Turning a small investment into a fortune is the ultimate dream for any investor. But it's exceedingly rare to find an investment that delivers outsize returns quickly that doesn't come with a few risks.
It's not easy to turn $1,000 into a million bucks (or more), but these four retailers have done it. They each have enjoyed decades of growth, fueled by U.S. consumer spending, the most significant contributor to America's economy.
The beautiful part is that these companies can still deliver for your portfolio. They might be too large now to repeat their past returns but consider them durable, proven compounders that can slowly make you rich.
1. The rise of e-commerce and the expansion beyond it
Amazon (AMZN +0.34%) is the youngest company on this list. It started selling books online in the 1990s and has become arguably the most powerful consumer-facing corporation today. A $1,000 investment at Amazon's initial public offering (IPO) would be worth roughly $2.4 million today, a staggering 2,400-fold return.
NASDAQ: AMZN
Key Data Points
Amazon dominates online retail in America, with an estimated 40% of e-commerce sales in the United States. Astonishingly, online sales still represent under 20% of total retail spending nationwide, leaving plenty of room for growth for the industry's leader. The company has built a potent ecosystem with Prime, its subscription that offers perks for shoppers and access to services like video streaming and telehealth.
Perhaps Amazon's best accomplishment is its cloud computing platform, Amazon Web Services (AWS). It has become the world's largest, setting the company up for massive growth opportunities over the coming decades. Not only will artificial intelligence potentially push the global cloud market to over $2 trillion, but AWS is also Amazon's most profitable business. These tailwinds signal plenty of future growth ahead for new investors.
2. America's dominant do-it-all retailer
Walmart (WMT +2.15%) has grown from a small store in Arkansas into a global entity and iconic brand. Today, roughly 90% of Americans live within 10 miles of a Walmart. A $1,000 investment in 1972 would have multiplied into a fortune worth nearly $7.2 million.
WMT Total Return Price data by YCharts
The company has a reputation for low prices. Its massive size is a competitive advantage because it allows it to operate on razor-thin profit margins and bargain with suppliers for lower prices than its competitors. In other words, smaller retailers can't afford to compete. The company has also embraced e-commerce, using its stores and existing supply chains to fulfill orders. Walmart is America's second-largest online retailer behind Amazon, with 10% to 11% of the market.
Walmart's position as a cost leader makes it a durable business that people visit loyally. The company's dividend excellence supports that notion. It has paid and raised its dividend for 51 consecutive years (it is a Dividend King). Investors should expect more steady growth and rising dividends over time.
3. This big-box retailer has a cult-like brand
Costco Wholesale (COST +1.26%) is a favorite of Warren Buffett's right-hand man and famous investor, Charlie Munger. Costco's success justifies the late Munger's affinity for the stock. A $1,000 investment in 1982 would have grown to over $1.1 million today.
NASDAQ: COST
Key Data Points
The business model is simple. Costco sells bulk goods at low prices; it charges shoppers a membership fee to access the store, which is how Costco generates most of its profits. The company has arguably a more loyal following than any other retailer, a brand Costco has built with famous gimmicks, such as its $1.50 hotdog meal offer, which has remained the same price since 1984. The company doesn't spend money on marketing and sends excess cash to its shareholders as quarterly and special dividends. It's a tremendously efficient business.
Costco can drive future earnings growth by expanding its 77.4 million paid memberships or increasing its subscription price. Recently, it issued its first price increase since 2017, so it can potentially pull that lever more than it has. Investors should expect Costco to continue performing well into the future.
4. A generational winner built on the real estate market
Home Depot (HD +3.61%) is the most lucrative stock on this list. The company has turned a $1,000 investment into roughly $20 million, a feat that took just over 40 years. Home Depot found success with a large store footprint and broad product selection and then replicated that formula to become the world's largest home improvement retailer.
Do you know the largest purchase most people will make in their lifetime? A home. This purchase often evokes an emotional attachment that motivates homeowners to spend money remodeling and maintaining their house. Residential real estate in America is worth about $50 trillion. That vast market has powered Home Depot's growth for decades.
This is unlikely to go away anytime soon. In addition, Home Depot has invested in expanding its business scope. Last year, it acquired SRS for $18.25 billion to gain exposure to specialty spending categories, including professional roofing, landscaping, and pool contracting. Home Depot's business may ebb and flow with the economy if consumers pull back on big projects, but the long-term future remains bright.
