Among the many benefits of owning stocks is the possibility for a price explosion. Few asset classes provide such a good possibility for an asset to pop in value following a period of good performance, a richly priced buyout offer, or one of many other factors that intensify demand.
Many examples of such blowups abound. Here are two recent ones that have had particularly impressive runs.
For decades, the car-manufacturing industry was rather staid, with the fortunes of its top companies basically rising and falling along with the economy. Then 2010 rolled around, and electric-auto specialist Tesla (NASDAQ: TSLA) blasted onto the stock market. To paraphrase the old General Motors ad slogan, this is not your father's car company.
Rather, at its core, Tesla is a heady blend of 21st century Silicon Valley disruption and classic build-and-hype car salesmanship. Led by the tireless and colorful Elon Musk, whose activities provide plenty of free publicity for his ventures, the company is now essential in the conversation about the future of auto technology -- and to a lesser extent, renewable energy generation and storage, a smaller part of its business.
Opinions are sharply divided about whether Tesla will play a major part in the future of the automobile. Proponents say that its electric vehicles have reshaped the industry and will continue to do so, while detractors believe the company is only a flash in the pan. There are other potential disruptors and better technologies, they say, and the incumbents are only starting to fight back effectively.
The dizzying climb of the stock price clearly shows that the dreamers far outnumber the doubters. From a close of just under $24 per share on its first day of trading in 2010, Tesla stock has risen by over 1,300% to the present level. This has occurred despite the fact that the company has posted a quarterly net profit exactly once since listing on the stock exchange. Some of its losses have been worryingly deep, while its debt is climbing skyward.
That clearly isn't a deal breaker for Tesla bulls, who keep bidding the share price ever higher. It's about to finish 2017 nearly 50% higher than where it began the year.
The world is moving away from cash transactions in favor of infinitely more convenient technology, like payment cards. A study from Euromonitor International showed that 2016 was the first year in history that the number of card transactions exceeded those made in cash.
As the No. 2 card-payment company by number of cards issued, Mastercard (NYSE: MA) has been, and will be, an obvious beneficiary of this trend. The company's bar for net revenue and profitability is rising. In fact, in its recently reported quarter, it booked all-time Q3 records for both ($3.4 billion and $1.4 billion, respectively). The two line items were a respective 18% and 21% higher year over year, by the way.
Mastercard is an "open loop" payment processor, as is archrival Visa. This means that Mastercard acts only as the processor of payments made through its namesake cards -- it's not the company actually extending the credit. That's provided by the issuing party, typically a bank.
Basically, this makes Mastercard a middleman business taking a small cut of a huge volume of payments. That's why the company has such high profit margins and, of course, why it's caught the eye of investors.
It doesn't seem as if they'll look away. Buoyed by the trend toward cash alternatives, plus favorable economic development in this country and abroad, Mastercard should continue to do well.
It's sure done nicely for its buy-and-hold investors over the years. In early 2007, the stock traded at just over $11 per share. These days, it changes hands for more than $151.
Stocks on the move
Tesla and Mastercard are hardly the only present-day success stories on the stock market. Want to read more? Then check out the story of this cutting-edge tech company, or these two solid real estate investment trusts for starters.
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