What are the biggest stock market baggers of all time?

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Keith Gill’s return to the internet has reinvigorated r/superstonk, the Reddit forum for people who think r/wallstreetbets is too staid and insufficiently preoccupied with GameStop — a stock they still think will eventually usher in financial nirvana.

At the time that made FT Alphaville wonder: what are the actual “superstonks”, the zillion-baggers that could have turned even lunch money into obscene wealth if you’d just bought in the beginning and HODLed through thick and thin?

Luckily for FTAV, Arizona State University’s Hendrik Bessembinder has once again been digging into his long-term stock market return data to find the best performing stocks of the past century. The results might surprise you.

If you include reinvested dividends then Altria — the cigarette merchant formerly known as Philip Morris — is a contender for the title of best-performing stock of all time, generating cumulative returns of over 265,528,900 per cent since 1925, when the Center for Research in Security Prices’ data set begins.

In other words, a single dollar invested at the start of the CRSP data in December 1925 would have been transformed into a $2.6mn stash by the end of last year.

That performance smashes the next unlikely table-toppers, Alabama gravel giant Vulcan Materials and Kansas City Southern, a railway operator that was subsumed by Canadian Pacific last year. A dollar invested in those would “only” be worth $393,492 and $361,757 today.

One pretty obvious factor stands out in Bessembinder’s list of superstonks: They’re all old companies that have been or were around for a very long time, and few (none?) are in what would now be considered glamorous industries.

This hammers home the power of longevity and steady returns over racier stocks. Of the nearly 30,000 US stocks that appear in the CRSP database, the median lifespan is just 6.8 years. Only 31 companies are present across the 98 years it spans.

Of the 30 greatest compounders compiled by Bessembinder almost all have over 90 years of stock market history under their belt. The youngest is Northrop Grumman, which went public in 1951.

While the mean outcome over that near-century of data is a 22,840 per cent gain, the median outcome is a loss of 7.4 per cent, because over half of all the common stocks registered by CRSP have incinerated money. And as Bessembinder’s previous work has shown, most of the remainder have underperformed Treasury bills.

This latest paper isn’t a huge leap forward, but it underscores that the narrow club of wealth machines that have driven the American stock market over the past century have tended to do so through steady returns over a long time.

Even the 17 US stocks that have generated cumulative returns of over 5,000,000 per cent over their lifespans have only produced compounded annualised returns of 13.47 per cent on average.

As you can see, the table of highest compounded annualised returns looks a bit different as the different longevity of companies is factored in. Altria is still top dog, but sprightly septuagenarian Northrop Grumman jumps to second spot, followed by Johnson & Johnson and safety-averse Boeing.

But what are the greatest annualised returns produced by any listed company with at least 20 years of stock market history? If you’ve been paying attention to markets over the past couple of years the winner won’t surprise you.

Nvidia’s lead is actually even greater than this table suggests, given that the CRSP data used by Bessembinder only goes to the end of 2023. Nvidia is up another 111 per cent this year despite the recent stock market puke, while Netflix and Amazon — the most credible surviving rivals — are up 30.2 per cent and 9.87 per cent respectively.

This table has some weird inclusions though, like scientific journal publisher Plenum, which was acquired by Wolters Kluwer for $258mn in 1998, and, POOLCORP, the world’s largest swimming pool distributor.

But the weirdest must be Time Warner, which makes the top-30 list despite its 2000 merger with AOL, memorably described by BuzzFeed’s Tom Gara as:

. . . a glorious, disastrous clusterfuck that marked the peak of the first dotcom bubble and still sets the standard for making bad decisions while under the influence of internet. Fifteen years later it’s still the stupidest thing anyone ever did with money and a web browser, which is pretty amazing when you think about it.

Its presence is presumably reflective of the price-run up from 1992, the eventual spinout of Time Inc in 2014 and eventual sale to AT&T for $85bn in 2018, and the dividends it paid along the way.

It’s a good example of Warren Buffett’s aphorism to only invest in businesses that are so wonderful that an idiot can run them, because sooner or later, one will. It seems even the AOL idiocy could only dent Time Warner’s claim to stock market greatness.