One of the lessons in Finance 101 focuses on the distinction between a good company and a good stock. One illustration of the disconnect between these two can also provide a few lessons to investors.
Most publicly-traded companies were built step-by-step over the course of years or decades, the result of the collective efforts of thousands of employees. The market value of many companies, however, reflects the sum of a small number of trading sessions. Below are 10 companies whose entire market caps are the sum of fewer than 20 individual trading sessions.
Bank of America
Bank of America (BAC) is only a shadow of what it once was, but it remains one of the largest banking institutions in the world. The company’s stock price is the sum of four trading days during a three-month stretch in 2008:
Monsanto
Monsanto (MON) has a similar story; the current stock price is the sum of nine days between January 2008 and January 2009, as well as one big day in August 2015:
Charles Schwab
Charles Schwab (SCHW) has become one of the largest discount brokerages in the world, as well as a provider of low-cost mutual funds and ETFs. The company has now survived two periods of extreme volatility that saw large fluctuations in its value.
The market capitalization of about $40 billion is the result of the stock’s eight best trading days:
Netflix
Netflix (NFLX) experienced quite a bit of volatility during the financial crisis, but the largest single-day moves in its stock have come more recently. The company’s customer base and entertainment library has been built over more than a decade, but the $44 billion market cap comes from 12 trading sessions since 2013:
Tesla
Tesla Motors (TSLA) has been a public company for about five years, during which its value has increased by a multiple of five. While Tesla stock has trended consistently higher since its IPO, the entire market cap is the result of 15 trading days since May 2013:
Ford
Ford Motor Company (F) was founded more than 100 years ago. Its entire $60 billion market capitalization is the result of 10 trading days between August 2013 and August 2015:
General Electric
Ford isn’t the only ancient company to make this list. General Electric (GE), founded by Thomas Edison (and others) in 1892, has evolved over the last 120 years or so to become a conglomerate with television, aerospace, and health care divisions.
The company’s $263 billion market cap is the cumulative result of 13 trading days since 2000:
ExxonMobil
ExxonMobil (XOM) is one of the world’s most valuable companies, and the product of decades of exploration and mergers. Its $310 billion market cap, however, is the result of 16 trading sessions:
Ten of these sessions — including the seven largest single day gains — came before markets finally bottomed in March 2009.
Microsoft
Microsoft (MSFT) is one of the great business success stories, with a history that includes many of the technological breakthroughs that changed the global economy.
The company’s $350 billion market cap is the result of 18 trading sessions that have occurred in eight different years since 1999:
Delta
Since Delta (DAL) exited bankruptcy in 2007, its value has more than doubled to about $37 billion. That amount is equal to the value created on the 12 best trading days:
The list of stocks whose market caps represent the sum of 20 or fewer trading days could go on and on. The best 38 sessions for the S&P 500 combine to a gain of about 2,007 points — higher than the current level of the index.
These examples and charts illustrate three noteworthy points:
- Market timing is risky. In the short term, anything can happen. Those who try to pinpoint moves in the market can be handsomely rewarded, but also severely punished. Decades’ worth of value can be wiped out and replaced in a matter of hours.
- Overreactions are commonplace. Intuitively, the dominance of a few trading days doesn’t make much sense. These companies were built over several decades, and the long-term trajectory of the business wouldn’t change so significantly over the course of a few hours.
- Jubilation can be short-lived. Many of the tables above include stellar one-day jumps from 2008, when markets were still in a downward slide. Beyond this anecdotal evidence, there are reasons to believe that the biggest single day jumps often occur in unhealthy markets.
This article, 10 Companies Built in a Month, first appeared on Dividend Reference.