The 3 Best-Performing S&P 500 Stocks of the Last 3 Years Have 1 Key Commonality Other Than Being AI Stocks. Can You Guess It?

Beyond all being artificial intelligence (AI) stocks, these three have one key commonality to which investors should give more attention: They're led by a founder-CEO

IPO = initial public offering. **Palantir had a direct listing rather than a traditional IPO

Palantir stock's powerful performance has been driven by strong demand for the company's AI-powered software platforms for data analytics

The company sells to both government and commercial clients

Co-founder Alex Karp is its CEO

S of Supermicro, as the company is commonly called, have had a super run-up thanks to robust demand for the company's servers optimized for AI applications

Founder Charles Liang is CEO

Nvidia stock's stellar gains have been fueled by ferocious demand for the company's market-leading graphics cessing unit (GPU) chips for training AI models and running AI applications

Co-founder Jensen Huang is CEO

Studies show founder-led companies tend to outperform the market It might not be just coincidental that the three biggest S&P stock winners over the last three years are all led by one of the company's founders

Studies show that founder-led companies tend to outperform the market over the long term

This makes common sense

Nobody -- not even the most loyal, hardest working person -- is going to care as much a company's success as its founders, or at least its founders that are still involved with the company

It's ly a lot of their ego is tied up in the success of their companies -- and that can be a powerful motivating force

I recall Nvidia CEO Huang saying in an interview years ago that he was either working or thinking work whenever he wasn't working

For all intents and purposes, he's acted as a founder, as he joined the company in its early days and invested huge sums of money to keep it going. ) Use the "founder-CEO advantage" to your advantage There are many factors that make a stock a good investment, so I'm certainly not suggesting that folks only invest in founder-led companies

That would leave out a huge number of well-established companies that have succeeded over many decades or even over a century

What I am suggesting is that you consider the question, "Is this company led by a founder. " when you're contemplating in a company that's young enough that it could have a founder-CEO

This factor would just be one consideration in your decision

The "Magnificent Seven" were all led by a founder at some point The "Magnificent Seven" are Big companies that are widely considered the market's current leaders in driving nological innovation

Their stocks have all outperformed the market -- some have absolutely crushed it -- over the long term

That all seven of them have had decent-length periods in which they were led by one of their founders lends support to the theory that founder-led companies tend to outperform over the long term

A partner at Bain & Company, a top management consulting firms, wrote this on the topic in the Harvard Review: "[H]ow founders built their companies on the inside, from the start, influenced their companies' success on the outside, for a long time. " [Emphasis mine. ] Magnificent Seven Company Founded IPO* Year Dates Led By a Founder Apple (AAPL 2. 22%) 1976 1980 1997 to 2011 Microsoft (MSFT -0. 20%) 1975 1986 Founding to 2000 Amazon (AMZN -0. 23%) 1994 1997 Founding to 2021 Nvidia 1993 1999 Founding to present Alphabet (GOOG 1. 61%) (GOOGL 1. 59%) 1998 2004 Founding to 2001, and 2011 to 2015 Tesla 2003 2010 2008 to present** Meta Platforms (META -0. 75%) 2004 2012 Founding to present Data sources: Various company sources and Wikipedia

IPO = initial public offering

Apple is unique among this group in that one of its founders -- Steve Jobs -- didn't become CEO for many years ( two decades) after the founding

But he led Apple during its most innovative period during which it released the iPod, iPhone, and iPad, and set the stage for the stock's strong, sustained run-up

In short, studies show founder-led companies tend to outperform the market over the long term -- and investors should use this knowledge in their stock-picking

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors

Beth McKenna has positions in Nvidia

The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Axon Enterprise, Meta Platforms, Microsoft, Nvidia, Palantir nologies, and Tesla

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