> actually no value what so ever other than the greater fool theory
Stock gives you partial (and qualified) ownership of the company, i.e. a claim on the company's assets. If Snap owns valuable assets then owning their stock is (indirect) ownership of those assets. No greater fool is required to give them value.
Most companies are run as 'going concerns' so a liquidation disbursement[0] to shareholders is probably (?) very unlikely, but its possibility must be the 'base value' of any stock. (Right?)
Most companies are run as 'going concerns' so a liquidation disbursement[0] to shareholders is probably (?) very unlikely, but its possibility must be the 'base value' of any stock. (Right?)
Of ANY stock? Wrong.
How much would you give me today if I gave you back 3% of that amount every year forever and at any time you could call it off and get back the original amount you gave me (and you get to keep those payments)? Okay, that's just a savings account.
Okay, how about if I had a solid plan such that I could give you back 3% of that amount next year, 4% the year after that, 5% the year after that, then 6.5%, then 8.5%, onwards and upwards until in a few years it plateaus at you being given 25% (and then rising with inflation) of your original stake each year (which, by the way, you can now cash in for a lot more than you originally paid for it). Is that worth something to you, even if you're not buying any physical assets? The plan is pretty solid, but not foolproof; there's a risk here than it won't work out, but it might.
I have dividend bearing stocks that have done this.
Dividends. A share of the company profits. The value of good dividend bearing shares can be based heavily on how much money they expect to give the shareholders now and into the future, and have very little to do with what physical assets the company actually has.
I was making the point that even stocks that don't pay dividends are still valuable in so much as the company and its assets are valuable.
Your comments are all about the relative value of a stock versus other alternative investments. I don't disagree with anything you wrote.
The point I was trying to make – and I have a good bit of experience now that it's either a really subtle point or it's so wrong (or 'not even wrong') that no one knows how to address it 'directly' – is that, given a stock that:
1. "gives you no profits"
2. Provides "no income from dividends" [Note that this is a separate item in the comment to which I originally replied!]
3. Provides "no voice in how its [company is] run"
The stock is still 'valuable' – apart from any value due to "the greater fool theory".
What I was not claiming is that stock is a 'good value' or a sound investment at its current price(s). I was claiming that if, e.g. someone gave you shares, you shouldn't (necessarily) give them away to someone else. Maybe you have no use for a shovel, or a house somewhere where you neither live nor travel to, but they're not literally of no value even tho you wouldn't buy them yourself at whatever price you could find.
I think it's a fantastic way to get value. Short of having significant influence over a company (Buffet) or very good intelligence about a company (e.g. to speculate that the value of a stock will change dramatically and use that information to make a trade) I consider it just about the best way to get value out of equities. The cash from dividends can be reinvested (the yield acts something like an interest rate on a savings account, although obviously the risk is higher and it isn't exactly the same thing) or pooled with cash from other dividends to diversify, etc.
I also like to issue covered calls/puts against assets/cash in my brokerage account for cash flow, although that's a tad more speculative than taking dividends.
Apart from selling my stock, it's the only way I could get any value out, but selling off the good dividend stocks just seems silly. Some of them have paid for themselves over the last decade; unspectacular, but very welcome.
Seguing off topic, a surprising number of companies are really bad at expanding; I'd much rather they gave the profits to me than waste them on failing ventures.
Might be more tax efficient, but I've seen a lot of companies buy back shares when the shares are high. Aside from high growth companies (which aren't usually buying back shares), that's value-destroying. Buy high, then sell low via options... With that kind of buybacks, I'll take the dividends, thanks.
Hmm, I appreciate your comment because it resulted in me looking into it and learning more. However as a result I've found that such a blanket statement is slightly dangerous - the [1]investopedia article goes into some good scenarios towards the bottom under "Additional Considerations."
What stocks 'gives you profits'?
> actually no value what so ever other than the greater fool theory
Stock gives you partial (and qualified) ownership of the company, i.e. a claim on the company's assets. If Snap owns valuable assets then owning their stock is (indirect) ownership of those assets. No greater fool is required to give them value.
Most companies are run as 'going concerns' so a liquidation disbursement[0] to shareholders is probably (?) very unlikely, but its possibility must be the 'base value' of any stock. (Right?)
[0]: https://www.wikiwand.com/en/Liquidating_distribution