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You seem a lost cause, but for the benefit of bystanders I'll just clarify that zero growth doesn't mean zero return. A non-growing company with annual profits
by kgwgk 4y ago
You seem a lost cause, but for the benefit of bystanders I'll just clarify that zero growth doesn't mean zero return.
A non-growing company with annual profits around $100bn is obviously worth much more than $0.
- astrange 4y agoWhat's the point in buying shares of a company with no possible upside? That's not a useful product for a retail investor, and it's not usable for stock compensation for employees either.
- yazaddaruvala 4y agoIn this example by the parent commenter the $100 BB divided up as dividends or stock buy backs is useful regardless of y/y revenue or profit growth.
- astrange 4y agoThat's not useful to a retail investor though. You know its exact value and so does whoever's selling it to you, meaning you can't get a bargain on it. It might be useful if you got it for free, but in that case you should sell it to a bank or someone who can actually use a fixed-income asset.
- kgwgk 4y agoRemember that this subthread started when someone claimed that « With 0% growth their equity price is near 0. »
- doktorhladnjak 4y agoIncome
- astrange 4y agoTax-inefficient income with no inflation protection. Unless it's a whole small business you're buying into, government bonds are better.
- doktorhladnjak 4y agoBecause a company has more downside risk than government bonds, the income they produce would need to be higher. Probably would look very similar to other corporate bonds which is basically what zero upside stock would look like.
- kgwgk 4y ago> What's the point in buying shares of a company with no possible upside? As the Beatles would say, to get you money to buy you things. A black box that spits out one dollar bill (after tax, if that’s your concern) every hour is a useful product to anyone even if there is « no possible upside ». Don’t you see the point in getting one if the price is right? Wouldn’t you pay $10000 to get one? $1000? $100? $10? $1?
- jollybean 4y agoI'm doing just fine. Go ahead and invest in companies with 0% growth and see how well you do with your retirement. Yes, companies can have a positive 'book / enterprise' value that must be heavily discounted by all kinds of risks, and future 0% growth cash flows even much heavily discounted, in which case, theoretically, yes, there are a few companies around that might have giant pools of liquid assets that might be worth something ... ... but in general, companies that don't grow are worthless. Owning a quickly evaporating pool of cash vs. one that is growing, compounds quickly over time.
- yazaddaruvala 4y agoI think you have mistaken “growth” to mean “stock growth”. The rest of this thread is talking about y/y revenue and profit growth. If profits are sustained at $100 BB annually every year perpetually, and I own 0.01% of the company. They can afford to (and can be made obligated to) pay me $10 MM annually through dividends or equivalent stock buy backs. This is a useful company, and I would buy its stock for the right price.