What Netflix, Chipotle and Boeing Can Teach Us About Market Cycles


We often make the point that investing is a long game, and it’s a mistake to overreact to a bad market day—and we’re right in the midst of a perfect example of that. If you panic-sold investments when the Grinch came to Wall Street on Christmas Eve 2018, you're probably kicking yourself. As of January 11, the S&P 500-stock index is up roughly 10 percent from that (very bad) day.

Look at a few popular stocks within the broad market measure and you'll find even bigger recoveries.

Tell me more.

Let’s start with Netflix, a member of a group dubbed FAANG: Facebook, Apple, Amazon, Netflix and Alphabet (Google). Because of their size, FAANG's moves have a pretty outsized influence on the market at large. All five have been Wall Street darlings in recent years—but even in that group, Netflix stood out.

At the start of 2015, its stock was sitting around $50. Netflix reached a high of more than $415 in summer 2018, an incredible 700-percent return. But it’d lost a quarter of its value by summer’s end, recovered a bit in the fall, then fell off a cliff in December. On Christmas Eve, it sank to $233.

But in the weeks since, the stock has jumped into the $330s—about 40 percent higher than its December low. Netflix still has a ways to go to meet its summertime highs, but the firm is among the clearest examples that panic-selling is a bad idea. After all, how would you have known to jump back in before the stock started its recovery?

The stock chart for Chipotle followed almost the exact same shape in 2018, hitting a high this summer around $526. It fell steadily into the fall, then plummeted to $385 on Christmas Eve. The new year has treated Chipotle well, however. It rose back above $500 during the second week in January, meaning it had recovered all the value it lost during the second half of 2018 and was up about 30 percent since Christmas Eve.

Boeing, the airplane maker, followed a slightly different pattern in 2018, but it, too, has recovered nicely. Boeing hit its all-time high in October at $394, but sank below $300 on Christmas Eve. But it too has had a nice run since, and currently sits about $350, or nearly 20 percent higher than its holiday doldrums.

TL; DR. Can you recap all that for me?

Since late December, Netflix is up about 40 percent, Chipotle is up about 30 percent and Boeing is up 20 percent. Since the S&P 500 overall is up about 10 percent, that means other components haven’t seen quite as nice numbers—but that’s the beauty of an index that tracks hundreds of company stocks at once. When some investments are down (or not flying as high), others may be up.

What does that mean for me, if I don’t own those stocks outright?

If you own an exchange-traded fund (ETF) that tracks the S&P 500, you can count these stocks among your holdings. ETFs are a relatively low-cost way to gain exposure to hundreds of stocks in one fell swoop.

These stocks’ patterns also underscore the importance of not trying to time the market (or frequently buying and selling in order to try and capture short-term gains). It can be tempting to react to the market’s moves with moves of our own, but no one knows the future. Over the long run, it’s generally smarter to hold tight through the ups and downs—not try to predict them.

Related: Being a Successful Investor Boils Down to These Three Principles

Disclosure: Investing involves risk including loss of principal. This article is provided for informational purposes only and is not intended to be a recommendation to buy or sell any specific stock or invest in any particular strategy. Past performance does not guarantee or indicate future results.