Question of the Day: What Have Been The Best Performing Stocks Over the Past Five Years?

From BarChart.com, here are the top five performing stocks over the past five years:

  1. Pharmacyclics (PCYC) +5,596%
  2. Cheniere Energy (LNG) +2497%
  3. Akorn (AKRX) +2265%
  4. Accelerate Diagnostics (AXDX) +2219%
  5. Regeneron Pharmaceuticals (REGN) +1814%

A few ideas on how you might use this information in a class discussion and tie it back to investing concepts:

  • What industry are four of the top performing five companies operating in?Biotech/biopharmaceutical  Note:  If you want students to research this, you can send them to Yahoo Finance Profile where they can type in the ticker (four letters) and pull up information on each company.
  • What are characteristics of that industry?  High risk due to long, costly process to develop drugs and bring them to the market.  It is also an industry where blockbuster drugs that a company discovers can yield billions of dollars in sales.
  • What investing concept does this tie to?  The relationship between risk and return; the greater the risk, the higher the potential return.  Important to let students know that high risk does not guarantee higher returns.  In fact, during this five year period, I would hazard a guess that hundreds of biotech companies went out of business as they ran out of money before discovering a wonder drug.  If you had invested in them, the value of your investment would be $0.
  • How about Cheniere Energy?  What trend has this company capitalized on?  Cheniere has benefited from the “fracking boom” in the United States, which has significantly increased domestic oil and natural gas production.  Many expect this boom to make the US a major exporter of energy and Cheniere owns a major natural gas terminal in Louisiana that benefit from this.
  • If you had invested $1,000 in each of these companies five years ago, how much would your investment be worth now?

One way to calculate this is:  (Ending Stock Price / $1000) – 1 = Percentage Change In Stock

So, for Pharmacyclics the equation would be:  (X/1000) – 1 = 5596%.  Solving for X, the answer is $56,960 would be the current value of your $1,000 investment.  Quite a return!!!