Markets in June
- Chasing performance can be a dangerous game.
- NVDA now has a market cap above $3T. Almost $2T of that has been added this year alone.
- At $3T+, this would make it the 7th largest economy in the world, behind Great Britain and ahead of France.
- Of course a business and an economy are very different things, but this illustrates just how immense the size and scale of the NVDA frenzy is.
- NVDA now has a market cap above $3T. Almost $2T of that has been added this year alone.
- Looking at performance of 4 very popular stocks over the past 10 years.
- First stock is META: It went from $382, down to $95, and spent 3 years from when it peaked until it reached that level again.
- Now lets look at NFLX: Experienced a -75% drawdown, which happened very fast. And it still has not gotten back to that level.
- Next up is TSLA: Has been one of the most volatile stocks since 2019, experiencing several violent price declines since peaking in November 2021.
- NVDA dwarfs them all, but is currently at it’s all-time high.
- Looking at this volatility a different way – Drawdowns in the last 10 years
- NFLX has had multiple -20% corrections and was once at -75% from it’s peak.
- TSLA has declined around -30% or more 4 times in the last 10 years!
- NVDA has drawn down -50% twice in the last 6 years.
- Significant price drops are something each of these beloved tech stocks experience not infrequently.
- Rolling 1-year returns of NVDA: Depending on where you choose to jump in on this timeline, two investors in the same stock can have very different experiences based on when they buy.
- We are attempting to help you focus on entry-point. Remind you that you must be cognizant of the price and performance of what you are buying because being aware of these factors will set the expectation for your ownership of the stock.
- What makes investing tolerable, is setting a context for your expectations when you buy something. If you jump into a stock, totally oblivious to its price, and think you’re going to enjoy the same returns it just had, you’re setting yourself up for disaster.
- Now imagine if you buy that same stock knowing how crazy high the price is, but tell yourself, “I expect this to go down, maybe a lot, before it rises above this level. And I’m committed to holding this beyond the next news cycle, possibly for years to come.” Starting a relationship with a stock with that mentality, your emotional experience of owning it will be vastly improved.
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- Is owning NVDA a bad idea? Probably not. But sometimes the only difference between a good investment and a bad investment is the price you pay, or your fortitude to ride it out.
By: Joe Gallemore, CIMA®, Partner
Director of Investment Management
