Sunday, 21 February 2010

****Growth stocks as a class has a striking tendency toward wide swings in market price (I)

The striking thing about growth stocks as a class is their tendency toward wide swings in market price.

Click to see:
1 Year Price Chart of Top Glove
2 Year Price Chart of Top Glove
5 Year Price Chart of Top Glove

The main characteristic of the stock market in the last few decades has been the injection of a highly speculative element into the shares of companies which have scored the most brilliant successes, and which themselves would be entitled to a high investment rating.  (Their credit standing is of the best, and they pay the lowest interest rates on their borrowings.)

The investment caliber of such a company may not change over a long span of years, but the risk characteristic of its stock will depend on what happens to it in the stock market.

The more enthusiastic the public grows about it, and the faster its advance as compared with the actual growth in its earnings, the riskier a proportion it becomes.

But is it not true, that the really big fortunes come from common stocks that have been garnered by those who made a substantial commitment in the early years of a company in whose future they had great confidence, and who held their original shares unwaveringly while they increased 10-fold or 100-fold or more in value?

Click to see:
10 Year Price Chart of Top Glove

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