Big Growthies Shed Huge 1972 Premiums

Note huge premiums over the market for Morgan’s 1972 stock holdings. Their stocks got crushed in the 1973 recession. Then, Morgan threw out such overpriced growthies and bought moderately valued paper. No more Avon at 65 times earnings. How do shareholders of Microsoft feel after their 150 points fade-away? 

I’ll disregard a 10 dollar stock slipping into single digits, but a $500 growthie shedding over a hundred bucks gets some attention. There are plenty of examples. IBM for a generation was too pricey. Same goes for Microsoft, off 140 points. Its last good entry point was at $250 back in 2022. Late 2024 Apple broke down to $164 from $250, but then recovered close to $300. 

Fundamentals do get shaky and unpredictable. Too difficult to model travel with gasoline over 100 bucks a gallon. For iffy fundamentals the market, historically speaking, puts a 10 multiplier on earnings, not the 15- or 20-times yardstick of the good ole days. 

Hardley anyone cares to call attention to non-performance among money managers. Not good for brokerage house business. Note this chart on Berkshire’s poor comparative results from 2014 to 2019. Underperformance was significantly some 20 percent below the S&P 500 Index. Conversely, there are few stocks that stayed 100 points above 12-month lows, Apple for example and Google more than a double above its low of $158.  

My deep basic is dozens of pricey stocks can bury you. Even Berkshire Hathaway didn’t escape a lengthy underperformance period. Note the slide in Microsoft, $550 to $350, past couple of years, finally attracted some buying power from long-term players. 

Note BRK’s underperformance was significant. Some 20% below the S&P 500 Index over 5 years.