This Year's Value Creators and Destroyers

The first half of 2007 was a roller coaster. After dropping 3.5% on February 27, the largest loss in one day since the 9/11 tragedy, the S&P 500 Index roared back to life and now sits 7.3% above where we started the year. As we've done in the past, we've examined the dollar changes in stock market values to derive our value creators and destroyers for the year. To figure the market cap for both Dec. 31, 2006, and June 21, 2007, we took the number of shares outstanding at the end of 2006, adjusted for any splits, and multiplied it by the market price at both dates.

There are always problems with these types of screens, and knowing the potential weaknesses is important in interpreting the results. Using our methodology, we have eliminated market capitalization gains solely from share issuance, including stock option exercises and acquisitions, leaving only what shareholders as of Dec. 31, 2006, would have experienced if they held onto the stock. If an acquisition was dilutive to the existing shareholders, it is reflected in the numbers. However, this approach can overstate the market cap slightly when companies buy back shares. If share buybacks exceeded 10% of shares outstanding, we eliminated the company from our screen so as not to skew our numbers too greatly. In addition, our numbers have a survivorship bias, so any companies that were de-listed due to bankruptcy or other financial problems are not reflected in our numbers. Finally, as a result of looking at total market capitalization, the results are biased toward large-cap stocks.