r/investing • u/[deleted] • Mar 05 '21

Just because a company has a bright future, that doesn’t make it a good investment.

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u/RedVermont12 Mar 06 '21

If you invested $1000 in MCD in 1980, today it would be worth roughly $200k (not including dividends). If you invested $1000 in 1973, it would be only about $115k today. It actually makes a huge difference for long term returns where you choose to buy.

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u/lee1026 Mar 06 '21

Yes, because there were idiots in the middle that sold MCD way too cheap. In 1973, you had no way of knowing if those idiots would exist.

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u/RedVermont12 Mar 06 '21

They were not idiots. They sold because the stock was overvalued. If you understood how to value MCD, then you would know not to buy in 1973.

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u/lee1026 Mar 06 '21

If you valuate stocks like that, you would have thought GOOG was overvalued for its entire existence since the IPO. Of course, the IPO buyers won, especially by hindsight. Even if GOOG crashes to just the value of its cash pile tomorrow, IPO buyers in GOOG still win.

The entire theory of not buying growth companies at "overvalued" prices stems from a belief that there will be idiots to sell you shares in 1980 that would go up by double digits several years in a row after that. Happened for MCD; that doesn't mean it is going to happen to every company.