When it comes to a stock’s long-term return, few stocks have outperformed Microsoft (NASDAQ: MSFT). Since the company launched its initial public offering (IPO) in 1986, its shares have risen more than 434,000%! Interestingly, this also included the (former) Steve Ballmer era, a 14-year period during which stock prices fell fell by more than 30%.
From 1975 to 2000, Microsoft thrived under co-founder Bill Gates thanks to its dominance in PC operating systems and productivity software. Since Satya Nadella took over as CEO in 2014, Microsoft has made most of its returns from its leadership in cloud, a foundation for its presence in artificial intelligence (AI). Not surprisingly, such successes have driven the stock’s enormous returns.
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The company launched its stock at an initial public offering price of $21 per share on March 13, 1986. That original investment generated significant returns and grew to 288 shares through nine stock splits. Microsoft initiated 2-for-1 stock splits in 1987 and 1990. This followed with two 3-for-2 stock splits in the early 1990s and five 2-for-1 splits between 1994 and 2003.
Assuming an investor purchased one share on the first day of trading, the total investment value of the resulting 288 shares has risen to a value of over $121,500 at the time of writing! If you include dividend income, the total return rises to over $197,000.
MSFT data by YCharts.
Granted, no IPO investor probably expected one share of the stock he owns to become 288 shares. Furthermore, no one could have predicted Microsoft’s PC success or rebirth in the cloud industry decades later.
Clearly, a new investor in Microsoft is unlikely to achieve similar returns given the current state of the company. Nevertheless, Microsoft teaches us that tremendous growth can occur when a company leads or dominates an emerging industry. Such lessons can guide investors in future purchases, allowing them to prosper even if they missed this particular opportunity.
Before you buy shares in Microsoft, consider the following:
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