When it comes to the Dow Jones Industrial Average (DJINDICES:^DJI), the worst of the financial crisis was nearly 10,000 points ago. That means today's Dow, which at the time of this writing was trading at slightly over 16,500, represents a 140% gain in just 61 months. That's the blink of an eye for long-term investors.
All good things must eventually come to an end, including this bull market. So before this bull turns bear, let's take a few minutes to reflect on the winners of last five years
1. American Express (NYSE:AXP)It probably shouldn't come as a surprise that a financial company would rebound the highest from the bottom of the financial crisis, but American Express' 679% growth since March 2009 is still astounding. Of all Dow components, AmEx is the only company with growth over 400%, and the company's stock outperformed fellow card company Visa by 2.4 times.
American Express' market success is largely driven by its fundamental success. As of Dec. 31, 2013, quarterly net income was up 288% from March 31, 2009, quarterly revenue up 40%, and total assets had increased 31%. Strong numbers from a strong company.
2. Walt Disney (NYSE:DIS)In second place is Walt Disney, which saw its stock price increase 381% over this bull run. Perhaps the biggest driver of Disney's success was the December 2009 acquisition of Marvel Entertainment. This acquisition led to the blockbuster Iron Man trilogy, The Avengers, Thor, and other super hero megahits. Following the same model, Disney acquired Lucasfilm from George Lucas in 2012, adding the Star Wars and Indiana Jones franchises to the portfolio.
For Disney, content remains the core of the business. Marvel and Lucasfilm prove that content through acquisition can be very successful. And with Frozen's Academy Award for Best Animated Feature in 2014, the company is proving that the model also works for in-house productions.
Honorable Mentions: UnitedHealth Group (up 356%), Boeing (up 323%).
What a difference 5 months makes
No one knows when the Dow's bull run will end. But it will end, that is a certainty. So the question is not if, but when.
Knowing this, it's generally a good idea to step back and add some perspective to any reflection on where we've been, where we are, and where we're going. In this case, that means rewinding our charts above from March 2009 to October 2008.
Remember, the Dow is up 140% from March 2009. American Express 679%, and Disney 382%.
Why the big disparity over just five months? Because those five months were five of the worst month in the Dow’s history.
That impressive 140% gain in the Dow now doesn't look quite as impressive. And American Express' run now looks pedestrian.
The takeaway is of course that the financial crisis and Great Recession caused a once in a generation shock in the markets. We don't know what will happen tomorrow. We can't know. And that's the point of doing these exercises in the first place.
Viewing the market in hindsight can be helpful -- understanding how Disney's acquisition strategy is driving growth, for example. But it can also be misleading.
American Express is a strong company with strong fundamentals, but it's hard to justify that its business' value grew 2.4 times more than the second-biggest gainer in the Dow over the same time period.
For American Express, the story is about timing. It's about macro problems in the economy and in the financial sector. It's about the market's perceived valuation of the company versus the true value of the company's earnings, assets, and growth potential.
Buy low and sell high, right? Perhaps a better bet is to buy when undervalued (AmEx in March 2009) and then ride the wave of a company executing a winning strategy (Disney, then and now).