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Aden - Yasmine El Tohamy - For long-term shareholders of Netflix, the end of December marks an extremely rewarding decade.
Shares of the video-streaming heavyweight have surged over 4,100 per cent since the end of 2009, making it the S&P 500's top performer over the past 10 years.
Analysts mostly recommend investors keep buying the shares, even as the Los Gatos, California, company faces a surge in competition and questions about whether it can maintain its rapid user growth.
The dramatic rise of Netflix's business and share price established the company as part of the so-called FANG quartet of high-growth stocks - along with Facebook, Amazon.com and Google-owner Alphabet - which captivated investors and accounted for much of Wall Street's rally in recent years. Netflix expanded its subscriber base from 12 million at the end of 2009 to 158 million last September.
But at the start of 2010, when mailing DVDs to customers was still a large chunk of Netflix's business, the average analyst recommendation for the company was "hold", making it one of the S&P 500 stocks least-favoured by analysts at that time.
As well as being the top overall performer across the decade, Netflix was the S&P 500's strongest annual performer in 2010, 2013 and 2015, gaining 219 per cent, 298 per cent and 134 per cent in each of those years, respectively.
The only other S&P 500 component leading the index more than once on an annual basis over the decade was chipmaker Advanced Micro Devices, which surged 80 per cent last year and is on track to gain 132 per cent in 2019. Up over 340 per cent since the end of 2009, AMD's recent surge marks a comeback after a downturn in personal computer sales in the first half of the decade had many investors questioning whether the chipmaker would survive at all in the shadow of semiconductor giant Intel.
Under chief executive Lisa Su, who took over in 2014, AMD stopped losing money and is expected by analysts to expand its bottom line by over 40 per cent in 2019, according to Refinitiv.
Following its stellar stock market performance, Netflix is now struggling with slowing subscriber growth, ballooning costs to produce content and new competition from Walt Disney and other services. With Netflix up 24 per cent in 2019 and falling short of the S&P 500's 28 per cent gain, analysts on average now recommend buying its shares. The stock remains down 20 per cent from its record-high close in July 2018.
The S&P 500's second-strongest performer of the decade has been electronic bond trading system operator MarketAxess Holdings, up over 2,600 per cent, followed by medical equipment maker Abiomed, which has surged over 1,800 per cent.
In ninth place is Ulta Beauty, which has flourished even as other shopping mall retailers struggled to fend off Amazon and is up 1,280 per cent over the decade. Amazon clocks in as the decade's 11th-strongest S&P 500 performer, gaining 1,232 per cent.
Investors buying the stocks most highly rated on average by analysts at the start of the decade, and holding them through 2019, mostly would have done well. But investors buying and holding the stocks least liked by analysts at the end of 2009 also would have fared well.
"No one knows for sure, but on a sector level, history implies [but does not guarantee] that the best sectors in the prior decade will not repeat as leaders in the coming decade," Sam Stovall, chief investment strategist at CFRA, said in a recent note to clients.
Among current S&P 500 components, Incyte, CMS Energy, JM Smucker, United Airlines and Delta Air Lines were the stocks with the highest aggregate analyst rating at the end of 2009, and of those, only JM Smucker underperformed the S&P 500's total return of over 250 per cent during the decade, including dividends. The five stocks least liked by analysts at the start of the decade were Ameren, Brown-Forman, Apartment Investment and Management, Hershey and American International Group, and of those, only AIG has underperformed the S&P 500.
As the decade nears its finish, just one stock in the S&P 500 has an average analyst rating of "sell": Franklin Resources, the holding company that owns Franklin Templeton Investments. Eight analysts recommend selling Franklin Resources, while six are neutral and none recommend buying, according to Refinitiv data.
"While these stocks have performed extremely well over the last decade, they are not necessarily the best portfolio additions today," Jenna Ross, content strategist and writer at Visual Capitalist, wrote. "Some companies may have become overvalued, or be facing new competition in their industry - as is the case with Netflix. It's best to consider all current information when building a portfolio."
With inputs from CNBC and Visual Capitalist
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