Shareholders of retailing giant Woolworths Limited (ASX: WOW) have seen their shares hit a record, all-time high of $37.23. The milestone marks a decade of significant outperformance for the retailer. Had an investor bought the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) ten years ago they would be sitting on a capital gain of 58%, in contrast an investment in Woolworths has returned 215%, both excluding dividends.
Not only is the share price performance of Woolworths in stark contrast to that of the index but also to its closest rival Wesfarmers Ltd (ASX WES) – the owner of Coles. Wesfarmers’ shares have risen just 45% in the past ten years, thereby not only significantly underperforming Woolworths but the index too.
Highlighting the slim margins and competitive forces in the industry, the experience for shareholders at wholesaler Metcash Limited (ASX: MTS) has been even more unpleasant. Metcash’s share price is currently at a decade low and its ten-year return is a mere 9%.
The varied results from these three supermarket industry players are a reminder for investors of the importance of careful stock picking and also the difficulty of outperforming the index. Selectively investing in the very best companies at a reasonable price for the long-term can lead investors into buying and holding stocks such as Woolworths and achieving these types of returns. What’s more, the outstanding performance of Woolworths is unlikely to be just in the firm’s past, with the long-term outlook for its future positive too.