Listen to the Joystiq Podcast (because your ears can't read)

AOL Money & Finance

Stocks that outperformed Google (GOOG)

Three years ago yesterday, Google (NASDAQ: GOOG) became public. Since then, those investors who could get past the seemingly high valuation of $85 per share have been generously rewarded with a hefty return of 478%. Google has been a perfect example of the need to look forward when analyzing growth companies. At the time of its IPO, value investors (rightfully so) appeared on CNBC to tell investors that Google was overvalued. However, because Google was able to grow its earnings per share at such an unbelievable rate, the stock's IPO price represents just 8x last year's earnings and 5.5x this year's. Given the choice to buy Google at $85 per share now I'd bet every value, growth, stupid and smart investor would jump on the opportunity to pick up the stock.

But Google hasn't been the only incredible performer during the last three years. In fact, Business Week has an interesting article listing the companies and stocks that outperformed Google during the last three years. You'll find that many of these stocks rose due to some huge underlying trend that these companies were able to ride out for powerful growth.

For example, high oil prices have been a huge trend for profits. Frontier Oil (NYSE: FTO) was able to return 611% to investors over the last three years as the company rode the increased oil prices to make huge refining profits. Foster Wheeler (NYSE: FWLT), with its focus on energy, pharmaceuticaul and environmental infrastructure products, was able to return 557%.

Apple (NASDAQ: AAPL), riding the iPod and now iPhone and Mac computer trends, has provided patient, long-term investors with 638% over the last three years. With very interesting trends remaining for the company (market-share increases for the Mac computer segment, iPhone popularity, and so on) this stock could continue to outperform but I'd wait for a more attractive valuation before becoming a long-term investor in the stock.

NutriSystem (NASDAQ: NTRI) has ridden the "get-skinny" trend over the last three years returning 3000% to investors. I suggested that NutriSystem was "playing the guidance game" after it reported earnings in the end of July. Since then, shares of the stock are down almost 11%. With an attractive valuation, the stock seems interesting at first glance but I think I'd avoid it.

Huge market outperformers come in all shapes and sizes. The problem is I doubt many investors held any of the names the entire time, and I bet many felt the compulsion to take profits, as would I.

What are going to be the strongest performers during the next three years? I think lululemon (NASDAQ: LULU), a stock I'm going to feature later this week, certainly has huge potential. Comment away!

Related Posts

Reader Comments (Page 1 of 1)

Symbol Lookup
IndexesChangePrice
DJIA-128.008,451.19
NASDAQ+4.391,649.51
S&P 500-10.70899.22

Last updated: October 12, 2008: 09:13 AM

BloggingStocks Exclusives

Hot Stocks

BloggingStocks Featured Video

TheFlyOnTheWall.com Headlines

WalletPop Headlines

AOL Business News

Latest from BloggingBuyouts

Sponsored Links

My Portfolios

Track your stocks here!

Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

BloggingStocks Partners

More from AOL Money & Finance