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Worried Stagflation Will Return? The History of 2 Stocks Shows Investors Can Still Win

The stagflationary environment in the 1970s was unkind to stocks, generally. The Dow stood at 809 on the first day of trading in 1970. By the end of 1979, it had risen to 839, less than 4% over a decade.
Assuming we have again entered stagflation, this history bodes poorly for those who invest in index funds such as the SPDR S&P 500 ETF Trust. Since broad-based indexes are barometers of the overall state of the economy, they don’t generally move higher in a stagflationary environment, and index investors could go years without earning significant returns.
Fortunately, even in such an environment in the 1970s, fledgling growth stocks such as Intel (NASDAQ: INTC) and Walmart (NYSE: WMT) performed well. Understanding their stories could provide clues to finding the growth stocks of the 2020s.
Image source: Getty Images.

1. Intel
In today’s tech-focused world, few can imagine a world without semiconductors. While Intel did not invent that product, it played a key role in mainstreaming chips. Intel began in 1968 and established an early reputation for outperforming competitors with existing technologies.
Soon after, the invention of the 4004 microprocessor in 1971 convinced Intel that its future lay in microprocessors that stood at the center of an emerging microcomputer industry. By 1974, its 8080 processor powered the Altair 8800, widely regarded as the first commercially successful personal computer. This computer eventually paved the way for its partnership with IBM in 1981, which placed its processor in most personal computers.
These improvements boosted Intel stock from its beginning in 1971. Intel launched its IPO in October of that year at $23.50 per share or about $0.02 per share adjusted for stock splits. In 1971, its revenue reached $9.4 million, more than double the previous year, and it reported its first profit of just over $1 million. By 1979, revenue would reach $663 million, taking net income to $78 million.
Although the stock price did not rise as fast as its income, it dramatically outperformed the Dow. During the 1970s, it would increase in value by over 1,600%. Also, it would go on to approve five stock splits during the 1970s — four three-for-two splits and one five-for-four split. This served as another sign of its rapid stock price increases.
 
 Oct. 13, 1971
Dec. 31, 1979
% Change
Intel (split-adjusted price per share)
$0.019
$0.33
1,637%
Dow Jones Industrial Average
889
839
(6%)
Source: Intel Investor Relations, TradingView, YCharts.
2. Walmart
Another 1970s growth story happened not in tech but in the retail space. Sam Walton founded Walmart in Rogers, Arkansas, in 1962.
Initially, Walmart focused on bringing department store retailing to smaller towns, offering a wider variety of goods at the “lowest prices.” This strategy changed a small-town retail culture once dominated by smaller local retailers. Its presence led to a positive economic impact on towns served by its stores, further enabling Walmart’s expansion.
Building on this success, the company began offering common stock in 1970, and that year, the company reported $44.2 million in sales from 38 stores in Arkansas and four surrounding states. The stock moved to the New York Stock Exchange in 1972, and by 1979, it grew to 229 stores in 10 states which generated $900 million in revenue.
That growth had a profound effect on the stock price. Its original price in 1970 came to $16.50 per share, or $0.008 per share adjusted for splits. Additionally, three of its 11 stock splits took place during the 1970s. The stock ended the 1970s with a gain of nearly 17-fold during the decade.
 
 Oct. 1, 1970 
Dec. 31, 1979
% Change
Walmart (split-adjusted price per share)
$0.008
$0.14
1,650%
Dow Jones Industrial Average
762
839
10%
Source: Walmart Investor Relations, TradingView, YCharts.
Making sense of growth amid stagflation risk
Even if the 1970s did not treat stock investors on the whole particularly well, the decade delivered considerable returns to those who invested in two of the growth stories that have become the leaders of today. 
Even as Intel’s current recovery hits a speed bump, its stock has risen more than 2,200-fold since the 1971 IPO. Intel also remained the world’s largest semiconductor company until 2019. In 2021, it reported $79 billion in generally accepted accounting principles (GAAP) revenue and is still second-biggest next to Samsung.
Moreover, Walmart’s stock rose 19,000-fold since its IPO. It now operates nearly 10,600 stores which earned almost $573 billion in revenue in 2021.
Finally, investors should understand that Intel and Walmart will probably not become the great growth stories of the 2020s. Instead, they should study these stocks as a reminder that growth stocks can still generate outsized returns in a stagflationary environment. This knowledge should give investors the confidence to take a chance on the growth stocks of today.
Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy. –

The stagflationary environment in the 1970s was unkind to stocks, generally. The Dow stood at 809 on the first day of trading in 1970. By the end of 1979, it had risen to 839, less than 4% over a decade.

Assuming we have again entered stagflation, this history bodes poorly for those who invest in index funds such as the SPDR S&P 500 ETF Trust. Since broad-based indexes are barometers of the overall state of the economy, they don’t generally move higher in a stagflationary environment, and index investors could go years without earning significant returns.

Fortunately, even in such an environment in the 1970s, fledgling growth stocks such as Intel (NASDAQ: INTC) and Walmart (NYSE: WMT) performed well. Understanding their stories could provide clues to finding the growth stocks of the 2020s.

Image source: Getty Images.

1. Intel

In today’s tech-focused world, few can imagine a world without semiconductors. While Intel did not invent that product, it played a key role in mainstreaming chips. Intel began in 1968 and established an early reputation for outperforming competitors with existing technologies.

Soon after, the invention of the 4004 microprocessor in 1971 convinced Intel that its future lay in microprocessors that stood at the center of an emerging microcomputer industry. By 1974, its 8080 processor powered the Altair 8800, widely regarded as the first commercially successful personal computer. This computer eventually paved the way for its partnership with IBM in 1981, which placed its processor in most personal computers.

These improvements boosted Intel stock from its beginning in 1971. Intel launched its IPO in October of that year at $23.50 per share or about $0.02 per share adjusted for stock splits. In 1971, its revenue reached $9.4 million, more than double the previous year, and it reported its first profit of just over $1 million. By 1979, revenue would reach $663 million, taking net income to $78 million.

Although the stock price did not rise as fast as its income, it dramatically outperformed the Dow. During the 1970s, it would increase in value by over 1,600%. Also, it would go on to approve five stock splits during the 1970s — four three-for-two splits and one five-for-four split. This served as another sign of its rapid stock price increases.

 
 Oct. 13, 1971
Dec. 31, 1979
% Change
Intel (split-adjusted price per share)
$0.019
$0.33
1,637%
Dow Jones Industrial Average
889
839
(6%)

Source: Intel Investor Relations, TradingView, YCharts.

2. Walmart

Another 1970s growth story happened not in tech but in the retail space. Sam Walton founded Walmart in Rogers, Arkansas, in 1962.

Initially, Walmart focused on bringing department store retailing to smaller towns, offering a wider variety of goods at the “lowest prices.” This strategy changed a small-town retail culture once dominated by smaller local retailers. Its presence led to a positive economic impact on towns served by its stores, further enabling Walmart’s expansion.

Building on this success, the company began offering common stock in 1970, and that year, the company reported $44.2 million in sales from 38 stores in Arkansas and four surrounding states. The stock moved to the New York Stock Exchange in 1972, and by 1979, it grew to 229 stores in 10 states which generated $900 million in revenue.

That growth had a profound effect on the stock price. Its original price in 1970 came to $16.50 per share, or $0.008 per share adjusted for splits. Additionally, three of its 11 stock splits took place during the 1970s. The stock ended the 1970s with a gain of nearly 17-fold during the decade.

 
 Oct. 1, 1970 
Dec. 31, 1979
% Change
Walmart (split-adjusted price per share)
$0.008
$0.14
1,650%
Dow Jones Industrial Average
762
839
10%

Source: Walmart Investor Relations, TradingView, YCharts.

Making sense of growth amid stagflation risk

Even if the 1970s did not treat stock investors on the whole particularly well, the decade delivered considerable returns to those who invested in two of the growth stories that have become the leaders of today. 

Even as Intel’s current recovery hits a speed bump, its stock has risen more than 2,200-fold since the 1971 IPO. Intel also remained the world’s largest semiconductor company until 2019. In 2021, it reported $79 billion in generally accepted accounting principles (GAAP) revenue and is still second-biggest next to Samsung.

Moreover, Walmart’s stock rose 19,000-fold since its IPO. It now operates nearly 10,600 stores which earned almost $573 billion in revenue in 2021.

Finally, investors should understand that Intel and Walmart will probably not become the great growth stories of the 2020s. Instead, they should study these stocks as a reminder that growth stocks can still generate outsized returns in a stagflationary environment. This knowledge should give investors the confidence to take a chance on the growth stocks of today.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intel. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

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