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The First Day of Home Depot's Conquest of the Stock Market

By Alex Planes - Sep 22, 2013 at 11:00AM

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Learning from the market's past to understand its present.

On this day in economic and business history ...

Home Depot (HD 1.35%) went public on Sept. 22, 1981, two years after its first stores opened in Atlanta. The home-improvement retailer listed 600,000 shares at $12 per share to raise $7.2 million -- enough to build a handful of megastores in 1981.

In its first year of trading, this tiny over-the-counter stock soared more than 300% in value, but it remained off Wall Street's radar despite recording a 220% year-over-year increase in revenue and a 150% year-over-year jump in adjusted net income for its May quarter for 1982. In fact, the only mention of Home Depot in any of the nation's four largest newspapers during 1982 -- with the exception of a couple of stock quotes and one quarterly earnings blurb -- comes at the very end of The New York Times' annual list of the best stocks of the year. Home Depot recorded a gain of 273% that year, behind some stocks that recorded gains as great as 625%. None of those stocks with higher returns exist today in any recognizable form. Advantage, Home Depot.

First-day shareholders had a 10-bagger (1,000% gainer) on their hands five years after Home Depot's IPO, despite an early peak in 1983 that gave way to a period of relative stock mediocrity. This weakness was far in the rearview mirror as the 1980s ended, and on Sept. 22, 1989, first-day shareholders held shares worth 4,800% more than their IPO purchase price. Another two years of growth sent Home Depot's gain through the roof, and on the 10-year anniversary of the company's IPO, Home Depot shares were worth 17,000% more than they had been on the first day of trading in 1981. At the end of 1991, Home Depot recorded $4.8 billion in revenue and $220 million in net income, up from just $250 million in annual sales in 1984.

Shareholders who held on for two full decades following the company's IPO would have earned a 100,000% return. Despite representing a fairly significant slide from Home Depot's dot-com peak return of more than 190,000%, this is still one of the best baby-boom era returns to be found anywhere. This exceptional performance more than justified Home Depot's induction to the Dow Jones Industrial Average (^DJI 1.27%) in 1999, at which point it became the only the second housing-focused company ever added to the index, after asbestos-materials manufacturer Johns-Manville.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter, @TMFBiggles, for more insight into markets, history, and technology.

The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,761.05 (1.27%) $424.38
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$314.89 (1.35%) $4.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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