Even in years such as 1971 when the big-winning stocks Southwest
Airlines, Intel, and The Limited Stores all went public, a portfolio of all
the IPOs issued that year trailed the returns on a comparable small-cap
stock index when measured through 2003, and the same happened in
1981 when Home Depot went public.
Even in the banner year 1986, when Microsoft, Oracle, Adobe,
EMC, and Sun Microsystems all went public and delivered 30 percent
plus annual returns over the next 16 years, a portfolio of all the IPOs
from that year just barely managed to keep up with the small-cap stock
index.
The performance of the mostly technology IPOs issued in the late
1990s were disastrous. The yearly IPO portfolios in 1999 and 2000 un-
derperformed the small-cap stock index by 8 and 12 percent per year, re-
spectively, if measured from the IPO price and 17 and 19 percent per
year if measured from the end of the first month of trading.
Even stocks that doubled or more on the opening of trading were
very poor long-term investments. Corvis Corporation, which designs
156 PART 2 Valuation, Style Investing, and Global Markets
FIGURE 9–6
Buy-and-Hold Returns of Almost 9,000 IPOs Issued between 1968 and 2001