A Slow Start Doesn’t Mean a Bad Stock
Apple Inc. is now one of the most valuable companies in the world. However, very few people know that for the first 22 years of its existence, the stock produced returns of only 100% (see image below). This averages out to about 4% annual growth, hardly an exciting figure. In fact, there were times when the stock fell by 70%, 80%, or even 90%. Anyone looking at Apple in 2002 might have thought it was a weak investment. But the story was only beginning.
The Big Turnaround
After those early years, Apple’s stock price skyrocketed. Over the next 22 years, it delivered an astonishing 92,000% return, translating to an annual growth rate of around 35% (see image below). This serves as a powerful reminder that patience in investing can result in remarkable returns. If someone had given up on Apple in 2002, they would have missed out on a life-changing opportunity. Just because a stock has been slow or negative in the past doesn’t mean it cannot turn around in the future.
Past Performance Isn’t an Indicator of Future Results
One of the biggest mistakes investors make is judging a stock solely by its past performance. If a stock hasn’t performed well, they tend to ignore it. Conversely, if it has done well, they expect that trend to continue indefinitely. However, stocks don’t follow any fixed rules. A non-performing stock can suddenly become a star, while a high-performing stock can also lose momentum. It’s crucial to remain open-minded and not let past biases influence your investment decisions.
Indian Stocks Are No Different
Even in India, we have seen many examples of stocks behaving this way. Several publicly traded companies in the public sector and defense sectors performed poorly for 10 to 15 years, but recently, they have demonstrated significant growth. These changes are often due to sector growth, government policy shifts, or internal improvements. The lesson is clear: any stock can perform well if circumstances change. Don’t dismiss a stock based on its past performance.
Stay Open and Ride the Trend
Some stocks can remain in a fixed price range for years. Traders often buy at the low end and sell at the high end of this range, but when these stocks break out, they can surge suddenly. Those who trade within the range may miss the major rally. That’s why it’s important to keep an open mind. If a stock starts to show positive momentum, let it run and ride the trend. That one breakout can make a significant difference to your portfolio.
What are your thoughts on this open approach to stock selection? Have you held onto any stocks that surprised you later? Share your views in the comments below! If you found this article helpful, don’t forget to SHARE it with your friends.
