What is the Best Performing Tech Stock Ever?
We recently wrote an article about how artificial intelligence (AI) cannot be compared to the “dot-com” days because “this time it’s different”. While researching that article we came across a stock that could be called the “best performing tech stock ever” which appreciated +74,000% in a single year. To put that into perspective, an investment of $1,000 would be worth about $740,000, enough to buy a
one-bedroom apartment small studio in Silicon Valley. If you speculated in that stock you may have done well, but if you invested in that stock it would be all but worthless today. This made us think. What has been the best performing tech stock ever for investors?
Aside from just a passing curiosity, this becomes relevant when you have people like Mark Cuban talking about “the next AI trillionaire“. When we look at a company like Nvidia, we see a “picks and shovels” play on AI. This makes us think, “just what sort of price appreciation is realistically possible?”. Stock price appreciation is a form of value creation, so another way of asking this question is “which stock created the most value to-date in the least amount of time?”
When doing this exercise, we wanted to set some ground rules as follows:
- The stock must trade today and have been trading for at least 10 years.
- The stock must be generally accepted as a “tech stock”. No biotech.
- We are limited by the availability of clean price data (1972 and on)
The last rule above is the most limiting, but let’s look at this thing realistically. 1972 is 45 years ago. Let’s say you actually had money to invest back then. That means that if you had to work for your money, then by the age of 25 you would have saved enough to invest a meaningful amount. That would make you 70 years old today, so this is a starting point that most investors can relate to.
Given our set of rules, we came up with 10 contenders for the best performing tech stock ever:
- Apple (NASDAQ:AAPL)
- IBM (NYSE:IBM)
- Cisco (NASDAQ:CSCO)
- Google (NASDAQ:GOOG)
- Amazon (NASDAQ:AMZN)
- Netflix (NASDAQ:NFLX)
- Microsoft (NASDAQ:MSFT)
- Intel (NASDAQ:INTC)
- Qualcomm (NASDAQ:QCOM)
- Texas Instruments (NASDAQ:TXN)
If you had to guess, which one would you say performed the best? We know what you’re going to say. When we look at returns, we have to consider time in the market. That’s exactly right, and this can be accomplished by looking at “annualized returns” which means that instead of saying stock XYZ returned +10,000% since IPO you would say that it had an annualized return of 12%. This does not mean you were paid 12% every year (that’s what a junk bond does). It means that you get paid 12% every year on your principal. For example, a $1,000 investment with a 12% annualized return would look like this:
After year one, you would have made 12% so you now have $1,120. After year two, you would make 12% on that investment of $1,120 which means you now have $1,254.40. After year 3, you would have $1,404.93. And so on and so forth.
That compounding effect is why we love dividend growth investing (DGI) so much. Anyways, back to the best performing tech stock.
Now that we understand annualized returns, let’s dig in and look at each company’s total return (this means we include dividends) starting from the “worst” performing to the best performing (all starting prices are split adjusted with data sourced from YCHARTS).
IBM – You bought 1 share of IBM in 1972, the same year that Atari came out with PONG. You would have paid $19.95 for your single share which would have paid you $158.25 in dividends over the 45 years you held it. The present value of your share and dividends is $309.50 giving you a total return of +1,451%.
Google – It was the year Snoop D-O-Double-G released “Drop it Like It’s Hot“, and one hot thing that year was Google’s IPO. Back in 2004 you could have picked up a share of GOOG for just $85. That share would have eventually become two shares that are now worth a combined $1,883.62 giving you a return of +2,116%.
Texas Instruments – The same year Eminem, Shaq, and Cameron Diaz were born, you bought one share of TXI for $1.70. From 1972 until now, you would have been paid $42.25 in dividends giving your initial investment a total value of $121.70. This would represent a total return of +7,059%.
Qualcomm – 1991 was the year that a man named Rodney King became a household name, and also the same year that Qualcomm began trading. You picked up a share of Qualcomm for around .56 cents and it ended up paying you $13.08 in dividends giving you a total return of +12,030%.
Netflix – If you had the radio on, the song “Wherever, Whenever” by Shakira was probably playing when you plunked down $1.19 for a share of Netflix in 2002. Since then, shares have reached $160.28 and returned an astounding 13,066%.
Apple – If you had your TV on when you were buying a share of Apple for .51 cents, you might have seen CNN air on their first transmission ever. The year was 1980 and since then, you would have been paid $33.07 cents in dividends. Your total investment would be valued at $186.33 giving you a return of +36,193%.
Amazon – The world went into a state of mourning, as their beloved princess was taken away in a tragic event. That year was 1997, and you would have been able to pick up shares of AMZN for just $1.96. With today’s share price of $948.95, you’d be up +48,341%.
Intel – Nixon was in office and Watergate was going down when you picked up INTC for just 7.4 cents a share back in 1972. Over the next 45 years you would have received $10.82 cents in dividends and your investment would be valued at $47.19 today giving you a whopping +63,584% return.
Oracle – Oprah Winfrey first aired on the telly, and Ah-nold married Maria Shriver. That year was 1986, and you would have been able to pick up ORCL for just 6.33 cents a share. With dividends of $3.23 over the year, you would have a total investment value of $48.71 giving you a total return of +76,851%.
Microsoft – 6.5 million people held hands across America while Reagan and Gorbachev tried to sort out their misunderstandings. The year was 1986 and you would have picked up a share of MSFT for just 9.7 cents. Over the years it would have paid you $9.81 in dividends for a present day value of $78.85 giving you a return of +80.938%.
Cisco Systems – If you’re affected by the Mandela effect, then this might not make sense to you, but in the year 1990 Nelson Mandela was released after 27 years imprisonment. That same year you could have bought CSCO just 3.87 cents per share. Over the years, you would have received $4.29 in dividends giving you a total investment value of $38.19 equating to a return of +95,582%.
Cisco has stomped all the other tech players showing that a picks-and-shovels play on the Internet turned out to be the best performing tech stock ever. Now before we seal that envelope, let’s take a look at which of these tech stocks performed best when we consider annualized returns:
So the best performing tech stock of our group was Netflix which saw annualized returns of +38.45%. To put that number in perspective, the average stock market return has always been considered to be around 6-7% annualized.
So how did we come up with this list of companies? Firstly, we invited our brightest MBA on staff to join us down at the pub. Then, we had him go grab us a round of pints while we jotted down on a napkin all of the tech companies we thought were contenders for the title of best performing tech stock ever. Even using these rigorous methods, we may have omitted an obvious contender. Can you think of a company that adheres to our ground rules and which performed better than Cisco or Netflix?
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