Investing
January 3, 2019
By Emily Jones

Investing in Stock vs. Product

Simple. Thrifty. Living.

Investing can often be full of ‘what ifs’ and hindsight. When it comes to the stock market, that can be especially true, as it is full of risks and rewards, particularly when it comes to investing in specific companies. It’s not uncommon for people to wish they had invested earlier in a company, and often people say that in reference to big companies like Apple. How much would you have if you had invested $100 in Apple 30 years ago? 10 years ago? What if you decided to invest in Apple instead of buying an iPhone?

At Simple. Thrifty. Living., we decided to take this premise and apply it to other companies and industries. We conducted in-depth research on 35 different companies, including Apple, to see how much you could have made if you invested in their stock instead of buying their product or service.

For our study, we chose 35 major companies from 7 different industries. We chose products or service offerings that marked significant milestones in the company’s history, such as the first iPhone for Apple or the debut of the Pumpkin Spice Latte for Starbucks. For the stock prices, we collected historic prices from the year of the product’s or service’s debut and compared it to current stock prices of the same day (September 26th). Then, we found the cost of the item or service from the year it debuted.

So, for example, a Pumpkin Spice Latte from Starbucks costs $2.50 in 2003 and the stock price was $7.31 a share. The stock price when we pulled the numbers for our research (9/26/2018) was $57.27 a share. Then, we calculated the difference between the prices and multiplied it by the hypothetical investment (the price of the latte) to find the total value of the investment in 2018 along with the change value of the investment. In this case, it was $24.00 and $21.68 respectively. This process was applied to the rest of the companies and then further analyzed.

Our analysis varied by industry and by company, but for the most part, you would make a profit if you invested in a company instead of purchasing product. However, there were a few exceptions.

Out of the 35 analyzed companies, you would have lost money on your investment with 4 companies: GoPro, Sony, Pandora, and HBO. The largest loss would have been with Sony, losing $147 after a $299 investment. On the flipside, the largest gain would have been Nike with an amazing $62,774,925 total value. Nike’s stock has risen dramatically since 1987 (the year it released the first Air Max 1s) and the $75 investment in their stock would have paid off big.

When looking at the data by specific product and industry, Nike is again the standout and the retail sector along with it. Outside of that, the automotive industry had three of the five most profitable investments. The profit for Toyota, Honda, and Tesla would be over $24,000 each. The total profit for the automotive industry (if you had bought stock in the five car companies instead of their cars) would be over $100,000 with a 77.89% average perfect change in stock value.

Continuing to parse the data by industry, technology was one of the most varied sectors for results. Apple had the highest change value with +$6,620, partly bolstered by its high initial investment cost. This category included two of the companies with a loss, GoPro and Sony.

For the food and drink category, all of the investments would have made you money but how much varied significantly. Chipotle barely broke even with just making $0.37. The clear outlier here was McDonald’s and the McRib. An investment of just $0.99 would net you over $2,700 — that sounds significantly more worth it than one sandwich.

For retail, Nike had the biggest change as mentioned previously. Overall, the retail sector was a very profitable one. For this category, we used an investment of $79 for the four retailers (Target, Amazon, Wal-Mart, and Etsy) because that was the price of Amazon Prime in 2005. Out of those four, Amazon had the highest profit – $3,518.

With the high initial investment costs came large changes, both profits and losses, for the automotive sector. Ford, with its dramatic decrease in stock value, had the highest loss of any company in our study at nearly $5,000. On the other hand, Toyota, Tesla, and Honda all would have significant profits, in the tens of thousands.

For the entertainment industry, we chose a specific year, 2008 (a decade ago) and used the average cost of an adult movie ticket in the United States from that year. Disney and 20th Century Fox were nearly tied with around a $25 profit for each. Both have had significant stock value increases in the last decade.

Streaming services were an interesting industry to analyze. The dates for their services are all fairly recent (after 2010) which inherently leads to smaller changes. Netflix was the big winner here and for good reason. Their streaming service is booming and is now a juggernaut. Interestingly, HBO would have been an $8 loss — their parent company is AT&T.

Finally, we analyzed two companies in the banking sector, JPMorgan Chase and American Express and used the annual fees of one of their credit cards. If you would have invested $10,000 in American Express instead of a year’s worth of the Amex Black Card, you would have an extra $429,065 — one of the biggest gains of any company. The investment for JPMorgan Chase would have had a more modest gain of just over $200.

Investing can be a lifelong process and there is inherently always risk associated with it. Stocks and stock trading, in particular, can be high risk and high reward, especially if you invest in specific companies rather than a managed portfolio. This study is a snapshot of how the changes in a company’s stock value can dramatically alter an initial investment. There are always going to be ‘what ifs’ when it comes to the stock market, so it is important to do your research, talk to an expert, and invest wisely and to your comfort level.

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