Shares never move in a straight line, not even the best ones. So it can be useful to have a look at high performing stocks to see where they started out and the journey that investors went on in order to capture huge returns.
Here are 10 of the highest returning stocks on the ASX over the last 10 years:
|Company||10 YearAnnualReturn||$10,000 Becomes||Maximum Drop|
|M2 Group Ltd (ASX: MTU)||50.24%||$585,943||49.59%|
|Northern Star ResourcesLtd (ASX: NST)||47.90%||$500,820||94.51%|
|Sandfire Resources NL (ASX: SFR)||47.43%||$485,130||95.54%|
|Magellan Financial Group Limited (ASX: MFG)||43.05%||$358,821||87.69%|
|Hansen Technologies Limited (ASX: HSN)||41.01%||$310,812||41.18%|
|Altium Limited (ASX: ALU)||37.82%||$247,242||93.65%|
|REA Group Limited (ASX: REA)||35.51%||$208,791||58.39%|
|Vocus Communications Limited (ASX: VOC)||34.04%||$187,216||55.25%|
|Sirtex Medical Limited (ASX: SRX)||33.73%||$182,931||70.87%|
|NetCommWireless Limited (ASX: NTC)||32.86%||$171,373||81.12%|
(Data Source: Morningstar)
As you can see, a 10-year investment in any of these companies had the potential to be pretty life changing. But the massive returns were only achieved after a volatile ride involving falls in the value of these investments of between 41% and 95%! There is no doubt many investors gave up and sold out along the way and are now regretting it.
So what did these companies look like 10 years ago?
M2 Group Ltd
M2 Group supplies telecommunications, electricity and gas utilities to residential and business customers. Ten years ago it was already profitable and paying a dividend. Since then, revenues have exploded from $44 million to $1.1 billion.
Northern Star Resources Ltd
Australia’s second largest gold miner. Starting out as an explorer, it shifted to producing in 2010 and grew revenues to $846 million in 2015.
Sandfire Resources NL
Sandfire explores and develops a portfolio of mining projects, primarily gold and copper. Initially a junior explorer in 2004, its first profit was in 2013, and it grew earnings to $69 million by 2015.
Magellan Financial Group
A fund manager with a $3.4 billion market capitalisation. Its consistently high performing funds have grown assets under management to $40 billion, and increased net profits from $3 million to $174 million over the last 10 years.
Hansen develops customer care and billing software for service companies. Shareholders have enjoyed a positive return in every year of the last 10 as annual profits have steadily increased from $3 million to $17 million.
Altium produces software for the design of electronic products. An investor who bought in 2006 had to be patient until around 2012. Since then, earnings have exploded, with a net profit of $120 million in 2015.
REA Group Limited
Starting with realestate.com.au, REA Group now has a global portfolio of interests in property websites. Earnings have increased from 11 cents per share to over 150 in 2015. Although it was a well-known company in 2006, many would have said it was overvalued at the time, with a P/E ratio of over 50.
Vocus Communications Limited
Vocus provides internet and data services in Australia and New Zealand and grew from a market capitalisation of $6 million in 2006 to $1.85 billion now. You didn’t need to buy in 2006; most of the gains have come in the last 5 years as revenues grew 500%.
Sirtex utilises small particle technology to provide liver cancer treatments. Massive sales growth in the last decade has seen earnings increase from 2.8 to 69 cents per share.
NetComm Wireless Limited
Netcomm develops and sells broadband solutions globally. Revenues have been increasing steadily since 2010. A large chunk of shareholder returns came in the last 12 months, with the share price up from 47 cents to $2.60.
- Businesses with consistently high earnings growth will reward shareholders, sooner or later.
- Huge growth stories generally unfold over a few years, meaning there is usually plenty of opportunity to get on board.
- Even the best performing shares are likely to be volatile. Be wary of selling shares in a great business on the basis of share price volatility.
Motley Fool contributor Matthew Bugden has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Altium and Hansen Technologies. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.