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All Contents © 2020The Kiplinger Washington Editors
By John Waggoner, Contributing Writer
| December 18, 2019
One thing nearly everyone can agree on about the past decade is that it has been very, very good for stock market investors. The Russell 1000 large-company index, which tracks the 1,000 biggest U.S. stocks by market value, has gained roughly 252% since the start of the 2010s, including reinvested dividends.
Some stocks have done far better. Microsoft (MSFT) awoke from its long slumber and jumped 545% over the past decade. Dollar General (DG) made a lot of bucks, gaining 632%. And Ulta Beauty (ULTA) has made a lovely 1,325% gain.
But those aren't the tippy-top stocks of the Russell 1000. Not even close.
Here are the top 10 large-company stocks of the decade, as well as a look at what put them on top of the heap. We chose the Russell 1000 because it offers an even broader look at the stock market than the S&P 500, but still excludes smaller companies where extremely outsize gains are more common and can more easily come from a single, quick driver.
Data, provided by S&P Capital IQ, is as of Dec. 17. Total returns are a combination of price returns and dividends, and is calculated from Dec. 31, 2009, through Dec. 17, 2019.
Market value: $30.5 billion
Total return: 2,098.3%
Pumps and valves are not exactly the most high-tech gadgets around – but they can be, if you put them on commercial and military aircraft.
TransDigm (TDG, $570.32) makes what may seem like prosaic items, but makes them to extremely high specifications for aviation. Aside from pumps, it makes motors, controllers, couplings, batteries and cockpit security systems, among many other components.
In Transdigm's fiscal 2019 ended Sept. 30, the company sold about $5.2 billion worth of those components. When you consider that the company did about $828 million in revenues in fiscal 2010, you start to get an idea of what propelled TransDigm into the ranks of the decade's top stocks.
In 2019, TDG has delivered a 77.6% total return, thanks in part to decent organic growth as well as bolt-on gains from the acquisition of manufacturer Esterline. Shareholders also benefited from a $30-per-share special dividend – it's among a handful of stocks that have paid several special dividends in recent years.
From here? At 27.6 times forward-looking estimates for next year's earnings, TransDigm's stock isn't cheap, but it's not in the stratosphere, either.
Market value: $15.7 billion
Total return: 2,442.1%
Cheniere Energy (LNG, $61.52) is the leading U.S. producer of liquefied natural gas (LNG, hence the ticker), and in 2016, the company became the first U.S. company to ship LNG from a commercial facility in the lower 48 states. The company buys natural gas, processes and liquifies it, and delivers it around the world.
Cheniere made this list of top stocks because timing is everything, especially when it comes to energy stocks. Had you bought the stock 15 years ago, your average annual return would have been 4.4%; if you had bought five years ago, you would have lost an average 1.2%, thanks to swings in energy prices. A decade ago, the economy was barely crawling. Today, the economy is booming.
And should U.S.-Chinese trade relations continue to thaw, Cheniere should benefit as China moves toward LNG for generating electricity.
Market value: $19.9 billion
Total return: 2,593.1%
If you're a diabetic, you care deeply about your glucose levels. You're also probably tired of hurting your fingers. (The simplest way for a person to monitor blood sugar is to prick a finger and use test strips to figure out how much insulin they need.)
Dexcom's (DXCM, $217.33) latest product does away with finger pricks and lets diabetics monitor the blood sugar continuously. (You can also share that data with up to 10 people.) Not surprisingly, Dexcom's products are a big hit – its revenues have grown at a 37% annual pace over the past three years.
Just be warned that Dexcom has plenty of competition. And at its current price – about 120 times forward-looking estimates – it might be wise to look for a cheaper buying point.
Courtesy Exact Sciences
Market value: $13.5 billion
Total return: 2,597.6%
Colon cancer is one of the leading killers today, and Exact Sciences (EXAS, $91.45) has a noninvasive screening test, Cologuard, that detects colon cancer.
Exact Sciences is among the Russell 1000's top stocks of the past decade because revenue growth has averaged an astonishing 126% annually over the past few years. But its profitability has been lousy. EXAS literally has no forward price-to-earnings (P/E) ratio because it's expected to show more losses over the next 12 months. The big loss stems primarily from its merger with Genomic Health and with significant investment in lab capacity.
But things are starting to look better on that front. Exact Sciences' most recent quarterly loss of 30 cents per share was less than Wall Street's expectations of a 56-cent deficit. And the pros are estimating a 33-cent loss across all of 2020, versus the $1.62 in red ink expected to spill in full-year 2019.
Market value: $5.1 billion
Total return: 2,974.2%
Nexstar Media Group (NXST, $109.82) is a television broadcasting company recently highlighted among other high-quality, high-growth stocks to buy. Most of its stations are affiliates of ABC, CBS, Fox and NBC.
The company started in 1996 with a single station, and it now has 197 full-power stations in 115 markets, primarily in the U.S. It also has a growing digital operation, with 142 local websites.
Nexstar generates strong free cash flow – the cash profits a company generates after making the capital expenditures necessary to maintain the business – and can use that cash to keep expanding.
Market value: $14.2 billion
Total return: 3,018.2%
The bond market is far larger than the stock market, and until relatively recently, here's how bonds were bought and sold: You told your broker you wanted to buy or sell, and he called as many bond dealers as he knew to see if they were interested. Sometimes you'd even get the best price.
MarketAxess (MKTX, $373.54) is an electronic bond trading platform that aims to make the process easier and more equitable for buyers and traders. Most of the company's revenue is from the United States, although it also operates internationally. And that revenue has been growing unabated for more than a decade.
Market value: $3.7 billion
Total return: 3,207.2%
LendingTree (TREE, $285.22) is a marketplace for loans, including mortgage loans, reverse mortgage, home equity, personal loans, auto loans, credit cards, student loans and small business loans. When lender and consumer come together, LendingTree gets a fee, as well as a closing fee when the deal is sealed.
In the 23 years the company has been in business, LendingTree has served more than 100 million customers and matched them with $50 billion in loans.
At its current valuation (41 times forward estimates), it's hard to say you're getting a bargain for the stock. However, its revenue growth remains impressive: LendingTree is forecasting revenue growth of 13% to 18% growth for 2020.
Market value: $10.0 billion
Neurocrine Biosciences (NBIX, $108.50) looks for ways to relieve patient suffering.
It has two approved products: valbenazine (marketed as Ingrezza), for tardive dyskinesia, a condition that causes tremors in patients with long-term use of antipsychotics; and elagolix (marketed as Orlissa), designed to treat pain associated with endometriosis, a uterine disease.
Neuocrine also has submitted New Drug Applications to the FDA for another use of elagolix (to manage heavy menstrual bleeding associated with uterine fibroids), and for opicapone, an add-on therapy to go alongside levodopa to treat Parkinson's disease.
Revenues have exploded by 183% annually over the past three years. Profits are starting to catch up. Analysts expect net income to jump from 22 cents per share in 2018 to 73 cents in 2019, then $3.66 in the year ahead.
Market value: $138.3 billion
Total return: 3,908.6%
If you've watched The Crown or Orange Is the New Black, you know that Netflix (NFLX, $315.48) is the king of streaming television and movies. (Though interestingly enough, it will still mail you DVDs.)
Interestingly, in 2011, Wall Street was ready to pull the plug on Netflix after a disastrous attempt to split out a separate DVD-only service, called Qwikster, from its streaming business. But that turned out to be a blip in what would eventually become a 3,900%-plus run, landing it at No. 2 on this list of top stocks from the past decade.
Nowadays, Netflix has 158 million paid memberships in over 190 countries. But analysts worry about the rate it's burning through cash, as well as slowing subscriber growth. Combine that with a pricey 58 forward P/E, and you've got a stock that should be handled with the utmost care.
Market value: $11.9 billion
Total return: 3,960.5%
Domino's Pizza (DPZ, $291.75) has proved that you can learn from your mistakes. Specifically, Domino's learned that its pizza wasn't very good.
In 2009, Domino's was foundering, both in sales and customer satisfaction. A Brand Keys national consumer-taste survey put its pie in a tie for dead last with Chuck E. Cheese's. After surveying customer comments, such as "This tastes like cardboard," Domino's not only revamped their recipe, but made its admission of failure the centerpiece for a new set of ads promoting its improved pizza.
That set the stage for a decade of outperformance unmatched by the rest of the Russell 1000.
Domino's now aims for 25,000 stores worldwide by 2025, up from 16,000 in 2018. (Franchisees own 98% of the stores, giving the company a steady stream of income.) Although the stock's momentum has waned in 2019, the company announced a $1 billion buyback plan to redistribute more of its healthy cash flow to shareholders.