Feel like crying over missed opportunities?
If you'd invested in Dell
This may not be the right time for Dell, as it has been losing significant market share. Lowe's, too, hasn't been growing very briskly, averaging 5% annual revenue growth over the past five years. Paychex is more promising, with a recent dividend yield above 4%, but it hasn't offered investors much beyond that in recent years.
So why didn't you buy these stocks 20 years ago, when it was a good time to do so? Why aren't these amazing returns yours? Why isn't your portfolio home to a few millionaire-maker stocks?
What stopped you?
Maybe you weren't yet awakened to the promise of the stock market. (I know I wasn't.) Maybe you didn't have money to invest, even if you wanted to. But even if you wanted to invest, and had the means to do so, you probably still didn't buy the companies above and others like them for your portfolio. Why?
Perhaps you didn't expect them to keep generating strong returns. Perhaps you didn't see the promise of others, because you weren't imagining a future very different from the present.
You didn't appreciate how powerful Dell's business model would be, as it permitted customers to have computers built to their specifications and order directly from the manufacturer, cutting out the middleman. You didn't expect Paychex to find hundreds of thousands of small companies eager to hand over their payroll processing responsibilities to an outside entity. You didn't envision successful and ubiquitous big-box retailers centered solely around home improvement and home building.
Such companies succeeded largely because they changed the status quo, breaking the rules about "how things are done" along the way. eBay
Now, by the time such innovators are apparent to even the dimmest of us, they are likely to have their strongest growth phases behind them. Attitudes toward eBay, for example, are very mixed these days, with some applauding PayPal's performance and promise and the company's international ventures and others worrying about marketplace participants upset about high fees. Priceline.com, meanwhile, has many admirers of its 21% five-year average annual revenue growth rate, but few think it's a bargain, with its price-to-sales ratio topping 4.
Older or former Rule Breakers may still serve your portfolio well, but they aren't likely to blow its doors off anymore.
Don't kick yourself
Fortunately, there are a bunch of up-and-comers poised to grow briskly. These businesses are breaking rules, moving first in exciting new arenas, and creating new ways of doing things. Some might even deliver out-of-sight returns for you over the coming 20 years. True, it can take guts to invest in them -- but the rewards may be worth the risk.
How can you tell the difference between companies that will deliver out-of-sight returns, and companies that will simply sink out of sight? Fool co-founder David Gardner looks for companies that offer "the highest possible returns" -- top dogs in important and emerging industries, enjoying sustainable advantages, strong past price appreciation, good management, and more.
Take videogaming, for example. The industry has enjoyed impressive growth, up 19% in 2008 and generating $21 billion in revenue, though that figure slipped a little during 2009's recession. Still, many gaming companies have seen their sales soar. Both Activision Blizzard and Take-Two Interactive are busily changing the rules of the game -- and setting new standards.
Another example is Intuitive Surgical
What will you regret not buying today?
Among many other exciting companies, David and his team have found a specialist in surgical robots, a company that runs China's premier search engine, and a business involved in commercial space systems. Each of these contenders has some key traits in common with the powerful performers in the table above.
If you'd like to see what David and his team are spotting today, I invite you to take advantage of a free 30-day trial of our Motley Fool Rule Breakers service. You'll get full access to all past issues and every previous recommendation, many of which are in cutting-edge fields such as biotech, alternative energy, and nanotechnology. Click here to learn more.
Give it some thought. You might want to park a little money in some of "the greatest growth stocks of the next generation."
This article was originally published on March 4, 2009. It has been updated.
Longtime Fool contributor Selena Maranjian owns shares of Activision Blizzard, Paychex, eBay, and Intuitive Surgical. Lowe's and Paychex are Motley Fool Inside Value recommendations. Chipotle Mexican Grill, Intuitive Surgical, and Take-Two Interactive Software are Motley Fool Rule Breakers picks. Activision Blizzard, eBay, and priceline.com are Motley Fool Stock Advisor recommendations. Chipotle Mexican Grill is a Motley Fool Hidden Gems selection. Paychex is a Motley Fool Income Investor pick. Motley Fool Options has recommended a synthetic long position on Activision Blizzard and a bull call spread position on eBay. The Fool owns shares of Activision Blizzard, and Chipotle Mexican Grill. The Motley Fool is Fools writing for Fools.