Normally when you think about earning big returns from the stock market, you're likely to remember risky investments that ended up paying off. But by no means is that the only case. You can also invest in solid blue chip stocks which make for safe long-term buys, and attain some incredible returns.
Three examples of this are Nvidia (NVDA +1.95%), Oracle (ORCL 0.85%), and Eli Lilly (LLY +1.47%). If you invested in these companies five years ago, you would be up over 380% (returns as of Oct. 1). And these were large, well-known businesses back then. By simply investing in companies with strong track records for growth and excellent fundamentals, you could have achieved amazing returns.
Here's why these three stocks have done so well.
Image source: Getty Images.
Nvidia: up 1,290% in 5 years
Nvidia is, unsurprisingly, the top stock on this list. Its incredible rally over the past five years has been due to the enthusiasm for generative artificial intelligence (AI). The company was known for its graphics cards five years ago, and was already a relatively big tech business.
It ended up being well-positioned to benefit from the boom in AI, and today, it makes cutting-edge chips that tech companies rely on. It has become the most valuable company in the world, with a market cap of $4.57 trillion. And what's most remarkable about that is that it's still not an obscenely overpriced stock. It trades at a forward price-to-earnings (P/E) multiple (based on analyst estimates of future profitability) of 42.
NASDAQ: NVDA
Key Data Points
Normally, when stocks surge to incredible valuations, there's a high degree of risk and speculation involved. However, Nvidia has simply been a growth machine. Over the trailing 12 months, it has generated earnings totaling nearly $87 billion. Just a few years earlier, its full-year earnings weren't even $5 billion. If you have a long-term horizon, Nvidia can still make sense as an investment to hang on to, given its leadership position in the AI chip market.
Oracle: up 381% in 5 years
Another company that benefited from the AI boom, albeit to a much lesser extent than Nvidia, is Oracle. Five years ago, it was already known as a large tech company with reliable databases. Today, those databases still play an important role. But it also provides crucial cloud infrastructure and applications that can assist with AI development, particularly as more of its customers do more of their operations in the cloud.
In September, the company said it would soon be launching an "Oracle AI Database" allowing its customers to use the large language model of their choosing. That will be on top of their normal Oracle database, making it easy for customers to analyze their data with the help of AI. It's a great example of how Oracle has adapted to the changing needs of its customers.
NYSE: ORCL
Key Data Points
Oracle's business has grown at a much steadier pace than Nvidia's over the years, but it's nonetheless still a top AI stock. Earnings over the past 12 months have totaled $12.4 billion, nearly double the level they were at three years ago. Shares trade at a forward P/E of 42. And like Nvidia, this can be a good stock to hang on to if you want exposure to a top AI company.
Eli Lilly: up 462% in 5 years
Drugmaker Eli Lilly may seem out of place on this list, as it isn't a big tech company developing AI-related products. But the stock helps bring home an important point: innovation isn't predictable. Five years ago, Eli Lilly was a top healthcare company, but GLP-1 weight loss and diabetes drugs weren't yet on the radar for healthcare investors as huge growth catalysts to watch out for. And now those products have transformed Lilly's business and enabled it to significantly grow its operations.
Today, the company has two approved GLP-1 drugs, one sold for weight loss (Zepbound) and another for diabetes (Mounjaro). They both contain the same active ingredient, tirzepatide. Lilly is still working on more GLP-1 treatments, including a pill which it hopes to launch sometime next year.
NYSE: LLY
Key Data Points
Eli Lilly's bottom line has totaled $13.8 billion over the past four quarters; it has also doubled in a span of a few years, thanks to the massive growth in GLP-1 drugs. Its forward P/E of 24 makes it the cheapest growth stock on this list to consider. And given the lucrative potential for GLP-1 weight loss drugs, that makes it practically a no-brainer buy at this point.
