Especially as of late – it was going “bad” with the economy and interest rates were rising. How come we see so many stocks with an “All time high”? I’m not looking for a psychological explanation, but literally: where do the coins come from to purchase?
In: Economics
A stock or share is a small slice of the value of a company. It is a percentage. So let’s say you own 1% of a company, and the company is worth $100 million, based on physical assets, stock on hand, business forecasts, profit expectations, and demand forecast. Your holding is worth $1 million, and you might expect a dividend of $50,000.
As time goes on, the situation changes – demand goes up, performance exceeds the forecasts, profits are up, and the stock on hand can be sold at a higher price. The market analysts and those who want to buy shares now value the company worth at $120 million. Your 1% share is $1.2 million, and your dividend might be $55,000.
At this point your share of the company is still 1%, but it is worth more to anyone who might want to buy your shares. At any point in time, the share value represents a mix of actual, measurable value and forecasts, and how the company and its future is perceived. Sometimes perception is more important than hard numbers, and sometimes the actual numbers are more important.
For people investing in the stock market, the only thing that is important is the buy price and the sell price, and any dividends they get on the way.
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