A lot of news stories and CNBC-type market analyses focus on the short-term performance of individual stocks. But that doesn’t necessarily give financial advisors the best picture of how their clients’ equity portfolios are performing over the long-term, the typical time horizon for most wealthy clients.
That’s why Morningstar recently conducted an review of the 15 most wealth-creating stocks and 15 wealth-destroying stocks over the past decade.
(A couple months ago, Morningstar ranked the top 15 wealth-creating and wealth-destroying funds, which WealthManagement.com highlighted.)
The list of the top wealth creators includes some of the more obvious names, including Apple, Google, Microsoft, Amazon and Tesla.
Here, we highlight the top wealth-destroying stocks, which can provide a cautionary tale for advisors investing client assets in individual securities. In all, these 15 stocks destroyed an estimated $281.2 billion in shareholder wealth over the past 10 years. Morningstar Portfolio Strategist Amy C. Arnott points out some of these names are large cap stocks that once dominated their industries, such as GE Aerospace, the legal successor to General Electric.
“While the remaining companies span a motley assortment of industries, sectors and underlying problems, many of them have a common thread: a lack of economic moat, or sustainable competitive advantage,” Arnott wrote. “Ten of the companies on the list have no economic moat, and another three have narrow economic moats.”
Arnott measured wealth destruction by finding companies with the largest drops in market capitalization, then adding back the total value of dividends paid and stock spinoffs.