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Stock Strategist

2007 Value Creators and Destroyers

What were the year's biggest winners and losers?

The end of the year is near, and it's time to assess the damage or gains this year has brought to the market. Who were the winners and losers of 2007? 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 Dec. 18, 2007, we took year-end 2006 shares outstanding, adjusted for splits, and multiplied it by the share price at both dates.

There are always problems with these types of screens, and knowing the potential weaknesses is important when interpreting the results. Our method eliminates market capitalization gains solely from share issuance, including stock option exercises and acquisitions. If an acquisition was dilutive to the existing shareholders, it is reflected in the numbers. However, there are drawbacks. Our methodology does not adjust for share repurchases, which means we might overstate the current market cap. Also, as a result of looking at total market capitalization, the results are biased toward large-cap stocks. However, even taking into account the limitations stated above, we believe this is the best way to show what would have happened to the investor who held on to these stocks all year. We hope you also find this exercise informative.