I have some questions regarding long term trading, rebounds and losing

Discussion in 'Stocks' started by Wach80, Sep 8, 2019.

  1. smallfil

    smallfil

    The value of the stock depends what the stockmarket is going to pay for that stock today assuming you wanted to sell it! In the long term, anything can happen. Look at CSCO, during the dot com bubble, it went as high as $120.00 per share. That was around the year 2000, now CSCO is worth $48.84 as of 09/06/19. So, assuming you unluckily bought at the exact top and paid $120.00 per share for CSCO, 19 years later, you are at $48.84 still waiting to just breakeven. While, the stockmarket has an upward bias in the long term, it does not guarantee your stock will go up as well! In contrast, those who traded CSCO over those 19 years probably, made some monies atleast! I am assuming the trader knows what he is doing!
     
    #11     Sep 8, 2019
    trader99 likes this.
  2. You have a fatally-flawed assumption right in the beginning of your first sentence, and it makes all of the rest of your ideas wrong.

    "Worth $1000" to whom? The range of opinions about value is what defines and creates markets. If you think that your car is worth $1000 but the rest of the world thinks it's scrap, all you're going to get is scrap value. You're imagining a company having some immutable, innate value... there's no such thing.
     
    #12     Sep 8, 2019
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  3. Specterx

    Specterx

    Read up on "survivorship bias". Most companies are bad investments and will lose you money over the long run. I forget the exact figure but I think it's something like 5% of all equities which have ever listed account for 100% of the market's total return over the past century.

    To take just one example, GE. Back in 2000 it was a rock-solid, "can't lose" stable of American capitalism, paying a steady dividend, beating every quarter by a penny, etc. If you bought nineteen years ago at $56 it would today be worth.... $9 per share.

    Sure you got some dividends, sure the price may rebound in the future (though it may also go to zero) - but you still lost money, and even worse, you locked up your capital in a shitty losing investment instead of a rocket ride like AMZN or AAPL.

    Yes, if you increase the holding period, diversify, and stick to symbols which at least pass the smell test of being decent companies, then you will approximate the results of being passively invested in a broad index. But that's not why most of us are here.
     
    #13     Sep 8, 2019
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  4. Wach80

    Wach80

    I use the company's wealth as my metric. Actually I was wrong, I was thinking about dividends mostly. Those are based on specific numbers that the company makes right? if a company liquidity all its assets then those who own equity will get a specific amount of money from it based on the current wealth of the company, aren't they?
     
    #14     Sep 8, 2019
  5. smallfil

    smallfil

    You are now talking about book value per share which is the approximate value per share of the company in the event it is liquidated. Example: Book value per share is $5.00 but, the stock trading at $2.00 and you think you are okay. Company declares bankruptcy and all shares are wiped out including, yours. Remaining equity given to the creditors, all of it! You get squat! Then, new shares issued to the creditors. This scenario happens a lot of times.
     
    #15     Sep 8, 2019
  6. %%
    That + some go bankrupt, DAL, AMR, Bear Stearns, LEH, so no, on always having some value.
     
    #16     Sep 8, 2019
  7. Yeah... there's no such thing as "company's wealth". I'm not going to give you an entire basic education on how business assets work, but... you need at least a general understanding of how business works before you can come anywhere near understanding the answers to the questions you're asking.

    I'll give you a pretty good example, though - one you can study to at least get an outline of why your thinking is fundamentally incorrect. UBER stock is at 31.86, and the company's market cap is 54.16B - that's billions of dollars - and they have never yet produced a positive P&L, nor are they likely to for a number of years (if ever). Take a look at the total assets, liabilities, and stockholders' equity on their balance sheet - finance.yahoo.com has a rather easily-readable version - and tell me: what is the "company's wealth"? Those three numbers will add up pretty easily.



    The short answer is "no". There are all sorts of games accountants play with dividends.

    ...No. The settled value, in a forced liquidation, is always going to be a loss.

    (Edit: that's not to say "total loss for everyone", but it can be - and, given the circumstances under which forced liquidation occurs, the majority of investors will take a loss -typically a large one.)
     
    Last edited: Sep 8, 2019
    #17     Sep 8, 2019
    Wach80 likes this.
  8. You may want to watch this video to get a better, but still basic, understanding of the "value of a company":
     
    #18     Sep 9, 2019
    BlueWaterSailor likes this.