market over the long term, though, this looks like a smart one to buy now.