We are all aware of the stock market crash of the last month. The S&P 500 index, which includes the 500 largest U.S. publicly traded companies, has lost around 30% over this period of time.
Although this decline is considered very important, within the index there are several components that have seen a drop in the stock price greater than 30%, erasing the rise in recent years in just one month.
5 categories based on stock price decline
The chart below divides the components of the S&P 500 index into 5 categories based on the decline in the stock price in the last month (February 21 to March 20).
Category 1 – The winners
Among the 500 components of the index, only 8 companies closed this period with a price increase (“positive” category). Among these we find two pharmaceutical giants such as Gilead Sciences (+ 5.11%) and Regeneron Pharmaceuticals (+ 8.76%).
Category 2 – The Survivors
In the second category (“0% to -20%”) we find the 53 companies that have seen a “contained” decline in the stock price in the last month not exceeding -20% and therefore better than the decline of the S&P 500 index. Among these we find several giants including Amazon (-11.92 %), Walmart (-3.89%) and Netflix (-12.43%).
Category 3 – The majority
The category containing most companies is the one that includes a decline between -20% and -50%. In this third category (“-20% to -50%”), the numbers are starting to get heavy, as a 50% decline means having the market capitalization halved in just 1 month. Among the 351 companies included in this category we find several technology giants including Adobe (-20.81%), Microsoft (-23.09%), Apple (-26.77%), Google (-27.99%) and large investment banks such as JP Morgan ( -38.52%) and Morgan Stanley (-43.40%).
Category 4 – The big losers, but not the worst
The fourth category (“-50% to -70%”) includes the 73 companies with a decline in the stock price between -50% and -70%, therefore a really important decline which for several companies meant a reset, in just one month, of the rise in the stock price made in the last 5 years.
Also in this category we find several important companies including the finance and insurance giant AIG (-60.43%), large airlines including Delta Air lines (-63.11%) and United Airlines (-68.59%) and global fashion luxury group Capri Holdings (-64.32%), which controls prestigious brands such as Micheal Kors, Jimmy Choo and Versace.
Category 5 – The main victims
The latest category (“more than -70%”) includes the 15 companies in the index that have been most affected by the collapse of the markets, with a decline in the stock price between -70% and -83% in a single month. The companies included in this category deserve further study.
The main victims
The table below lists the 15 companies in question, providing the following information for each:
- 1Mo perf. (%)
- 1-month stock price performance
- Upside Needed (%)
- percentage increase in the stock price needed to return to the price recorded before the market crash
- Price / Sales
- the ratio between stock market capitalization and revenues
- the industry in which the company operates
Based on the contents of the table, most of the companies that have had the greatest decline operate within the sector related to Oil and tourism.
It is interesting to note how all 15 companies, due to the recent collapse, have seen their market capitalization become lower than the amount of revenues generated in the last year (Price / Sales ratio less than 1), making them potentially underestimated to these prices but the risk remains very high as many of them will suffer significant economic damage.
The “Upside Needed (%)” column is calculated based on the price recorded in the last session (20 March 2020) and the closing price recorded in the last session before the market crash (19 February 2020).
For example, the current price of Apache, an oil and gas exploration and production company, is $ 4.83. If the company’s shares were purchased now and in the future it should recover and return to the same price recorded about 1 month before ($ 28.47), the percentage increase would be approximately + 490%.
The case – Boeing
Within the 15 companies, the most important is certainly Boeing.
Boeing is the world’s largest aerospace company and leading manufacturer of commercial jetliners, defense, space and security systems, and service provider of aftermarket support. As America’s biggest manufacturing exporter, the company supports airlines and U.S. and allied government customers in more than 150 countries.
Boeing products and tailored services include commercial and military aircraft, satellites, weapons, electronic and defense systems, launch systems, advanced information and communication systems, and performance-based logistics and training.
The company currently has a market capitalization of approximately $ 50 billion, with a revenues of approximately 77 billion. The recent problems caused by COVID-19 are in addition to those related to the 737 Max disaster which is estimated to have already cost the company more than 18 billion.
Because of this, the company has asked the US government for around 60 billion to avoid bankruptcy and apparently Trump appears to have given a first approval. In addition, the 150,000-employee aviation group has announced that it will suspend dividend payments and cease all share buyback programs.
In conclusion, the last month has been really difficult for financial markets around the world. The situation seems to become more and more serious and if it continues the risk that many companies go bankrupt will increase day by day.
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*Data by Investing.com
*Boeing chart by tradingview.com
DISCLAIMER: The information in this blog post represents my own analysis/opinions and does not contain a recommendation for any particular security or investment. Stocks trading involves substantial risk of loss and is not suitable for every investor. Trade responsibly.