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You Don't Have to Chase the "Next Big Thing" to Achieve Great Returns
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In the investing world, there's often a lot of buzz around the "next big thing." Whether it's the latest tech startup, a revolutionary product, or a new industry trend, many investors get caught up in the excitement and rush to invest in hopes of striking gold. However, consistently high returns don't always come from the flashiest or most talked-about investments. In fact, many steady and so-called 'boring' companies have proven to be sound investments over the long term.
Key Insights
Chasing the latest trends or innovations in the investment world can be riskier than investing in established companies with proven track records.
Many established or 'boring' companies have exhibited consistent growth, with their stability rooted in years of experience, strong business models, and dedicated customer bases.
Examples such as Floor and Decor, Bufab, Howden, and Europris underscore the potential of substantial returns from companies that might not be in the limelight but have proven their worth over time.
Stability Over Hype
It's human nature to get drawn to new and shiny things. This excitement is amplified in the stock market, where stories of early investors making fortunes from startups can make anyone's eyes sparkle. But for every breakout success, there are countless failures. Chasing hype can be a risky strategy, as new and unproven companies often face various challenges, from market competition to regulatory issues.
On the other hand, established companies, which might be seen as "boring," often have a track record of stability, consistent growth, and a history of weathering economic downturns. Their long-standing position in the market usually comes from years of experience, robust business models, and loyal customer bases.
Examples of 'Boring' Companies with Outstanding Returns
Let's take a look at a few boring companies with outstanding track records.
Floor & Decor, a big-box retailer specialized in hard surface flooring, has grown its EPS by a whopping 35% CAGR over the last decade. Founded in 2000 and headquartered in Atlanta, this company now operates more than 200 stores across the U.S.
Bufab, a global supply chain partner helping companies source small parts like nuts and bolts, has grown its EPS by 36% CAGR over the last decade. The stock? Up 500%+ excl. dividends since the IPO in 2014. Interestingly, Bufab operates in more than 28 countries, and it's been in the business since 1977, making it a veteran in the field.
Howden, a trade kitchen supplier with more than 800 depots throughout the UK and Europe, has grown its EPS by 18% CAGR over the last decade. The stock? Up ~600% excl. dividends over the same period. Established in 1995, Howden has a unique selling approach, working exclusively with trade professionals rather than selling directly to the public.
IMCD, a global specialty chemicals giant providing ingredients to almost every industry (food & nutrition, life science, coatings & construction, etc), has grown its EPS by 27% CAGR over the last 8 years. The stock? Up 500%+ excl. dividends over the same period. Based in the Netherlands, IMCD has operations in over 60 countries, connecting manufacturers and users of specialty chemicals.
Cintas, a company supplying uniforms, mops, restroom supplies, fire safety etc to a wide range of industries such as the military, cleaning, and healthcare, has grown its EPS by 18% CAGR over the last decade. The stock? Up 1,200%+ excl. dividends over the same period. Incorporated in the 1920s, Cintas started as a rag processing company and has transformed into a leading service industry giant.
Dino Polska, a Polish fast-growing grocery store chain operator, has grown its EPS by an incredible 43% CAGR over the last 8 years. The stock? Since Dino Polska went public in 2017, the stock is up 1,125%. Founded in the 1990s, Dino Polska is recognized for its emphasis on fresh produce and local Polish products.
The Middleby Corporation, a conglomerate selling all types of kitchen/food equipment, ranging from commercial automated pizza ovens, to consumer products like Kamado Joe grills, has grown its EPS by 14% over the last decade. The stock? Up ~350% over the same period. Established in the late 1800s, Middleby boasts a broad range of over 100 brands in its portfolio, catering to both commercial and residential customers.
Europris, the #1 discount retailer in Norway and one of the largest players of its kind in the Nordics, has grown its EPS by an astonishing 42% over the last decade. The stock? Up ~200% excl. dividends over the last five years despite the pandemic, macro headwinds etc. Founded in 1992, Europris has rapidly expanded its footprint, with over 280 stores and a strong online presence, capitalizing on the Nordic region's demand for quality at affordable prices.
Summing it up
The allure of the "next big thing" often captivates investors, driving them towards the newest and most exciting ventures in hopes of high returns. However, history shows that investing in consistent, long-standing, and seemingly 'boring' companies can yield outstanding returns. These companies above, often overshadowed by flashy startups and revolutionary products, have demonstrated stability, resilience, and consistent growth over extended periods.
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