Apple (NASDAQ:AAPL) has busted out to new all-time highs this year and shares are already up 15.8% year-to-date. It is, once again, Wall Street's darling. And rightly so. This Zacks Rank #2 (Buy) is expected to grow earnings another 30% this year and has a forward P/E of just 15.
It's fitting that exuberance has returned to the shares just in time for the NASDAQ to break out to new all-time highs. But recently there have been a lot of stories on social media from people who are claiming they bought shares 5 or 10 years ago and are now rich. This comes on the heels of news reports covering political advisor David Axelrod's new book, which apparently recounts President Obama's reaction in 2007 after Steve Jobs showed him the iPhone before it was released to the public.
"If it were legal," Obama supposedly said, "I would buy a boatload of Apple stock. This thing is going to be really big." The book isn't actually out yet, but this comment created a stir. Some reporters actually did a mock calculation of how much money the President would have made if he HAD invested in 2007. Without a doubt, if you had bought Apple shares (NASDAQ:AAPL.O) 8 years ago you'd be doing really well for yourself. It has been a great investment.
The Myth of the One Great Investment
But this storyline plays into one of the great investing myths. That mythology says that if you only would have bought the hottest, most dynamic company, 10, 20 or even 30 years ago, you would have been rich. It is the great myth of buying "the one." And everyone seemingly knows someone who has an uncle who DID just that so the mythology lives on.
Investors therefore spend endless time and effort attempting to find this one unicorn company. After all, wasn't it obvious when Apple came out with the iPhone that it was going to make billions? Yet, in reality, Apple hasn't even been one of the top performing stocks over the last 5 years but you wouldn't know it from the stories people tell. It always comes back to Apple.
Look Beyond the Glamour Names
But money can be made by investing in all sorts of companies in many different industries. What if I told you you could have bought a pizza restaurant chain that has been around since 1960 and more than doubled Apple's return over the last 5 years? Don't be blinded by the glamorous, popular names. Look for companies with solid fundamentals, such as double digit earnings growth, and an attractive valuation.
Yes, Apple may still fall on your list of top companies. But don't rule out lesser known companies like a rural retailer. It is serving a niche market that you may never have thought about. If you had invested in these less popular options 5 years ago, you would be crushing the Apple return over the same period today.
5 Stocks that Crushed Apple the Last 5 Years
Through Feb 18, according to the NASDAQ data, Apple shares returned an impressive 306%. But these 5 companies, in a variety of industries, did even better. (All data as of Feb 18, 2015.)
1. Lithia Motors (NYSE:LAD)
2. Domino's Pizza (NYSE:DPZ)
3. Ulta (NASDAQ:ULTA)
4. Tractor Supply (NASDAQ:TSCO)
5. Sherwin-Williams (NYSE:SHW)
1. Lithia Motors (LAD)
Lithia is one of the largest automotive retailers in the United States. It sells 30 new and used car brands at 130 dealerships in 14 states. It also performs maintenance and service. Lithia has been able to capitalize on the return of auto sales to pre-recession levels. If you had bought it 5 years ago, you would have quadrupled the Apple return.
Lithia's 5 Year Return: 1228%
Apple's 5 Year Return: 306%
Forward P/E = 14.6
Expected 2015 EPS growth = 23.2%
Zacks #1 Rank (Strong Buy)
2. Domino's Pizza, (DPZ)
Domino's is one of the world's largest pizza restaurant chains. Founded in 1960, the company recently opened in Cambodia and Azerbaijan.
It successfully has moved pizza ordering to smart phones and iPads with its popular pizza app.
Domino's 5 Year Return: 620%
Apple's 5 Year Return: 306%
Forward P/E = 30.2
Expected 2015 EPS growth = 15.6%
Zacks #3 Rank (Hold)
3. Ulta Beauty (ULTA)
Ulta is a beauty retailer that offers up to 20,000 prestige and drugstore brand beauty products for men and women along with salon hair services. As of Nov 2014, it had 765 stores in 47 states and also sold products online.
Its been able to tap a lucrative market as third quarter same-store-sales jumped 9.5%.
Ulta's 5 Year Return: 539%
Apple's 5 Year Return: 306%
Forward P/E = 30.3
Expected 2015 EPS growth = 23%
Zacks Rank #2 (Buy)
4. Tractor Supply Company (NASDAQ:TSCO.O)
Tractor Supply is the largest rural retail chain in the United States. It recently opened its 1400th store and has stores in every state except Alaska.
It offers products for the recreational farmer, ranchers and small businesses including clothing, boots, hay, seasonal lawn products, seeds, and animal supplies.
Tractor Supply's 5 Year Return: 491%
Apple's 5 Year Return: 306%
Forward P/E = 27.9
Expected 2015 EPS growth = 14.4%
Zacks Rank #2 (Buy)
5. The Sherwin Williams Company (SHW)
Sherwin Williams is the old man of this group as the company was founded in 1866. But don't let that fool you. This paint and coatings company just raised its quarterly dividend 22% and has raised it every year for the past 36 years.
Sherwin William's 5 Year Return: 337%
Apple's 5 Year Return: 306%
Forward P/E = 25.7
Expected 2015 EPS growth = 27.6%
Zacks Rank #2 (Buy)
Disclaimer: [In full disclosure, the author of this article owns shares of DPZ, ULTA and TSCO.]