Are the winning ASX stocks of yesteryear the wealth-growers of tomorrow?
Many years of consistent compounding are integral to amassing a small fortune. There are countless ways an investor might locate the ASX stocks capable of accomplishing this, all with varying degrees of difficulty. A rough starting point might be analysing past frontrunners.
Of course, past performance is not indicative of future results, as the common investment disclosure goes.
Even so, there is some evidence to suggest historical heroes (in return terms) routinely maintain their success over time. My colleague, Zach Bristow described as much in a recent article discussing the persistent performance of Commonwealth Bank of Australia (ASX: CBA) shares, which have climbed 61% in the last five years.
In our quest to identify potential winners, let's examine the best-performing Aussie shares over the last ten years.
Which ASX stocks make it to the podium?
The highest-returning companies between 31 July 2014 and 1 August 2024 are:
- Pro Medicus Limited (ASX: PME) — up 15,358%
- Pilbara Minerals Ltd (ASX: PLS) — up 12,108%
- Bellevue Gold Ltd (ASX: BGL) — up 7,959%
At the top is the medical imaging software company Pro Medicus. A modest investment of $1,000 in this healthcare business on 31 July 2014 would be worth $154,580 a decade later. During this time, the company's annual revenue grew from less than $11 million to more than $142 million.
Pilbara Minerals is the second-best investment one could have made ten years ago. However, unlike Pro Medicus' relatively continuous upward trend, the lithium miner's shares experienced plenty of volatility before skyrocketing between 2020 and 2022.
Finally, Bellevue Gold shares take the bronze with its 80-fold increase. The Western Australia gold mine owner didn't budge much in value between 2014 and 2017. However, this quickly changed after its high-grade discovery at the Bellevue Gold project. The miner began commercial production earlier this year.
Would I invest today?
Each of the three aforementioned companies has executed exceptionally well to get to where they are now. Without a doubt, these are some of the highest-quality businesses their respective industries.
Even so, I'm personally not looking to buy shares in any of these ASX stocks (though I already own shares in Pro Medicus).
Pilbara Minerals and Bellevue Gold don't fit into my investing strategy. I'm generally not interested in price-takers (prevalent among miners). I'm looking for companies with pricing power, whereby some form of competitive advantage grants a high margin price.
Pro Medicus fits into my strategy as a quality company with pricing power, which is partly why I own shares in it. Despite this, at a forward price-to-earnings (P/E) ratio of 162 times, I simply can't justify adding to this position at the current price.
But never fear; the next decade's multi-bagger ASX stocks are out there. Stay tuned for my thoughts on which Aussie companies are the most likely candidates in a future article.
