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The 6 Best S&P 500 Stocks of the Past Decade

By Anders Bylund - Sep 16, 2015 at 1:00PM

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Today's biggest winners are yesterday's minnows. Six of today's S&P 500 components have scored market returns of 2,000% or better over the last 10 years. Here's how.

These 6 stocks are soaring. Photo: Stockpic.com.

The S&P 500 market index has gained 61% over the last 10 years, averaging an annual return of 4.9%.

That's a sluggish growth curve, but still a better investment than any savings account started in the last decade. But that benchmark covers the stock market in general. Did you know that five different S&P 500 members have delivered gains of 2,000% or more over the same period?

It's true. Though it wasn't always a smooth ride, six S&P 500 stocks would have multiplied a mid-2005 investment at least 20-fold. Here's how.

Conspicuous in their absence
A few seemingly obvious names didn't show up in this rundown. For example, a certain fruit-flavored computer and smartphone designer holds the largest market cap in the world, but fell just short of this list. That stock grabbed the #8 spot with a 1,540% gain. You can't win 'em all, and it's difficult to deliver massive percentage gains starting from a very large original market cap.

That being said, let's move on to the actual countdown.

#6: The single-serve coffee empire
Sliding in with an exact 2,000% gain over the last decade, Keurig Green Mountain (GMCR.DL) built a single-serve coffee kingdom through acquisition and careful management. As of last summer, Keurig could look back at a titanic 8,650% 10-year gain. The world was awash in Keurig-branded coffee brewing solutions, and everyone else could only hope to sell a few bean pods to Keurig's users, all under heavy license fees.

Tight-fisted control over these single-serve systems and their supplies created this empire in the first place, but also led to huge setbacks in 2014 and 2015. The company introduced a brewing system with built-in digital signatures, meant to stop unlicensed bean roasters from entering this lucrative field without paying those big Keurig royalties.

Strained coffee industry partnerships started falling apart, and consumers hated the very idea of artificially enforced limits on their bean choices. Keurig had to back down from this unpopular approach, and K-Cup 2.0 will now accept a wide variety of coffee pod brands without strict license checks.

The whole K-Cup 2.0 saga was a terrible mistake, but far from fatal. Again, Keurig investors have enjoyed a 2,000% return in ten years. That's nothing to sneeze at.

#5: The former king
Energy drink specialist Monster Beverage (MNST 0.88%) is next, yielding a 2,170% return over 10 years. Those caffeine-packed sodas sure hit a nerve, and Monster is still racing. The stock has doubled over the last year alone, lifted by strong earnings reports and a very tight partnership with the world's largest beverage distributor.

For the historians and true long-term investors among us, that's actually a bit of a letdown. Looking back ten years from 2005, the company then known as Hansen Natural was the best performer of the decade. The 10-year return back then? A staggering 24,185%.

The stock has now ranked at or near the top of the market's fastest growers for two solid decades. Among the other 2005 superstars, two companies have been acquired, two kept pace with the S&P 500, roughly doubling in ten years, and four stocks declined in value, with drops ranging from 10% to 91%.

But Monster kept the good times rolling for twenty years. That's a big "Wow!" in my book.

#4: The hyper-specialized drug designer
Alexion Pharmaceuticals (ALXN) comes next, rising 2,190%.

The company has made a mint on treating diseases too rare to get widespread attention from the usual biotech suspects. In particular, Alexion is known for Soliris, an antibody designed to treat two unusual diseases of the blood.

At more than $400,000 per year, Soliris is arguably the most expensive medicine on the market. Some health insurance providers cover the drug; others don't. Either way, Alexion pockets the massive revenue from each patient under Soliris treatment. Alexion can charge that much because Soliris is the only treatment option on the market.

Again, we're talking about extremely rare diseases, offering little incentive for other drug makers to enter the market. Research is expensive, after all. No, a second provider wouldn't be able to match Alexion's $400,000 annual bill, because a healthy market with several options will naturally lead to lower prices.

So Alexion finds these rare niches, takes the risk of developing or acquiring appropriate treatments, and then reaps huge rewards when the bet works out. This oddball strategy has unlocked a ton of value for Alexion investors over the years.

Source: Netflix.

#3: The digital video wizard
Ten years ago, Netflix (NFLX 1.33%) was a fresh-faced DVD rental service. Competing chiefly with Blockbuster and mom'n'pop video stores, Netflix mailed red envelopes to 4 million subscribers while learning the ropes of doing business in Hollywood.

The company quietly added an all-digital viewing option, included for free with your DVD-mailer service. In 2011, the two services were split apart. Now, the old DVD business is a helpful but increasingly irrelevant oddity. Netflix is all about digital video streams nowadays.

The company serves more than 62 million streaming customers now, including 21 million outside American borders. While there's still some room for growth in the domestic segment, the bigger story is Netflix aiming to cover the entire globe in streaming services by the end of 2016. The company makes its own award-winning shows, is getting into the movie production business on the side, and hopes to capture loyal audiences worldwide with its unique portfolio of high-quality content.

That led to a 2,860% 10-year stock return, a period that includes the Qwikster blunder. That separation between Netflix's DVD and streaming services in 2011 was poorly handled, sending investors running for the exits. Four months later, the stock had lost a heart-stopping 78% of its market value.

But management had already seen the error of its ways, corrected the obvious mistakes, and set the company up for long-term success.

"Selling Netflix today would be a big mistake," I said near the bottom of the 2011 trough. "Huge. This is actually where you back up the truck."

A week later, I added shares to my Netflix position at a split-adjusted $11.86 each. Today, Netflix shares trade for $99.16. You do the math.

So the stock has bounced back from a seemingly fatal mistake, and still has a ton of growth ahead. Come back in 2025, and you might very well find that Netflix pulled a Monster-style run of two decades in the hypergrowth spotlight.

#2: The affordable travel titan
Priceline.com (BKNG 3.28%) reached a 6,340% return through a combination of efficient operations and smart marketing.

The service is known for low-cost airline tickets and hotel reservations, mostly sold under the "name your own price" banner. Priceline markets this package to consumers with the help of William Shatner, the quirky actor formerly known as Star Trek 's Captain Kirk.

The company may be a massive success today, but still only serves about 2% of the $2.4 trillion annual market for global travel sales. Priceline has grown its free cash flows right in line with those massive share price gains, and is putting that cash to good use via strategic acquisitions and projects stretching into new markets.

This is not the last time you'll hear about Priceline in light of its raging growth prospects.

And with that, we've reached the end of the line. Drumroll, please...

Eylea's big FDA moment deserved an announcement in Times Square. Source: Regeneron.

#1: The mainstream drug giant
If Alexion took the backstreets to massive stock gains, then Regeneron Pharmaceuticals (REGN -0.05%) walked down Main Street in broad daylight.

Regeneron's defining hit is macular degeneration treatment Eylea. Wet macular degeneration affects about 40 million people globally. Ten years ago, the disease almost always led to blindness. Now, Eylea is one of three effective treatments for the condition.

So this is not a boutique opportunity, but a mass-market condition. Eylea is also used to suppress tumor cells in colorectal cancer patients under the Zaltrap brand. That's another 1.4 million global cases per year, and Regeneron could still find other cancer forms that respond to Eylea/Zaltrap's reduction of new blood vessel growth.

In short, Regeneron built its soaring 6,870% returns on developing medical treatments for very common diseases. The market obviously has a place for both Alexion's laser-focus and Regeneron's broad approach.

Looking back at this list, we didn't find any investment banks or Silicon Valley high-tech companies. Instead, these six 2,000% gainers included two drug developers and four beautifully simple consumer goods stocks. Keurig and Priceline prove that exciting growth can be found in downright boring markets like coffee beans and discount airline tickets. And the winners in 2025 will mostly be today's unknown, underappreciated, under-the-radar minnows.

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Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$190.32 (1.33%) $2.50
Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL
Monster Beverage Corporation Stock Quote
Monster Beverage Corporation
MNST
$88.50 (0.88%) $0.77
Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
REGN
$690.51 (-0.05%) $0.37
Alexion Pharmaceuticals, Inc. Stock Quote
Alexion Pharmaceuticals, Inc.
ALXN
Booking Holdings Stock Quote
Booking Holdings
BKNG
$2,217.64 (3.28%) $70.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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