Investing in growth stocks can lead to huge returns in the long run. The problem is that it can be difficult to predict which ones will become the real deal and which ones will fail miserably. That’s why rather than investing a large sum into one stock, you may be better off spreading that amount across multiple investments. Even if you get most of your stock picks wrong, hitting a home run with one growth stock can more than make up for those losses.
Take the following three stocks as examples: Nvidia (NASDAQ: NVDA), Netflix (NASDAQ: NFLX), and Apple (NASDAQ: AAPL). They all would have generated life-changing returns for you during the past 20 years. And if you had invested $2,000 into each one of them, then the total value of all those investments would now be worth about $3.8 million. Here’s a look at what those investments would be worth individually, and if these stocks are still good buys today.
Nvidia was a promising tech company in the early 2000s, but its value has gone on a rapid ascent in just the past couple of years, and that’s when investors would have earned mammoth returns. Thanks to the emergence of ChatGPT and the growing popularity of chatbots powered by artificial intelligence (AI), demand for Nvidia’s chips has been soaring. Its new Blackwell chips are sold out, with customers now having to wait a year or longer for them.
A couple of decades ago, it would have been impossible to forecast this type of scenario; the unpredictability of growth stocks highlights why putting some money on a promising company could make a lot of sense. In its 2004 fiscal year (Nvidia’s year ends in January), Nvidia’s revenue totaled $1.8 billion and it had declined from the $1.9 billion it reported in the previous year. Although the business was still growing, its performance that year pales in comparison to the company’s recent quarters, where sales have been more than doubling.
Nvidia’s business has evolved drastically in just the past couple of years and that has helped it become the most valuable company in the world, with a market cap of about $3.6 trillion. A $2,000 investment in the company 20 years ago would be worth about $2.2 million today. While Nvidia is unlikely to replicate those types of returns during the next 20 years given its mammoth valuation, it can still be a good buy for growth investors looking for a solid stock to hold on to for the long haul.
Another millionaire-making stock during the past couple of decades has been Netflix. To say the streaming company has proved its doubters wrong over the years would be a huge understatement. Not only is it still around, but it has been able to generate strong and growing profits from its operations, which is something other streaming companies continue to struggle with.
During the trailing 12 months, Netflix has generated $37.6 billion in revenue, with profit of $7.8 billion. Back in 2003, the company’s full-year revenue totaled just $272.2 million. Netflix reported a modest operating profit of $4.5 million but it was also a vastly different business then with subscribers paying about $20 a month to rent unlimited DVDs. In today’s dollars, that would be the equivalent of about $33 — which is more than what consumers are paying today for a much more convenient streaming option.
At that point, a streaming service wasn’t even on the radar for Netflix investors. But Netflix was a promising growth company nonetheless, and investing $2,000 into the stock today would have resulted in your investment growing to more than $1.1 million today.
Netflix still looks to be a good long-term buy given its dominance in streaming. But at a price-to-earnings multiple of 43, its valuation is getting a bit high and investors should temper their expectations for future gains.
Only on such an impressive list as this could Apple stock look underwhelming. But it would have still turned a $2,000 investment 20 years ago into $470,000 right now. That’s not a bad performance by any stretch, and it’s one that investors would certainly be thrilled with.
The game changer for Apple came in 2007 when it introduced the iPhone. That would ultimately become the catalyst that would lead to an entire ecosystem of products and services that generate billions in revenue for the business today.
And if you invested in the stock 20 years ago, you couldn’t have predicted it at the time. It would have required taking a chance on Apple and Steve Jobs to believe that this could be the monstrous growth stock it has become. For the fiscal year ended Sept. 25, 2004, Apple’s revenue totaled $8.3 billion and grew at a rate of 33% year over year. It was profitable, but with earnings of just $276 million, its profit margin was just over 3%. Nowadays, Apple generates nearly $400 billion in annual revenue, with profit typically north of $90 billion.
Like Nvidia, Apple is among the most valuable stocks in the world. And with a still-growing ecosystem and loyal user base, it’s also an investment that can continue to rise in value in the long run, albeit likely at a much slower pace than in the past.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $23,324!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,133!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $420,761!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
*Stock Advisor returns as of November 4, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Netflix, and Nvidia. The Motley Fool has a disclosure policy.
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