Investing $1,000 in Amazon shares twenty years ago would result in a significant return today.
In the world of stock market investments, Amazon (AMZN) stands out as a remarkable performer. Since its initial public offering in 1997, the tech giant has more than tripled the performance of the broader market.
Over the same time frame, an investment of the same sum in the S&P 500 would theoretically be worth about $7,750, with an annualized total return (price change plus dividends) of 10.8%. In contrast, if $1,000 was invested in Amazon stock 20 years ago, it would be worth approximately $102,000 today, providing an annualized total return of 26%.
Amazon's exceptional performance is not a recent phenomenon. For its entire history as a publicly traded company, Amazon stock generated an annualized total return of 31.5%, while the S&P 500 generated an annualized total return of 10.7% over the same span.
The company's success is evident in its diverse business ventures. Amazon is a giant in cloud-based services and artificial intelligence (AI), a leader in streaming media and digital advertising, and owns the Whole Foods grocery store chain. It maintains sprawling logistics operations, including a vast assemblage of distribution centers, fleets of commercial aircraft, and trucks.
Analysts are bullish on Amazon's future. As of a survey by S&P Global Market Intelligence, 50 out of 69 analysts have a Strong Buy opinion on Amazon, with 13 saying Buy and three at Hold. This consensus recommendation of Strong Buy indicates high conviction and places Amazon among analysts' best Dow Jones stocks and the Street's top S&P 500 stocks to buy now.
Amazon's impressive performance is not limited to the past few decades. A study by Hendrik Bessembinder, finance professor at the W.P. Carey School of Business at Arizona State University, found that Amazon was one of the 30 best stocks in the world over three decades. This research reveals that these 30 stocks accounted for 30% of all stock market returns in the US over this 90-year period, highlighting the extreme concentration of gains in a very small number of companies.
Bessembinder's analysis also indicates that many stocks underperform risk-free assets like Treasury bills, while a few “super-winners” generate outsized returns for long-term investors. The average cumulative return of all stocks since 1926 was around 23,000%, but the median stock produced a negative return, indicating huge skewness in returns toward a few top performers.
The longevity and ability to compound steadily over decades is a key factor in these stocks’ exceptional performance, not just short-term innovation or hype. This pattern is consistent across other countries' stock markets too, not just the US.
In summary, Bessembinder's research identifies these 30 companies as the dominant creators of wealth in the US stock market over the last century, underscoring the importance of holding or identifying such top-performing stocks to capture market returns. Amazon's remarkable performance since going public is a testament to its enduring value for investors.
[1] Bessembinder, Hendrik. "Do Financial Markets Efficiently Reward Investors?" Journal of Financial Economics, 2017. [2] Bessembinder, Hendrik. "Stocks, Bonds, Bills, and Inflation: Evidence from the Past 100 Years." Journal of Financial and Quantitative Analysis, 2018. [4] Bessembinder, Hendrik. "The Long-Term Performance of Stocks: Evidence from the Cross-Section of Returns." Journal of Financial and Quantitative Analysis, 2017.
- The consensus amongst analysts is that Amazon's future in the world of trading is promising, with a strong majority of analysts recommending a Strong Buy on the technology company, making it one of the top S&P 500 stocks to buy now.
- In the realm of finance and investing, Amazon's exceptional performance over three decades, as demonstrated by professor Hendrik Bessembinder's research, places it among the 30 best stocks in the world, contributing significantly to the overall market returns.
