This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Apprenticed Investor: Protect Your Backside

In terms of lost investor wealth, Enron actually compares favorably to other flameouts. EMC, Cisco Systems (CSCO) and General Electric (GE) each "lost" over $100 billion in market cap from December 2000 to their 2002 lows. From the perspective of market-cap loss, Lucent (LU) shareholders would also have been collectively better off owning Enron instead.

Even (once) mighty Microsoft (MSFT) -- with a market capitalization of $266 billion as of Thursday's close -- has suffered enormous losses. From its split-adjust peak of $60, to its post-bubble low near $20, more than $300 billion in Microsoft shareholder valued has disappeared.

So compared with any of these market crash calamities, Enron loss is relatively minor. That is truly astounding.

And it's not just the tech sector where shareholder losses accrue: From December 2000 to the present day, pharmaceutical giant Merck (MRK) has dropped $120 billion in value. Even oil colossus Exxon Mobil (XOM) lost over $105 billion of market cap from November 2000 to July 2002, before rallying in conjunction with rising oil prices.

What Moves Stocks?

In order to limit the havoc "disaster stocks" can wreak, it helps to understand what moves share prices.

Investors typically look to a variety of short-term factors. Ask most people why their stocks are going up and down, and they'll reel off a list of news-driven events: economic releases, analyst rating changes, quarterly earnings reports, conference calls, etc.

These factors have a de minimus impact when compared to the real action. The true cause is much less complicated: Share prices are moved by large-scale buying and selling by institutions. We discussed this extensively in Tracking the Elephants .

This relates directly to Enron's stunning decline from over $90 to zero.

From peak to pennies
Click here for larger image.
Source: Barry Ritholtz

Enron's stock gave many signals that it was under "distribution" by large shareholders. You may not have read about it in the paper, but Enron's chart told astute observers that big institutions were quietly unloading millions upon millions of shares.

2 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs