Including dividends, the Nasdaq Composite Index has produced a total return of 103% (as of April 19) in the past five years. This means your capital would have effectively doubled, which is a fantastic gain.
But you should know that Alphabet (GOOGL 0.37%) (GOOG 0.32%), one of world's dominant internet firms, has significantly exceeded that benchmark's gain. If you had invested $1,000 in this "Magnificent Seven" stock five years ago, you'd have more than $2,500 today. That's a stellar 151% return.
Let's look closer at Alphabet.
Keep it simple
This stock has done so well for investors primarily because of how the underlying business has consistently grown sales and income. Between 2018 and 2023, the company's revenue and diluted earnings per share increased at compound annual rates of 17.6% and 21.6%, respectively. It's no wonder shareholders were rewarded.
This points to how investing doesn't have to be complicated at all. Great returns can be achieved by buying and holding the best businesses out there. It's also important to be able to hold on to your winners.
The current setup
Past performance never guarantees future results, but I do believe Alphabet will continue to perform well for its investors. Even after that remarkable five-year gain, shares trade at a very reasonable forward P/E ratio of 22.8. That's a cheaper multiple than every other "Magnificent Seven" stock.
Just because a company generated $307 billion in sales last year and carries a massive market cap of $1.9 trillion doesn't mean its gains will be limited. In this instance, it's very easy to be optimistic.
Alphabet benefits from the growth of the digital advertising, streaming entertainment, and cloud computing markets. They all have huge expansion runways in the decades ahead, making the stock a worthy investment candidate right now.
