At 740%, this stock posted the single biggest gain of 2023. Can you guess which company it is? (No, it wasn’t Nvidia.)

Even so, David Sekera, Morningstar’s chief U.S. market strategist, says most of us shouldn’t pick individual stocks. Instead, he says, the best bet for the broader majority of us is to stick to a diversified investment strategy with a mix of both stocks and bonds. “Individual stock selection requires a great deal of time, effort, and interest,” Sekera says. “For some investors it can help to bolster investor returns, but it should only be undertaken by those that have the additional risk tolerance, time, and aptitude to conduct the appropriate upfront analysis and ongoing ability to monitor their investments over time.”

But for those who did the required complex research, along with some good fortune, betting it all on the right individual stock would have increased your investment made at the time in multiples. With the use of Morningstar’s proprietary investment industry analysis tool known as Morningstar Direct, we pulled together the industry’s best-performing, publicly listed individual stocks of 2023 to see which one had the single largest gain over the period — and no it wasn’t Apple. 

This stock has the biggest YTD gain — but it’s short-term gains can be deceiving

Yes, we know analyzing stock performance by looking at a window as short as 143 days is unlikely to provide a holistic view of the investment universe. However, while Apple ( AAPL, +1.41% ) delivered investors this year a total return of 32.4%, Tesla ( TSLA, +4.72% ) reported a year-to-date (YTD) net gain of 50.81%, and Nvidia ( NVDA, +2.54% ) recently surged to post a return this year of 110.03% through May 23, the numbers achieved by the best-performing stock are higher. 

If you had $1,000 available back on Jan. 1 to invest in the best-performing stock of the year, you would have experienced some wild growth over that short period. With that lump sum, you could’ve purchased around 1,111 publicly-listed shares of Warren, New Jersey-based biotherapeutics company Bellerophon Therapeutics Inc. ( BLPH, +8.93% ), according to data from Morningstar. After increasing in value to $7.57 per share on May 23, from $0.90 per share at the start of the year, those holdings today would be worth $8,410.27. 

That 741.11% return, however, can be deceiving — especially for long-term investors. First listed at $134.55 a share at the time of its initial public offering (IPO) on Feb. 15, 2015, BLPH —  a company specializing in the treatment of cardiopulmonary diseases — has posted a total loss of more than 94.5% over the period. If you were to have invested $1,000 at the IPO date, your 7.43 shares today would be worth just $55. 

Is it too late to invest — and should you even invest?

Because of that high level of risk involved in investing in any single stock for a long period of time, Sekera says investors “may be better off investing in products such as mutual funds and ETFs that can provide greater diversification.”

Just take the basket of stocks found in the SPDR® S&P 500 ETF Trust ( SPY, +1.30% ), an exchange traded fund tracking the S&P 500 Index — a stock market index tracking the performance of the 500 largest companies listed on stock exchanges in the U.S. While SPY’s gain this year doesn’t come close to BLPH with a total positive return of just 8.7%, the fund did however manage longer term returns of 10.54% and 11.66% over the past 5- and- 10-year periods, respectively, Morningstar data show.

To be sure, nearly all companies that manage to outperform over the long term face periods of instability, data show. As many as 81% of all publicly listed companies that managed to beat broader stock indexes over the last 10 years still underperformed for at least five of those years, according to a report from Schroders. Nearly 41% underperformed for nine of those 10 years.

“Most investors are usually best served by having a diversified portfolio across multiple asset classes and categories,” Sekera says, adding that “this diversification will help to offset some of the idiosyncratic risk of investing in individual stocks and reduce the natural variability across market cycles. Investing in individual stocks can result in a much greater dispersion of outcomes.”