By Joseph Adinolfi
An academic with a large following on Wall Street recently published a paper showing the stocks that have seen the strongest returns over time
There is an old saying about investing: time in the market trumps timing the market.
It means better returns typically result from buying and holding stocks for the long term, rather than trying to guess where the market might be headed next and adjusting one's portfolio accordingly.
In a paper published this month, Hendrik "Hank" Bessembinder, a professor in the finance department at Arizona State University, offered more examples of how the market rewards patience.
After analyzing the performance of thousands of U.S.-traded stocks between 1925 and 2023, he produced a list of 30 that he says have returned the most money for investors during this period.
The results of Bessembinder's study may come as a surprise, especially for younger investors who are accustomed to a market dominated by highflying technology stocks. Instead, his list is packed with companies that would be more accurately described as value names.
At the top is Altria Group Inc. (MO), a tobacco company that, until 2003, was known as Philip Morris Companies Inc.
The tobacco company has returned more than $2.6 million for every dollar invested on Dec. 31, 1925, the earliest date available in the data set Bessembinder used as the basis for his calculations.
All 30 stocks on the list shared two other common characteristics. The first is that, from year to year, their returns have been relatively modest. Across the group, the median annualized return was 13%, while the mean was 13.1%.
At 16.29%, Altria's annualized return was the largest. Bessembinder's figures account for dividends being reinvested in the same stock.
The takeaway is that over time, even modest annual returns can deliver huge payoffs, as Bessembinder says in the paper. Returns for the top 30 stocks on the list were accrued over an average of 92.1 years. While that timeframe may be somewhat longer than the investing horizon for the average worker, the lesson still applies over shorter timeframes, he says.
Company Name (Most Recent) First Return Date Last Return Date Years Cumulative Gross Wealth Per Dollar Cumulative Return (%) Annualized Return (%) ALTRIA GROUP INC 31-Dec-25 29-Dec-23 98 2,655,290.00 265528000.62% 16.29% VULCAN MATERIALS CO 31-Dec-25 29-Dec-23 98 393,492.00 39349113.13% 14.40% KANSAS CITY SOUTHERN 31-Dec-25 13-Dec-21 95.95 361,757.00 36175578.11% 14.27% GENERAL DYNAMICS CORP 28-Jun-26 29-Dec-23 97.92 220,850.00 22084880.36% 13.39% BOEING CO 5-Sep-34 29-Dec-23 89.32 212,206.00 21220525.33% 14.72% INTERNATIONAL BUSINESS MACHS CORP. 31-Dec-25 29-Dec-23 98 175,437.00 17543644.18% 13.20% EATON CORP PLC 31-Dec-25 29-Dec-23 98 151,173.00 15117167.57% 12.94% S&P GLOBAL INC 31-Dec-29 29-Dec-23 94.87 128,787.00 12878643.34% 13.20% COCA COLA CO. 31-Dec-25 29-Dec-23 98 123,724.00 12372265.06% 12.71% PEPSICO INC 31-Dec-25 29-Dec-23 98 86,360.00 8635937.80% 12.30% ABBOTT LABORATORIES 1-Mar-37 29-Dec-23 86.83 78,038.00 7803730.36% 13.85% UNIVERSAL CORP 11-Nov-27 29-Dec-23 96.13 70,318.00 7031700.72% 12.31% DEERE & CO 29-Jun-31 29-Dec-23 90.5 69,886.00 6988538.63% 13.12% HERSHEY CO 1-Dec-27 29-Dec-23 96.08 69,099.00 6909822.15% 12.27% WYETH 29-Apr-26 1-Oct-09 83.47 57,024.00 5702341.59% 14.02% JOHNSON & JOHNSON 25-Sep-44 29-Dec-23 79.26 54,281.00 5427968.94% 13.26% ARCHER DANIELS MIDLAND CO 31-Dec-25 29-Dec-23 98 51,811.00 5181049.17% 11.71% CVS HEALTH CORP 27-Sep-28 29-Dec-23 95.26 46,939.00 4693845.60% 11.96% UST INC 31-Dec-25 5-Jan-09 83.02 43,963.00 4396203.50% 13.74% EXXON MOBIL CORP 31-Dec-25 29-Dec-23 98 40,273.00 4027183.13% 11.43% NORTHROP GRUMMAN CORP 10-Dec-51 29-Dec-23 72.05 39,495.00 3949426.66% 15.82% TRANE TECHNOLOGIES PLC 31-Dec-25 29-Dec-23 98 39,238.00 3923693.49% 11.41% FMC CORP 22-Apr-31 29-Dec-23 92.69 37,001.00 3699995.48% 12.02% CATERPILLAR INC 2-Dec-29 29-Dec-23 94.08 36,901.00 3690110.17% 11.74% BRISTOL MYERS SQUIBB CO 8-Sep-33 29-Dec-23 90.31 34,867.00 3486607.85% 12.28% TOOTSIE ROLL INDS INC 31-Dec-25 29-Dec-23 98 34,401.00 3440011.10% 11.25% PFIZER INC 17-Jan-44 29-Dec-23 79.95 28,990.00 2898900.69% 13.71% MERCK & CO 26-Jan-39 29-Dec-23 84.92 27,344.00 2734362.61% 13.13% WALGREENS BOOTS ALLIANCE INC 15-Feb-34 29-Dec-23 89.87 27,053.00 2705196.76% 12.03% EMERSON ELECTRIC CO 5-Sep-44 29-Dec-23 79.32 24,098.00 2409682.63% 13.57%
Bessembinder also included lists of stocks ranked by highest annualized return over shorter timeframes. Nvidia Corp. (NVDA) took the top spot on the list of stocks that have been around for 20 years or more.
During this time, the stock has gained 33% on average each year between its 1999 IPO and the end of 2023, according to Bessembinder's calculations. During this period, the company's shares have returned $1,316 for each dollar invested.
When asked by MarketWatch, Bessembinder said there are two key lessons that the average investor can learn from his findings.
"One is that time in the market is important. The second is that really high returns...do not persist. The best performers at longer horizons have more modest annualized returns than the best performers at shorter horizons," he said via email.
Bessembinder has developed a following on Wall Street for his research showing that, over time, a tiny minority of stocks are responsible for most of the wealth created by the market.
Wall Street professionals have cited his work in discussions with MarketWatch about the current extremely-concentrated state of the market, where the 10 largest stocks in the S&P 500 account for nearly 40% of its value, according to an analysis from Strategas.
-Joseph Adinolfi
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
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07-19-24 0744ET
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