Namaste!
I was studying various publicly traded companies and their stock price growth in modern history (1920 onwards).
I was wondering how much any publicly traded stock can go? Is the sky the only limit? These are the questions in my mind.
So I decided to study the stock price history and the difference between all time low and all time high.
I came up with this.
Following are the various companies with all time low and all time high prices. I also included Bitcoin in the comparison, even if it is a completely different asset class. I don’t believe in Bitcoin though.
Bitcoin: All time low: USD 1.00
All time high: USD 69000
=69000 times.
Microsoft: All time low: USD 0.0885
All time high: USD 366.78
=4144.40 times.
Bajaj Finance: All time low: Rs 1.95
All time high: Rs 8050
=4128.20 times.
Apple: All time low: USD 0.0491
All time high: USD 198.23
=4037.27 times.
Eicher Motors: All time low: Rs 1.00
All time high: Rs 3889.65
=3889.65 times.
Amazon: All time low: USD 0.0656
All time high: USD 188.65
=2875.76 times.
Infosys: All time low: Rs 0.70
All time high: Rs 1953.90
=2791.28 times.
Berkshire Hathaway: All time low: USD 235
All time high: USD 544389.26
=2316.55 times.
SRF, Nvidia, Netflix, Tesla, etc didn’t make to the list because their returns were less than 2316 times.
Many people can derive a different understanding from the above article. But, I was wondering if the stock price growth is infinite (like Time is infinite according to Hindu Scriptures).
My understanding from the above study:-
1. Microsoft is overbought. I do not see any substantial upside in the stock. Microsoft has stopped inventing the revolutionary product or “the next big thing”. Tell me what other revolutionary products from Microsoft you remember, except Windows and Office? Its near future is like a tech holding company (like investing in ChatGPT, etc) in my opinion.
2. Apple isn’t a good buy either. I have 0 experience as compared to Sir Warren Buffett, but I think Berkshire Hathaway might be considering selling the stock or reducing exposure to the stock.
3. Bajaj Finance still looks overvalued to me now. Mainly because of growth of 4128.20 times.
Personal Assumptions:
1. Relentless printing of dollars from The Federal Reserve saved the economy (GDP) for the short term, but it resulted in a 4 decade high inflation. Because, the free dollars ended up in the pockets of the US companies in the end, which boosted their earnings. But now the US Fed realized their mistake, and started increasing interest rates. You see the interest rates were around 1% in the year 2004. It’s been 2 decades and we have become used to very low interest rates. Now the interest rate is 5.25%. The consumers have to eventually cut their spending, so the company has less earnings to make. More stimulus (like dollar printing in Y 2020) is unlikely in the near future.
2. USD has been the world’s reserve currency since the year 1920. You see, when most of the world’s trade is done in any particular currency, it is logical and convenient to make that “a reserve currency”. Currently, the USA holds 24.08% of global GDP and China holds 15.12% of global GDP. There is an established world superpower (USA) and a rising superpower (China). The established superpower doesn’t often give their status and rank easily to rising superpower due to the benefits that come along with Rank 1. So, they fight with the Cold War, Trade War, Actual War, etc.
3. Any country which held its world’s reserve currency maximum was Spain (110 years). The USD has been the world’s reserve currency since the year 1920.
4. The probability says that nobody is right 100% of the time, nobody is wrong 100% of the time. I may or may not be right about some of the things I am writing in this article. But, it doesn’t mean you should decline everything I say or accept everything I say.
5. Why do I write these articles? To be a doomsday predictor? To spread pessimism about the economy or stock market? NO. I write these articles to sharpen my knowledge and understanding. Because knowledge=power; power=money, so knowledge=money:)
Exceptions:
1. The stock market or any particular stock will not fall when a few people (like Michael Burry, myself, etc) think it is overvalued. It will fall when the majority of market participants feel the same way. Many analysts and institutions wait for the discrepancy in the earnings to take a sell decision. A few like me speculate. It doesn’t mean we’re not optimistic. What it means is that we expect to see a correction and more reasonable stock prices to buy.
2. I may have a bearish bias.
3. Apple’s stock may continue to go up because they are smarter and (cash rich) people. They are shifting to software businesses to fuel further growth. You see, Apple’s star product (the iPhone) sales have peaked in the year 2015. Most of the revenue (50%) still comes from iPhone sales. But many people won’t know that more than 80% of revenue comes from the iPhone. How? Well, the answer is user base. Apple has around 146 crore iPhone users. It is launching Apple TV, Apple Cloud, etc to capitalize on the Apple ecosystem user base. People buy Apple TV subscriptions because they have an iPhone, they are stuck in the Apple ecosystem.
Disclaimer: This article should not be considered as investment advice. The analysis is based on my understanding and experience in the markets. You must consider your financial advisor before investing or trading.