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

[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!

 

[BlueWaterSailor]

Ok, for this example let's assume that a company is worth 1000$ [...]

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.

 

[Specterx]

Ok, for this example let's assume that a company is worth 1000$ and I buy a stock which is 1% of it aka 10$, so my stock is currently worth 10$. If the company doesn't fall to zero worth then my stock will always have some value right? even if it's less than its initial value. E.G the company worth is falling to 100$, so my stock should now worth 1$ right?

If my goal is to show a profit in the short term then it's understandable that such investment will be risky because there will a lot of volatility regarding the worth of the company. However, if I wait long enough wouldn't the company's worth surpass the 1000$ thus my stock will improve its worth and show a profit?

I understand that some companies will bust but what if the company you invested is a titan like Amazon or Microsoft, isn't it guaranteed that you will show a profit in the long term? why do people lose money buying equities from these companies? aren't these stocks guaranteed to rebound even if they lose value in the short term?

Generally, why people lose money when they buy stocks and hold onto them? can a market never rebound or you might miss the timing when it does? can the Us dollar go down for a specific time and never move up again? Why 99% of retail traders lose?

As long as a stock retains some value it should survive and then if you wait enough it will rebound assuming that the company doesn't bust and is a serious company. Am I thinking something wrong?

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.

 

[Wach80]

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.

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?

 

[smallfil]

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?

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.

 

[murray t turtle]

Theory - your measuring the book value and the market could be very different. The market should include supply/demand, capital asset pricing of the expected forward cash flows(CAPM), the market activity(BETA), the valuation of the industry group and a number of metrics that different folks are going to be estimating. Not as simple as just book value.
Another consideration is your view and valuation and could the money be better deployed elsewhere?

%%
That + some go bankrupt, DAL, AMR, Bear Stearns, LEH, so no, on always having some value.

 

[BlueWaterSailor]

I use the company's wealth as my metric.

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.

Actually I was wrong, I was thinking about dividends mostly. Those are based on specific numbers that the company makes right?

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

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?

...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.)

 

[HobbyTrading]

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?

You may want to watch this video to get a better, but still basic, understanding of the "value of a company":