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.
|Stock||EPS Returns||EPS Annualized Return||Total Returns||Annualized Return|
|Chipotle Mexican Grill (NYSE:CMG)||552.6%||33.8%||197.0%||20.4%|
|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, Inc. (NYSE:CMG), for instance. Chipotle Mexican Grill, Inc. (NYSE:CMG)’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 Mexican Grill, Inc. (NYSE:CMG) 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 Mexican Grill, Inc. (NYSE:CMG) may well have a decade’s worth of growth ahead of it.
Priceline.com Inc (NASDAQ:PCLN) — the online travel company — did even better. During this period, Priceline.com Inc (NASDAQ:PCLN) 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.com Inc (NASDAQ:PCLN) to a stunning 1,668% increase in earnings, and a one-way-ticket to almost an eight-bagger.