There’s a lot of power in being first. And when it comes to Initial Public Offerings, or IPOs, it pays to be one of the earliest investors.
But we wanted to understand how much it would pay, so we ran an experiment. Imagine you could go back in time and invest $100 into a handful of great companies when they first went public. What would your investments be worth today?
- Of all the companies we analyzed, Nike is the clear winner. An initial investment of $100 in 1980 would be worth over $6 million today.
- Walmart was a better bet than Amazon, topping the online retail giant by over $1 million in total investment growth.
- The same investment into Google (Alphabet) when it first went public would be worth only $2,632.
Let’s start with how we crunched the numbers. We wanted to compare apples to apples, so we made a couple key assumptions. First, we assumed our hypothetical investment of $100 at each IPO would stay with the underlying asset for the long term, but any dividends would be taken out as cash and not reinvested. Then, we determined the present-day value of the investment through the ups and downs of stock splits, mergers and acquisitions. You can read more about our sources and methodology here. In short, you put $100 in at the IPO, and let it ride.
The surprising conclusion of our visual is that tech stocks aren’t historically the best IPOs. Nike and Walmart fare much better than Apple and Google (Alphabet). Want another surprise? Buying $100 of Coca Cola would have been a much better investment than Starbucks. But regardless of how things turned out, the overall story in our visual is the enduring value of great American companies over several decades. Even GE, a company that’s suffered its share of setbacks in the last several months, still looks like a great IPO pick after all these years. And although we aren’t excited about Google’s return ($2,632) compared to other companies, that’s still pretty good.
So it pays to be among the earliest investors, but how do you know what to invest in? All these companies initially started as one among many competitors. Some IPOs skyrocket in value only to plummet in the following years. Other IPOs take a long time to get off the ground. We don’t know how to pick the winners, but we’re confident if you bought any of these stocks early on, you’re still happy with your return today.
Correction March 4th, 2019: A previous version of this article compared an Investment of $100 in BTC vs IPOs. In order to avoid confusion we are now only comparing investments into IPOs.