Nike-NKE Lessons from history, Lose 75% to make 13410%

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If a 75% decline will scare you out of a stock then I strongly suggest you never invest in stocks .

Stocks are a voting machine in the short term that only measures what someone is willing to buy or sell the stock at in the short run. In the long run (pun intended) the growth of sales and earnings (and hopefully a dividend) is what makes you money.

So, if you had bailed out using a simple "money management strategy to cut your losers at 50% or 75%", then you'd be out and you'd have missed the 134 times return.

Because if you can't afford to lose 75% first, then you will never make 130 times your money in your lifetime.

(The 2nd green box marks the 9/11/2001 level - NKE             is up 919% since then)
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And look at all of these declines along the way too.... gut wrenching for those who have little faith... but opportunities for those with a long term view.
say what? buy & hold is soooo dead. lol
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75% decline
49% decline
43% decline
52% decline
59% decline
62% decline
47% decline...... Would you ever imagine that you would make money with that many HUGE drawdowns?
so whats the trading idea. everyone knows that there are drawdowns in equities? Do you mean to say you would go long NKE at 115??
timwest PRO irishmist
This chart is an educational piece - I "unsuggested" it so it didn't fall into the list of charts with trading recommendations.
timwest PRO irishmist
The trade is to buy NKE on 50%-60% dips over the course of the next 30 years.
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Even on 40% dips too.
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Would you classify the 3D printing stocks such as 3D systems as a potential long term buy.
I like to pick them at the bottom for long term hold. but you are right it is hard to stay in when the stock is going south!
PKA PRO mazdaki
You have to understand financials. Cash flow statement and balance sheet. C'mon dumb question.
I would like to buy a lot of things -60%
I saw a study that 60-80% of stocks will at some point make a 100% move up and a 60% move down in their lifetime. IMO, the lesson is either accept that if in fact you sit through a 75% drawdown, in most cases you are screwed -- they don't come back. As a corollary, if you want to own the "next microsoft" as it were, long from 1985 etc, then yeah youd be obligated to hold through those drawdowns.

Like me I will probably never own a nke except (fingers crossed) in my IRA bc anything in a account I actively manage I would cut long before such a steep decline.
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timwest PRO SPYderCrusher
Yes. In most cases if you sell after a big loss, you are screwed. The one case where you are good to sell is when a company is facing bankruptcy, but otherwise you have to have the staying power to not care if the price of the stock goes down. The long term power of compounding sales growth, earnings growth and dividend growth will more than make up for the short term volatility that you see in the stock price.
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irishmist timwest
Totally agree. Very true statement. I for example have invested in 100o shares in MSFT since 1987 and still holding :)
timwest PRO irishmist
Great for you! I put my mother in MSFT in 1988 (May) and she just passed away last month and she still held it. The compound rate of return was well over 20% while the stock market has done less than 10% over that same time. Overall, her account went up 40 fold from 1988 to last month. The DJIA in 1988 (May) was about 2000, and is now 16000, or up 8-fold. So, she did 5 times better than the market.
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The pieces of money management ideas you often share in your posts inspire me a lot. I think I need a training on money management from you.
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I really like the concept of the piece! It is very accurate...
"Because if you can't afford to lose 75% first, then you will never make 130 times your money in your lifetime" proves that investing needs to bear risks when someone is investing in an equity with a deep belief about its products, and its business model. For instance, M. Buffett is invested in Coca Cola in the 70ies and he didn't bail on it not even during it worst days...
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Tim, find the next Nike and you'll be set.
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So true. That is what TradingView is all about - hopefully too, in the same breath, we can all avoid using mutual funds for long term investing. Mutual funds have a vested interest in having you afraid to manage your own money.
#1. Fear of not being diversified.
#2. Fear of not having a highly paid, Wall Street expert in charge who has an MBA, CFA, Series 7, and a masters in Behavioral Finance.
#3. Fear of not having an army of accountants poring over balance sheets.
#4. Fear of not having a direct link to what the brokers are saying on Wall Street.

It's time to change the way people think. You only need to know how to identify a winner and how to hold onto it through thick and thin and let the power of compounding go to work for you, instead of against you.
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idealistically I agree but without a background in finance or accounting I don't think most people will be able to find the proverbial nike *as a duplicatable and repeatable process* unless through sheer luck. Finding a NFLX, a NKE, as a singular event, sure, but building a portoflio of them with a sense of money management, understanding sentiment and investor mood (behavior), being able to reverse engineer the many, many accounting decisions that are made in reports, or idea generation (a network of smart skilled people to bounce ideas off of) its basically impossible. Even people with 1-4 routinely fail in this endeavor and there is no arguing they have a better informational advantage.

The good news is we do have a resource like TV where this exchange from people with domain knowledge and sharp ideas is possible, and probable (like your great work Tim)
And another point to make - if you can't afford to watch a stock go sideways for 10 years too - then you likely don't have the patience or the time frame to invest for 100 X's gains. Results (sales, earnings, dividends) build slowly and compound steadily over time.
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I wonder will this resemble the chart for Tesla in 25 years time ?!
Nice example

However, would you suggest people to cutloss short ? i.e. cutloss when NIKE loss is about 8-10%.

Then if the stock show recovery sign (at -50% or more), it will be a great time to buy.

In that case with same amount left from cutloss earlier, one can buy more NIKE at even more discounts.

FYI I do agree with you that ... after people sell it ... they might never look back at it ever, thus they will miss a big rally!

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