3 Multibaggers From 2007's Market High
HL is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It has been close to six years since the S&P peaked on Oct. 11, 2007, marking the start of the Great Recession. Today, the index stands at less than 6% above that level. The uninspiring returns have led some to suggest that a long-term buy-and-hold strategy would be a prescription for disaster -- especially, in times like these. However, at least three multibaggers emphatically put that suggestion to rest.
To be sure, it is easy to see why the argument against buy-and-hold strategy may be persuasive. The annualized index returns since 2007 is far from the historical 10.6% annualized return. Additionally, from its 2007 peak, the Great Recession sent the index down by a gut-wrenching 56.7% over one and a half years. It required close to five years before the same level could be reached again. These are dismal returns.
But it may be too broad to completely dismiss a buy-and-hold strategy. And from these three multibaggers, there are lessons that could be learnt.
Looking back, looking ahead
The three companies below have achieved multibagger returns from Oct. 12, 2007 through June 28, 2013.
EPS Annualized Return
|Total Returns||Annualized Return|
|Chipotle Mexican Grill (NYSE: CMG)||552.6%||33.8%||197.0%||20.4%|
|Priceline.com (NASDAQ: PCLN)||1668.8%||61.6%||785.3%||45.0%|
|Panera Bread (NASDAQ: PNRA)||342.5%||23.4%||289.3%||26.1%|
Judging from their business performance, these stocks' returns do not appear to be a stroke of luck.
Take Chipotle Mexican Grill (NYSE: CMG), for instance. Chipotle's passion for organic, and sustainably-raised food caught flavor as it grew from 640 stores to 1,410 stores in less than six years. This tasty store growth has led to earnings multiplying by more than five times, and the stock price delivering close to a three-bagger.
Looking ahead, Chipotle is extending its mission for sustainable organic food through a new Southeast Asian ShopHouse concept. With a new concept for growth and a store count less than a third of Taco Bell, Chipotle may well have a decade's worth of growth ahead of it.
Priceline.com (NASDAQ: PCLN) -- the online travel company -- did even better. During this period, Priceline grew Booking.com's network of hotels from 53,000 hotels in 53 countries to 295,000 hotels in 180 countries. The huge network of hotels, coupled with a superior traffic-to-booking conversion rate, has led shareholders of Priceline to a stunning 1,668% increase in earnings, and a one-way-ticket to almost an eight-bagger.
With the growing network effect of its hotels, its history of smart acquisitions and online booking penetration still relatively low in emerging countries, Priceline may yet have a decent growth runway ahead of it.
Bakery-cafe restaurateur, Panera Bread (NASDAQ: PNRA) is also no deflated dough, either. Panera's focus on fresh bakeries with a concentrated franchisee model has supported consistent, high-quality growth while it expanded from 1,168 to 1,673 stores. Its catering services and MyPanera card have also helped increase weekly average store sales by 23% over the time period. This performance led Panera shares to almost a four-bagger.
Looking ahead, if Panera is able to achieve even a fraction of rival Subway's 39,314 stores worldwide, shareholders could well look forward to decades of growth.
Thank you, Captain Hindsight
To be sure, this is not to show the reader the power of 20/20 hindsight. Observant readers would have noted that the stock prices for the three companies chosen were not the best possible stock prices obtainable throughout the period. It becomes obvious that the performance of the business behind the ticker managed to outlast the imperfect initial stock price, as well as the imperfect high market level.
In other words, successful investing has hardly ever been about catching the perfect bottom price, or selling at the perfect top stock price, in equally perfect market conditions.
Instead, the key lesson that we can take from investing in potential market highs is to keep our focus on the underlying growth of great business at all times, in spite of the market conditions.
If you try to own great businesses, and continue to study those businesses over the long term, you could profit handsomely over the long term -- even if you start during a market high.
HL Chin owns shares of Chipotle Mexican Grill, Priceline.com, and Panera Bread. The Motley Fool recommends Chipotle Mexican Grill, Panera Bread, and Priceline.com. The Motley Fool owns shares of Chipotle Mexican Grill, Panera Bread, and Priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!