Saturday, June 28, 2014

A lot of stocks move 50% in one year

One of the more interesting observations that I have made and read about is that a large proportion of all stocks can move in price about 50% (from lowest point) in one year.

Some examples as per yesterday (first figure is lowest price paid over the last 12 months, all %-figures correspond to the highest price paid compared to the lowest)
Apple             55,58 USD, up 70,9%
Atlas Copco   140,4 SEK, up 32,7%
Betsson          167 SEK, up 49,7%
Clas Ohlson    87,25 SEK, up 74,8%
H&M             220,3 SEK, up 36,5%
Oriflame        145,3 SEK, up 51,8%

Kids, in my experience there are few cases where a company's real value ('intrinsic value') move that much in one year. Rather I would say that a well-run company in rough terms increase somewhere between 10 and 20% in value during a year. The key take-away is that even in the short-term (<one year) the price of a stock-listed company will be wildly different during times. The conclusion should, however, not be that you should try to make 30-50% a year on each respective investment. As a corollary to my observation above, there is a fair risk of the stock going down by 33% in one year's time from today. So, rather the conclusion is that with even a fairly modest amount of patience (waiting one year or less), one can find reasonable buying opportunities in specific stocks across the market in many (but not all) instances.

One 'practical' example of how one can use the above described 'fact';
The other day I bought a smaller amount of ROST when it was close to a one-year low. Unfortunately it is still some 5-10% too expensive for me to be fully comfortable with the investment from a risk perspective in a 3-5 year perspective; on the other hand it has not been this cheap for some time.

2 comments:

  1. Intresting blog! I will follow you and add you to my blog-list.

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  2. Likewise, have been following your blog for a while, and now noticed we have a fair overlap in the stocks we have in our respective portfolios

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