The stock market is one of the best ways to build lasting wealth. This is because over time, the broad S&P500 generated an average annual return of around 10%.
But if we look back, we'll find companies that crushed the market, turning small investments into seven-figure sums.
Here's a closer look Apple (NASDAQ:AAPL), Costco (NASDAQ: COST)And Home deposit (NYSE:HD)three magnificent consumer actions that turned $1,000 into over a million dollars.
First on this list is the most valuable brand in the world. Apple is a leader in selling some of the most popular electronic products. And this propelled the FAANG Stocks 191,000% over the last 43 years or so, turning $1,000 into $1.9 million today, including dividends.
While the iPhone still generates more than half of revenue, the company is seeing success with other devices, like the MacBook, AirPods and Watch. Together, hardware accounted for 81% of total sales in the first quarter of fiscal 2024.
But the software and services division is growing rapidly to become a bigger business driver. Offerings include things like Apple Card, Pay, Music, TV+, iCloud, and advertising. Revenue here increased 11%, higher than the company's total. With a gross margin above 70%, Services can increase Apple's profitability over time.
Investors hoping for similar returns from this business over the coming decades should probably temper their expectations. Apple's huge revenue base is struggling to grow at a high rate. Sales fell 2.8% in fiscal 2023, indicating a mature business.
And the current price/earnings ratio The (P/E) ratio of 29.3 is very expensive, at least based on the average valuation over the last 10 years. This may also limit returns over time.
With revenue of $241 billion over the past 12 months, Costco is the third-largest retailer in the world. It operates hundreds of warehouses around the world, offering buyers high-quality products at extremely low prices. This economic model has not changed over the decades.
Even though Costco seems like a boring business, the returns are attractive. THE retail stock is up 123,000% over the last 49 years, including dividends. Even in recent years, stocks have crushed the broader market. The gains are supported by special one-time payments, such as the $15 dividend announced in December.
What sets Costco apart from a typical retailer is its successful membership model. Consumers must pay an annual fee for the right to shop at a warehouse, which provides them with a high margin and a source of recurring revenue. Membership sales increased 8.2% last quarter, with a global renewal rate of over 90%.
Like Apple, Costco is by no means a cheap stock, trading at a P/E multiple of 49.4. This is 47% higher than its 10-year average. Even though there is significant growth potential, and management plans to open new stores at a healthy pace, which will certainly increase earnings, it is not a good idea to buy the stock today today.
3. Home deposit
Another major retailer that turned $1,000 into over a million dollars is Home deposit (NYSE:HD). The home improvement giant's stock has been an even bigger historic winner than Apple or Costco, which you might not expect. Since 1981, Home Depot stock has turned an initial $1,000 outlay into today's whopping $29.9 million (including dividends).
Like Costco, Home Depot's business hasn't changed much over time. The company sells various tools and supplies in its department stores to DIY and professional customers looking to beautify their homes. It's a boring job, but the financial results are excellent.
Home Depot's operating margin and return on invested capital have averaged 14.2% and 34%, respectively, over the past decade. These indicators are better than those of the company's main rival, Lowes. Home Depot's focus on improving its store efficiencies by investing in omnichannel capabilities and strengthening the supply chain helped these metrics.
The company is facing a slight slowdown following the strong demand trend during the pandemic. But the sector's tailwinds support solid long-term growth. With the stock trading at a reasonable P/E ratio of 23.3, investors may want to take a look.
Although it is unlikely that these three companies will be able to repeat their past performance in the future, they are industry leaders that continue to dominate.
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3 actions that turned $1,000 into $1 million (or more) was originally published by The Motley Fool