In other words to generate higher returns one has to invest in small and midcaps. While it is true that most large caps, once they reach maturity, tend to grow at a steady pace and consequently deliver low to moderate returns, there are a few rare companies that continue to grow at a brisk pace even after attaining scale.
The beauty of such gems is that their reliability makes them less volatile (lower risk) while still compounding wealth at high rates. Some examples are:
Titan entered the Nifty 50 index in 2018. It was already a well-discovered large cap by then. Since then, it has delivered ~25% CAGR (price return only, dividends not included).
Amazon became a well-discovered large cap (>$20 bn market cap) around the year 2001. Since then, it has compounded at ~29% CAGR.
Costco crossed a $20 bn market cap around 2000. Since then, it has grown at ~14% CAGR (price return only, dividends not included).
Alphabet (Google) had a market cap of over $20 bn soon after its IPO in 2004, effectively making it a large cap from inception. Since then, it has compounded at ~24% CAGR.
What makes these elephants dance?
Very strong moats and long runways for growth (Titan, Costco)
A DNA of investing in product and service innovation (Amazon, Alphabet)
A culture of embracing failure (all)
Visionary management teams that constantly stay ahead of the curve (all)
Such rare companies having the ability to deliver consistent growth at scale, offer the holy grail of investing: impressive returns with relatively lower risk compared to mid and small caps.
Disclaimer: The stocks cited are for informational purpose only and are not investment advice.
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