It is very easy in hindsight to be in awe of one of today’s “great” stocks, and dream about how much money you could have if you had only invested decades ago.
For example, Apple stock since 1992, which is up about 8,300%:
But this doesn’t tell the whole story. Many of today’s great companies had periods where their stock performed terribly. There were times in history when Apple stock was down 80%, Home Depot down 75%, Nike down 70%. Here are some of the worst performing stretches of today’s “Super Stocks”:
(Click chart to enlarge)
This post is inspired by an article that Jason Zweig wrote for the Wall Street Journal 2 years ago called “The Best Stock of The Last 30 Years? You’ve Never Heard of It”
I complied this data a couple years ago, and this chart was buried inside one of our This Day in Stock Market History posts. I came across it today and thought it deserves its own feature.
In the column, there is a quote saying that all current “Super Stock” companies had at least “one near death experience.”
I was curious, in order to get those full returns for the “super stocks”, what would you have had to endure over the last 30 years? One might think that if you were lucky enough to buy one of these stocks 30 years ago, it would have been clear sailing…but that is not the case at all!
The chart above plots the wild rides for each one of the super stocks an investor would have had to endure.
For example, the lighter grey line is Apple’s performance from 1992 – 1997, when it declined nearly 80% or 1480 trading days.
All data comes from Yahoo Finance.
Some notable points:
- There was not one super stock that did not have at least one 45% decline or more at least once in the last 30 years.
- Home Depot, the most successful S&P 500 stock in terms of performance over the last 30 years has seen 3 separate 50%+ declines!
- Could you imagine being an investment advisor and telling your clients to stay strong holding Apple stock for 1400+ days while it declined 80%? Of course, very few (if any) did. As the article says:
“There are no investment professionals in the world who bought Apple 30 years ago and held it continuously ever since — except liars.”
I think charts and examples like this are important to see. Of course, it takes great strength to hold a stock that has declined 80%. It might even be a dumb idea for most to take on that risk.
But if you want your chances at the amazing returns on the next great super stock, you better be ready to hold through some rough patches.