WorldCom, Lucent Technologies, Wachovia and Rivian Automotive: These companies are members of a dubious group, the worst stock market investments of the last century.
That lowly status is documented in a long-running study that has got far more attention for its depiction of the century’s best stocks. But it suggests that the most dangerous times for investors are when the market is high – and we may be in such a time right now.
The study, by Hendrik Bessembinder, a finance professor at Arizona State University, shows that most of the biggest losers since 1926 were tech companies. They included stocks that boomed during the dot.com era and in the halcyon days just before the financial crisis that began in 2007 – and many crashed when those boom cycles ended. WorldCom and Lucent Technologies were dot.com telecommunications giants. There were banks, too: Wachovia was on the verge of collapse when it was acquired by a competitor, Wells Fargo, in 2008.
Two of the worst companies began trading on US public markets only in this decade. Both are electric car firms whose share prices at their initial public offerings were remarkably high. Their exorbitant prices reflected investor enthusiasm at the time for the budding industry, but set up shareholders for steep losses.
One was VinFast Auto, a Vietnamese company that trades on the Nasdaq. The other was Rivian, which generated shareholder losses of US$85.8 billion from its IPO in November 2021 through this past December, according to Bessembinder’s calculations.
Rivian jumped out at me as particularly noteworthy because its CEO, Robert J. Scaringe, was paid more than US$402 million (S$520 million) in 2025, as I reported in June. That put him fifth in a ranking of the most highly compensated CEOs at publicly traded companies in the United States. Rivian may well have a great future but the company is still unprofitable, and long-term shareholders have taken a pounding.
I’ve mentioned just a few of the firms with poor stock market performance. The companies at the bottom of the heap all had different characteristics. What they had in common was that their bad share performance occurred after their stocks were hot. First, they attracted enormous amounts of investor cash. Then the value of the shares evaporated.
Bessembinder demonstrated that a relative handful of elite stocks, headed by Apple, Nvidia and Microsoft, churned out spectacular returns that accounted for nearly all the profits for investors over the entire century.
At the same time, more than 96 per cent of the stock market did virtually nothing for investors. The vast majority of stocks could not even match the 3.3 per cent average return of one-month Treasury bills – a return you could get month by month over the 100 years through 2025 without taking any appreciable risk.
Those negative findings made me curious. Bessembinder shared the core of his study with me – a spreadsheet containing more than 29,000 stocks from a CRSP market index now run by Morningstar. (That index is the backbone of Vanguard’s Total Stock Market Index fund.)
Bessembinder’s spreadsheet is a numerical depiction of US stock market history. As I scrolled to the very bottom, I realised that this trove revealed the worst disasters in the stock market over the last 100 years.
As Bessembinder uses the term, “lifetime wealth destruction” is the flip side of wealth creation. The downfall of a stock market giant destroys far more investor wealth than the demise of a smaller company with equally poor share performance because these measures are both also connected to total market valuation. In addition, this approach accounts for stock dividends and buyouts, and the comparison with Treasury bills includes an inflation adjustment.
Wealth destruction
At the very bottom of the list, in 29,080th place, I found WorldCom. It filed for bankruptcy in 2002, amid a US$11 billion accounting scandal that culminated in the fraud conviction of its co-founder Bernard J. Ebbers. The company wiped out US$114.5 billion in shareholder wealth, according to Bessembinder’s calculations.
That is a lot of money, but it subtracted a mere 0.13 per cent from all the wealth created in the market over the century. By contrast, Apple, the biggest winner in the last 100 years, created more than US$5 trillion in stock market wealth for investors, accounting for 5.5 per cent of all the wealth in the market.
That discrepancy startled me at first. Then I realised that the worst total shareholder losses from every company at the bottom of the list were much smaller than the gains of the happy few stocks that produced extraordinary gains.
That is because of the way the stock market is structured. Your losses as an investor are capped at 100 per cent – as long as you don’t use borrowed money – while gains can theoretically be infinite. But even if losses from individual stocks aren’t as great as gains from the big winners, overall, there have been vastly more losers in the market. Those losses add up.
The market is asymmetrical in another important way: The gains of the biggest winners are uniformly greater than the losses of the greatest losers.
It turns out that the combined losses of the 10 companies at the bottom of the list accounted for less than 1 per cent of all the wealth destruction in the stock market over the century. By comparison, the top 10 companies – including Nvidia, Microsoft, Amazon and Alphabet – accounted for 29 per cent of all wealth creation over the 100 years.
There were thousands of companies that weren’t worth holding as investments. Only a comparative few made investors, as a group, considerably richer.
Losers everywhere
One takeaway from all this is that the stock market is skewed towards losing. Flip a coin and the chances are minuscule that you will pick one of the relatively few great stocks. Most likely, in a random coin toss, you will end up with a loser. There’s a good chance that you will not hold any winners at all.
That’s an argument for broad diversification. If you pick stocks, you could easily create a portfolio of losers, if only because there are so many of them.
There are talented stock pickers in the world, of course, and it’s possible to beat these odds and outperform the market. But it’s not easy to do. Most people will probably be better off if they don’t try, and instead hold broad index funds that mirror the overall stock market, which has been buoyed by the biggest winners. NYTIMES
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This article originally appeared in The New York Times.
