When you invest in a stock, you make a bet that the company will succeed, and the value of your investment will increase. But, returns aren’t guaranteed, and sometimes, the market can be highly volatile. Wild swings in share price are common for forward-thinking companies that are ahead of their time.
However, the market has proven itself to be quite unpredictable in the near term. A sudden massive drop in stock value today doesn’t necessarily mean the company is going out of business tomorrow. For example, if you rode the wave and stayed invested in big box stores like Walmart in the 1970s or online stores in the early 2000s, you profited greatly. In the case of Amazon, the Everything Store’s stock fell by more than 90% in two years during the Dot Com Bust. However, incredibly enough, a $1000 stock purchase at its absolute peak Dot Com Boom price is now worth more than $31,500. That’s why so many of the best investors preach that the key is betting for the long term when you buy a stock.
Let’s look at more recent drastic drawdowns of ten successful household names - and what it means for you as an investor.
Before we look at individual stocks, let’s define the term drawdown. In this instance, a drawdown is a sharp decline in a stock’s value, as measured by its share price. There’s a peak (where the stock hits an all-time high), followed by a trough (where the stock plummets), followed hopefully by another peak (where the stock returns to (or exceeds) its pre-drawdown value).
Drawdowns can help you understand an investment’s risk. When you research a stock, look at how sharp each drawdown is - and how long it generally takes for the share price to recover. Drawdowns can happen for a variety of reasons, such as:
Whatever the cause, drawdowns can be anxiety-inducing. But, as you’ll see, patience and nerves of steel can pay off.
Now that we have a working definition of a drawdown, let’s take a look at ten massively valuable companies that have experienced extreme volatility. As you’ll see, our favorite household names aren’t immune to these fluctuations.
Please note: We reviewed the most significant drawdowns for these firms over the past ten years. For many companies, that drawdown occurred in March of 2020 due to the COVID-19 pandemic.
Unless you’re on team Android or loyal to the PC, you probably have at least one Apple product at home. The iconic electronics company manufactures cell phones, computers, and other gadgets used widely around the world. But, the firm has seen its share of financial volatility.
On February 7, 2020, the stock closed at just over $80 per share. By March 23, 2020, the price fell to just over $56 a share. Fortunately, about a year later, shares rose to $122 each. If you held on, you made an additional $42 per share.
If you use an Xbox or a Windows operating system, you’re a Microsoft customer. The global computing and gaming brand keeps countless users productive and entertained. However, the company has experienced a recent drawdown.
On February 18, 2020, shares sold for over $187. By the closing bell of March 23, 2020, the stock price had dropped to just under $136 per share. Luckily, as of March 31, 2021, shares sold for just under $236 - a whopping $49 more per share than before the drawdown.
If you weren’t shopping on Amazon before the pandemic, we’re willing to bet you started due to the shutdowns. The massive online retailer sells everything under the sun and delivers it straight to your door. But, the company has experienced its fair share of financial distress.
On September 11, 2018, shares closed at just over $1,987. By Christmas Eve of that year, shares fell to just under $1,344 (over a $500 per share drop!). But, if you stayed invested through March 31, 2021, you were rewarded with a share price of $3,094 (a gain of $1,107 per share)!
If you have to look anything up online, you probably turn to Google. The dominant search engine handles an unfathomable amount of search queries per day. However, the COVID-19 pandemic hit the company’s share price hard.
On February 18, 2020, shares of Google sold for about $1,519.50 each. As of March 23, 2020, the share price bottomed out at just over $1,054. Fortunately, as the economy as a whole rebounded, Google followed suit. By March 31, 2021, shares sold for an all-time high of around $2,062.50!
You probably use social media every day, and Facebook remains a leading platform in the industry. We use it to connect with people we care about, advertise our businesses, and, of course, post funny cat memes. But, Facebook has endured some wild ups and downs.
On July 24, 2018, Facebook traded at roughly $215 a share. By December 21, 2018, the share price dipped sharply to just under $125. If you were patient, though, and held on to your Facebook stock, each share sold for $288 as of March 30, 2021.
If you’re into electric vehicles, you’ve been watching Tesla with keen interest. The innovative car manufacturer has gained traction in recent years. However, investors are experiencing a bumpy ride.
On February 8, 2021, Tesla shares sold for roughly $863.50. Four weeks later, the share price dropped to just under $600. The stock is still on its way back up and was priced at just under $668 a share on March 31, 2021. But, if you bought in (and held) when the shares were around $150 each in February 2020, you’ve still done very well!
Chances are, you’ve got a Walmart in your town or within a short drive from home. The well-known big-box retailer is a one-stop-shop for apparel, electronics, groceries, and more. But, despite the company’s popularity, investors have had to deal with some steep stock price fluctuations.
On January 19, 2018, Walmart shares sold for about $104.60. By June 15, 2018, the share price had fallen to $83.70. But, fast forward to March 31, 2021, the company, fortunately, reached a new peak of just under $136 per share. If you held on for those three years, you saw more than a $30 per share uptick!
The COVID-19 pandemic decimated the travel industry. Unfortunately, theme parks like Disney World and Disney Land were closed for months. While The Walt Disney Company had other revenue streams to fall back on, it still saw a significant drop in share price.
On February 7, 2020, shares sold for roughly $141 each. Due to park closures, the price plummeted to about $85.75 by March 23, 2020. Thankfully, as of March 31, 2021, shares were priced around $184.50 - more than a $40 increase over the pre-drawdown peak!
If you own a house, you probably spend more time and money at Home Depot than you care to admit. The home improvement retailer sells the tools, materials, and services to repair, maintain, and upgrade your property. But, the company’s stock price didn’t escape the pandemic unscathed.
On February 18, 2020, shares sold for just under $244 each. By March 23, 2020, the price per share dropped to roughly $162. Fortunately, a year later, the stock price rallied to a new high of $305.25. Steadfast investors saw more than a $60 per share increase over the pre-drawdown price.
If you take care of a baby, groom yourself, or clean your house, you probably use at least one Procter and Gamble product. The consumer goods company owns and sells a vast portfolio of merchandise people use every day. But, even a company that sells necessary goods isn’t immune to market volatility.
Before the COVID-19 pandemic, shares sold for just over $126. By March 23, 2020, the price dropped to $97.70 a share. Fortunately, as of March 31, 2021, the share price reached a new peak of over $135. Patient investors earned a $9 per share increase in just over a year.
So, what does all of this mean for you? Like all things investing and personal finance, it depends. You have to understand your risk tolerance and decide how steep of a drawdown you can handle.
You should also consider your investing horizon. If you’re a retiree, it makes sense to be more cautious with your portfolio. You’ll need that money soon, and a massive drop in value could spell disaster if your holdings don’t recover fast.
But, if you’re decades away from calling it quits, you have more time to get through a drawdown. That means it may be a good idea to hold steady even during turbulent times. As we’ve shown, maintaining your positions could pay off long-term.
Drawdowns can understandably make you nervous. No one likes to lose money. But, as Unifimoney’s Board Advisor, Max Osbon, points out, “You only lose money when you sell.” So, if you invest in companies with strong, inspiring leadership and solid products and services, he encourages you to think long-term. Unless you’re completely risk-averse or have a short investment horizon, you may want to stay the course — even when market fluctuations make you want to run.
The above does NOT constitute an offer, solicitation of an offer, nor advice to buy or sell specific securities. The opinions listed above are not the opinions of Unifimoney Inc. or Unifimoney RIA, Inc. but represent the opinions of independent contributors. These contributors may or may not hold positions in the stocks discussed. Investors should always independently research any stocks listed and form their own opinions, while recognizing that any investments made may lose value, are not bank guaranteed and are not FDIC insured.