The best stocks over the last century are tech companies

When you step back and look at the stock market over the last 100 years, what you will find is that a tiny group of publicly traded companies has accounted for nearly all of the profits for investors over the entire century.

Most of the top performers are tech companies, headed by Apple, Nvidia and Microsoft. What’s startling is that both Tesla and, if only briefly, SpaceX, two of Elon Musk’s companies, have muscled their way onto that list of superb performers.

While these elite stocks churned out spectacular returns, more than 96 per cent of the stock market did virtually nothing for investors over long periods. This vast majority of stocks couldn’t even match the 3.3 per cent average return of one-month Treasury bills.

These findings come from the latest update to a long-running study by Hendrik Bessembinder, a finance professor at Arizona State University who has provided a trove of essential and provocative data about stock market investing.

For example, Tesla didn’t make the list of top wealth creators nine years ago, when an earlier version of the study ended. The firm now ranks ninth among all publicly traded companies over the century. Even more striking, when Bessembinder ran the numbers on June 16, a few days after SpaceX’s initial public offering, the company made the top 30 all-time list, though its falling share price has since moved it out of that rarefied world.

For a great majority of investors, it was much less risky to avoid stock picking entirely and instead invest with diversified low-cost mutual funds, particularly index funds mirroring the entire market.

But Bessembinder’s findings also made it clear that there were vast riches to be made for those skilled or lucky enough to make the right choices: If you picked the very best performers, and avoided most losers, you would do extraordinarily well.

Those two insights remain true today, and perhaps even more so. I still think most people will be better off buying a small part of the entire stock market, a practice that I continue to follow myself. But the potential for gaining enormous wealth tempts millions of investors who scoop up shares of hot individual stocks like SpaceX. You will have to decide what’s best for you.

In the first study, Exxon Mobil was the top performer from 1926 through 2016, followed by Apple, Microsoft, General Electric, IBM, Altria Group, Johnson & Johnson, General Motors and Walmart. That list depicted a diverse mosaic of the economy, with old companies dominating, aside from two upstarts, Apple and Microsoft, which had IPOs in the 1980s.

Now Bessembinder has 100 years of data, with returns from 1926 through December 2025.

Just to put the SpaceX IPO in perspective, he has updated the returns, applying the same methods he has used for all publicly traded stocks tracked over the last century. His approach accounts for stock dividends and buyouts, and the comparison with Treasury bills includes an inflation adjustment.

“Lifetime wealth creation”, as Bessembinder defines it, is connected not just to share performance but also to a company’s total market valuation. This means that an increase of 10 per cent in the share price for a giant has a far greater effect on total wealth creation than a 10 per cent increase by a company with a small value in the market.

That’s important because tech companies have become giants, including SpaceX, which has been publicly traded only since June 12 but has a market capitalisation of more than US$2 trillion (S$2.59 trillion). When tech shares make big moves, 100 years of market returns need realignment.

The economy has changed in the nine years since the first study. More than ever before, the pack of leaders is dominated by tech stocks, with only two traditional companies, Exxon Mobil and Walmart, remaining in the top 10 for the entire century.

Here are the leaders from 1926 through December, including their lifetime wealth creation and the percentage of the US$91 trillion in total stock market wealth for which each was responsible:

Picking these stocks, and only these stocks, at their inception and riding them forever would have been a brilliant strategy. But in addition to needing remarkable perspicacity in the first place, sticking with the winners also required nerve, because even the greatest stocks periodically plunged steeply in value.

While a vast majority of companies didn’t perform well enough to justify this agita, a relative handful made up for all the rest, starting with Apple. It was founded in 1976, went public in 1980, and, on its own, accounted for 5.5 per cent of the total net wealth generated for investors in the entire stock market since 1926.

Perhaps more astonishing was the performance of Nvidia, which makes advanced chips for artificial intelligence. The firm didn’t even exist as a publicly traded company until January 1999. Yet it has performed so well since that it ranks close behind Apple in the 100-year ranking, accounting for 5 per cent of net investor profits in the last century.

Source : https://www.straitstimes.com/business/invest/the-best-stocks-over-the-last-century-are-tech-companies