Few stocks have as captivating a story as Amazon.com (AMZN -1.65%). Even before last week, those who have bought -- and held -- the stock through the dot-com bust were already up a mind-boggling 45,000%.
But what happened on Friday, Oct. 27, 2017 has only occurred twice before in the history of the stock market.
Image source: Getty Images
That rare occurrence? The stock added more than $60 billion in value in just one trading session. To put that in context, that's like creating an entire company equivalent in market value to General Motors in a matter of hours.
Has this ever happened before?
The impetus for Amazon's huge move was its stellar earnings report, which blew away analyst estimates. Believe it or not, however, this wasn't the biggest move that's ever occurred in a single day. In fact, it ranks as just the third biggest move in a single day -- in terms of market cap jumps.
|
Company |
Date |
Market Cap Growth |
|---|---|---|
|
Alphabet |
7/16/2015 |
$66.9 billion |
|
Cisco |
4/17/2000 |
$66.8 billion |
|
Amazon |
10/27/2017 |
$62.0 billion |
|
Microsoft |
10/19/2000 |
$53.8 billion |
|
Microsoft |
3/23/2000 |
$52.3 billion |
Data source: YCharts.
If we don't count the inclusion of Microsoft a second time, Apple's addition of $46.5 billion in one trading day back in 2012 would come in fifth.
This is by no means an exhaustive list. I wasn't able to go back and examine every company during the dot-com run-up or the recent recovery since the Great Recession -- though the task is made considerably easier since only megacap stocks could ever show gains this high.
Another thing to consider is that these gains aren't akin to apples-to-apples comparisons. If we account for inflation -- using the Bureau of Labor Statistics' CPI Inflation calculator -- we see that Amazon's jump is actually far from the largest ever. Here are the five times a company has added at least $50 billion to its valuation in a single day.
|
Company |
Date |
Inflation-Adjusted Market Cap Growth |
|---|---|---|
|
Cisco |
4/17/2000 |
$96 billion |
|
Microsoft |
10/19/2000 |
$76 billion |
|
Microsoft |
3/23/2000 |
$75 billion |
|
Alphabet |
7/16/2015 |
$69 billion |
|
Amazon |
10/27/2017 |
$62 billion |
|
Apple |
4/25/2012 |
$50 billion |
Data sources: YCharts, CPI Inflation Calculator. All figures rounded to nearest billion.
What this means for investors
There's no question that investors should expect any jumps of the same magnitude in the future. By the same token, they also should discount the fact that small and incremental gains can add up to make a huge difference over time.
Take Microsoft as an example. Even if you bought shares after the October 2000 jump, you'd still be sitting on returns of over 300% -- far outpacing the S&P 500 over the same time frame.
In Amazon's case, the stock is undoubtedly expensive: It trades for over 280 times non-GAAP earnings, and 66 times free cash flow. Yet there's so much to love about the company.
Foremost among those things is the company's mission statement: to be Earth's most customer-centric company. If you want to understand where Amazon has been and where it's going, this singular statement encapsulates it all. Most companies would have been content to be the world's leading e-commerce destination.
But not Amazon. It has moved into groceries and shipping, and it's making moves to disrupt the pharmaceutical industry. There's no telling how far this focus can take the company, but I know I want to be owning shares along the way.
While I'm not buying new shares myself, that's because the company already makes up 21% of my family's real-life holdings. If you don't already own shares now, buying into a starter position and adding to it at better and better price points is one way to gain exposure to what is quickly becoming the most important company of this generation.
