The Price Is Right. Isn’t It?
Long time investors know well the old saw that the equity market has risen, on average, about 9% per annum over a number of years (8.91% over the last 20 years, to be exact, according to Morningstar). But as we have often pointed out, such a ride is not necessarily a smooth one. Many wide fluctuations of 30% and more in either direction are contained within that quiet, well-behaved term “average.”
So too with individual stocks, even over as short a period as one year. This week’s reaction to Google’s earnings announcement is a case in point. As the chart below shows, over most of the last year, Google stock hovered quietly between $500 and $600 per share – a range of about 20% – and for much of the time, traded right in the middle of that range, around $550. Until last week. Then, suddenly, in one day, a company with over $400 billion in market cap gained over 16%, and in only one trading week, gained over 25%! To read the entire report: The Investment House Quarterly Q2 2015