8 ms·
Fun fact, if you invested $10,000 into MSFT on August 22nd 1997 [adjusted closing price $10.98] the next day after Warren's reply, you'd have $183k today. Not a
by nodesocket 6y ago
Fun fact, if you invested $10,000 into MSFT on August 22nd 1997 [adjusted closing price $10.98] the next day after Warren's reply, you'd have $183k today. Not as big as a return as many would have thought, still amazing annualized 2X S&P return for 23 years.
ROI 1,730.00%
Annualized ROI 13.47%
- deleted 6y ago[deleted]
- refurb 6y agoDoes that include dividends?
- nodesocket 6y agoBelieve so. Used Yahoo Finance[1]. Adjusted close price adjusted for both dividends and splits. [1] https://finance.yahoo.com/quote/MSFT/history/ https://finance.yahoo.com/quote/MSFT/history/
- ido 6y agoFor anyone interested the same source[0] reports apple going from 0.67 to 370.46 in the same time frame (55,192% increase ). Of course not quite a fair comparison as it was closer to the high point of MS and close to the low point Apple. [0] https://finance.yahoo.com/quote/AAPL/history?period1=872208000&period2=1595808000&interval=1mo&filter=history&frequency=1mo https://finance.yahoo.com/quote/AAPL/history?period1=8722080...
- nodesocket 6y ago$10,000 to $5.5M in Apple. Yup, that's absolutely insane.
- ido 6y agoYou could have probably gotten some similar/greater gains investing in some of the dotcom "stars" (even "real" companies like Qualcomm/Broadcom/Sun/etc rather than Pets.com) & exiting before the bubble burst! Easier to say in hindsight of course. I remember my brother convinced my parents to buy stocks (something like a few thousand $s) in a company making broadband internet modems in the mid 90s (this was high-tech future-like stuff at the time when most people were on dial-up internet - ISDN was considered fast) and they ended up going out of business shortly thereafter. So even if you have good insight & bet on the right trajectory of technology it's not that easy to get it right without the benefit of a time machine or crystal ball.
- akg_67 6y agoApple was going out of business until Microsoft invested ~190 (or was 90) million in Apple to bail it out. IIRC, it was late 90s.
- ido 6y agoYes - that's why I said it's not quite a fair comparison as that was probably more or less the best time in history to make an investment in Apple. Maybe akin to investing in Amazon in 1994 or in Google in 1998. The drama "Pirates of Silicon Valley" covers MS & Apple from their founding in the 70s till the late 90s (the movie was made in 1999) and I believe it ends in that scene (I've last seen it when it was new so it may end a bit later but that definitely appears in the movie).
- EricE 6y agoActually the real investment for Microsoft wasn't the stock purchase but the commitment to keep Office on the Mac for X number of years. Without that, the Mac probably would have tanked before the iMac ended up saving Apple. Retaining Microsoft at that time was key to retaining legitimacy. There's an awesome talk with Steve Jobs where he goes into it - it's been posted on Hacker News many times.
- valuearb 6y agoApple was never close to going out of business, irrelevancy sure, but not bankruptcy.
- yreg 6y agoI've put it into a dividend reinvestment calculator[0] I use and got similar, although interestingly not the same results. Final value: $165k Annual return: 13.03% [0] - https://dqydj.com/stock-return-calculator/ https://dqydj.com/stock-return-calculator/
- epanchin 6y agoFor a comparison with Buffet. If you’d invested $10,000 into BRK-B on the same date [$29.90] you would now have $65k.
- onetimemanytime 6y agoEither way it shows the power of investing. You put your money into a stock /s and others do the rest of the work.
- jariel 6y agoOr it shows the power of inflation ... A coke is probably 2-3x more expensive today ...
- epanchin 6y agoIf you’d bought £10k of 35p 330ml cans in 1997 you would now have £27k of coca-cola (95p).
- vidarh 6y agoLooking on ebay, if you varied your soda purchases to avoid flooding the market, you could likely sell them for far more as collectibles. [yes, I realise that wasn't the point - I just find it fascinating how much people are paying for old soda cans]
- iso1631 6y agoThat's way above the US inflation figures for food and beverages ($17k), and less even than US medical ($22k) The pound inflated a little more on average, to £18k, but nowhere near that 95p inflation.
- sukilot 6y agoNow do housing and healthcare.
- pengaru 6y agoDid you account for splits? According to [0] MSFT has split two for one on three occasions since 1997. [0] https://www.stocksplithistory.com/microsoft/ https://www.stocksplithistory.com/microsoft/
- cm2187 6y agoI suspect the parent used yahoo finance or the like to get historical stock prices. Historical stock prices are usually re-adjusted when a split happens so you get a clean history.
- 11thEarlOfMar 6y agoYes, he explicitly said 'adjusted' stock price. But, don't know if he accounted for dividends, which may have added another 1% annually.
- eru 6y agoHowever, the S&P 500 had a lower variance. So to compare the two investments on a risk adjusted level, you'd have to load up the S&P 500 with leverage, or mix your MSFT investment with something risk free. For fun, I checked out what the maximum leverage would be that you could run, if you rebalanced your investment every day to reach your exact target leverage (an assuming no transaction costs and no interest on your margin loan) without you going bankrupt. Under those conditions that's mostly governed by the what's the largest single day loss. The S&P 500 had a really bad day on 2020-03-16. Microsoft's worst single day loss was on 2000-04-24 when the dot com bubble burst. All data from yahoo finance adjusted closing price. My simple analysis suggests that you would have made the most money with 1.8x leverage on Microsoft. And with 1.9x leverage on the S&P 500. Both starting at August 22nd 1997 up to 2020-07-24. That 'optimal' leverage would have multiplied your initial investment by 4.888 for S&P 500 and 35.956 for MSFT over those years. I would have expected the optimal leverage to differ much more. But the pandemic really did a number on the S&P 500 for a while without hitting Microsoft nearly as hard. (There are probably some bugs in my code. And in practice you'd probably want to vary your leverage based on observed volatility. You also wouldn't want to rebalance every day.)
- BMSmnqXAE4yfe1 6y agoVariance is a funny thing. For example, a stock that went up every day by 1%, would have higher variance, and thus more "risky" than a stock that went 0.1% up every odd day and 0.1% down every even day.
- eru 6y agoYes. Though when you assume something like an efficient market, variance becomes more meaningful. Under some suitably broad efficient market assumptions, the expected return for all stocks is basically the same (after adjusting for risk). So variance automatically means going up and down compared to that expected return.
- deleted 6y ago[deleted]
- redwood 6y agoWhat about the same for Amazon? I thought it was interesting that Warren explicitly mentioned the Amazon in his river analogy... Little did he know.
- nodesocket 6y agoIt’s a mind blowing $14,299,769[1] from an initial $10k in AMZN. Absolutely unbelievable. [1] https://dqydj.com/stock-return-calculator/ https://dqydj.com/stock-return-calculator/