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So.. hold on. If the companies have no profits, and investors get no return. ..why would you want to invest?

by Filligree 13y ago

lrobb 13y ago
Indeed... Why?
tlarkworthy 13y ago
Coz the value of the company is still increasing as more warehouses are bought
vasilipupkin 13y ago
Because if the company is spending that potential profit on something that will increase its future value - you as an investor will get a piece of that increase in the future
Colliwinks 13y ago
Because they get no immediate return from profit (from dividends), but the value of the stock still increases (hopefully moreso if they are reinvesting more of their profit into future growth).
saalweachter 13y ago
Hypothetically you are betting on future profits. Historically, business ventures like Amazon have had two phases: a fast growth phase, and a long, stable, profitable phase. You don't expect profits while the business is still growing. You expect them to plow the profits back in to make it grow more. As long as companies can maintain absurd year-over-year growth, investors are willing to pretend that the company needs its giant cash piles to grow more faster. This is actually the rational reason why the stock market shoots a brick whenever one of these tech companies only increases its profits by 23% instead of the projected 27%. Hypothetically, what Amazon's share price means is that investors believe that it will return more than that many dollars per share to its investors once it switches from its fast growth to its slow-and-steady phase. Hypothetically; stock also has value because the expectation that it will go up or down creates a class of investor who buys or sells it based on its expected price regardless of its fundamentals, which can affect the price in either direction.
- Filligree 13y ago
  Then it'll be interesting to see what happens if they hit their stable phase, and proceed to give out no dividends whatsoever.

So.. hold on. If the companies have no profits, and investors get no return. ..why would you want to invest?

lrobb 13y ago

Indeed... Why?

tlarkworthy 13y ago

Coz the value of the company is still increasing as more warehouses are bought

vasilipupkin 13y ago

Because if the company is spending that potential profit on something that will increase its future value - you as an investor will get a piece of that increase in the future

Colliwinks 13y ago

Because they get no immediate return from profit (from dividends), but the value of the stock still increases (hopefully moreso if they are reinvesting more of their profit into future growth).

saalweachter 13y ago

Hypothetically you are betting on future profits. Historically, business ventures like Amazon have had two phases: a fast growth phase, and a long, stable, profitable phase. You don't expect profits while the business is still growing. You expect them to plow the profits back in to make it grow more. As long as companies can maintain absurd year-over-year growth, investors are willing to pretend that the company needs its giant cash piles to grow more faster. This is actually the rational reason why the stock market shoots a brick whenever one of these tech companies only increases its profits by 23% instead of the projected 27%. Hypothetically, what Amazon's share price means is that investors believe that it will return more than that many dollars per share to its investors once it switches from its fast growth to its slow-and-steady phase. Hypothetically; stock also has value because the expectation that it will go up or down creates a class of investor who buys or sells it based on its expected price regardless of its fundamentals, which can affect the price in either direction.

Filligree 13y ago
Then it'll be interesting to see what happens if they hit their stable phase, and proceed to give out no dividends whatsoever.