The 4 Greatest Stock Reversals in the Last Decade

By Damian Davila on 13 May 2015 0 comments

America loves a Cinderella tale.

  • After giving up boxing due to chronic hand injuries during the Great Recession, boxer James Walter "Cinderella Man" Braddock managed the unlikely feat of winning the Heavyweight title.
     
  • Despite losing both of her legs and damaging her right arm during the Iraq War, Tammy Duckworth became the first disabled woman to be elected to the House of Representatives.

We even have a special admiration for corporate comebacks. Watching a stock price topple — only to recover after several years — is proof of American perseverance and ingenuity. (See also: 4 Big Tech Stocks Offering Big Returns)

Here are four of the greatest stock reversals in the last decade.

1. AIG

Let's start with a big and controversial stock reversal. This company has been no stranger to financial scandals. For example, in 2005 AIG's operations were under fire by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General's Office due to potential accounting fraud.

However, AIG (NYSE:AIG) is best known for its credit derivatives debacle that required nearly $200 billion in government bailout funding in 2008. From a peak price of $2073.76 in December 2000, AIG stock tumbled all the way down to $7 by March of 2009.

While highly controversial, the bailout worked and the insurance meltdown was halted. The good news was that U.S. taxpayers did come ahead in this deal. As early as 2012, the U.S. Treasury considered selling some of its AIG holdings, providing a profit for taxpayers.

Today, the stock trades at about $56. Bearish investors that bought $10,000 of AIG stock at the March 2009 bottom would have close to $80,000 today. That's a 700% return.

2. AOL

Of all the noises that mark a generation, the sound of AOL's modem dial-up connection has to be near the top for both Generations X and Y.

Most of AOL's revenue came from subscriber fees, hitting a total of $25 million back in 2002. Fast forward to June 2014, that number has dropped to just $2.3 million. Ouch.

Aside from 90s nostalgia, AOL (NYSE:AOL) has also provided financial gain to stockholders that stuck around. From a rock bottom of $12 per share on September 1, 2011, the company's stock has risen to over $40 by April 2015.

The company has gone through a lot of iterations through the years. Currently, AOL makes most of its revenue by amassing eyeballs through its popular websites, such as The Huffington Post and TechCrunch, and hawking online ad space to advertisers. AOL is testament that some investment ideas that sound dubious may still pack a financial punch. (See also: 4 Great Investments That Sounded Really Stupid in the 2000s)

3. Apple

It wasn't always smooth sailing for the giant from Cupertino.

Back in 1986, Apple (NASDAQ:APPL) commanded a healthy 16% share of the PC market. However, that market share eroded to 2.7% in 2000. Things got so bad for Apple that at the end of the dot-com era, its stock price reached a dramatic low of $6.56.

But thanks to Steve Job's return to the company, Apple shifted its focus. By focusing on the MP3 market, Apple became the leader with a 72.7% market share. That's when the homeruns started to arrive: iTunes, iPod, iPod Touch, iPhone, and iPad.

The constant release of successful products helped Apple rise from the ashes to become the world's largest company by market capitalization. In November 2014, Apple's market cap was $700 billion, which is higher than the GDP of all but 19 of the world's economies.

Apple's stock price reached such a high price ($700) in June 2014 that the company decided to do a 7–1 stock split. The move to lower the stock price back to $100 was designed to attract more individual investors who could't afford buying the stock at $700. Given that Apple's current price is over $130 already, there are several financial pundits predicting that Apple's stock price may rise again to $700.

4. Best Buy

As more and more people are turning to online shopping, it may appear a bit confusing to include this chain of electronics superstores in this list. However, this once-ubiquitous big box store is enjoying a comeback.

Amazon has claimed a lot of victims, such as Circuit City (liquidated in 2009) and Nobody Beats the Wiz (permanently closed since 2003), in its rise to the top. And Best Buy (NYSE:BBY) certainly felt the squeeze as well. From a high of $58.32 per share back in May 2006, its stock tumbled to a low of $11.29 by December 2012.

Times were tough for Best Buy. Earlier in 2012, the company had posted a $1.7 billion quarterly loss and had experienced 0% growth in revenue from the previous year. However, Best Buy powered on by closing underperforming stores, reorganizing the shopping experience at its locations, and streamlining its supply chain. These renewed efforts have positively impacted Best Buy's stock price, which currently trades around the $35 mark.

Due to its large volatility, holding Best Buy stock is not for the faint of heart. Still, those investors that were in for the long run have been rewarded.

Now, here's to wishing that you discover some of the greatest stock reversals of the next decade!

What are other great stock reversals in the last decade that need to be on this list?

(Disclaimer: I neither own any of these stocks nor receive compensation by the mentioned companies.)

5
Average: 5 (2 votes)
Your rating: None
ShareThis

Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.

Wise Bread is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.