please explain something to me. i took a stock market lesson on the internet from a well respected stock broker. he took an example of walmart company stock. he said that if you make an invesment of 10,000 dollars 40 years ago, your investment would worth today over one billion dollars.(1,000,000,000) 40 years ago, the price was 0.06 dollars per share. let's take the highst price the company've been the last few years - 80 dollars per share. with 10k$ and 0.06 price you wold get 166k amount of shares. if you do this like that 166k*80(stock price now) you would get 13 million. how in the name of god did he got that your invesment would be worth over one billon? what am i missing? thank you for all helpers.
I am not sure where he got the that price from and BTW welcome to the board Wal-Mart Stores Initial Public Offering and Stock Splits Wal-Mart Stores was incorporated on Oct. 31, 1969 and offered 300,000 shares of its common stock at $16.50 per share during its IPO. If you were lucky enough to purchase just 100 shares at $16.50 per share, you would have only paid $1,650. Wal-Mart's common stock began trading on the New York Stock Exchange on Aug. 25, 1972. http://www.investopedia.com/article...-had-invested-walmart-right-after-its-ipo.asp
From what I'm seeing Walmart may have split 11 times. I don't know if they were all 2 for 1 splits or 3 for 2, etc. But assuming they were all 2 for 1 splits you would have 2048 times 166,000 shares = 339,968,000 shares x $80 = $27.2 billion. Apparently they were not all 2 for 1 splits. Edit: According to TTTs link they did split 11 times at 2 for 1 but that was since inception (1969). So, there was probably a fewer splits since 1976. 6 two-for-one splits: 64 x 166,000 x $80 = $850M. Add in all the reinvested dividends and you'd probably be over $1B.
Great answer @Onepoint. Yes, it is taking into account the power of compounding and dividend reinvestment. Taking starting price and reinvesting all dividends through drip and accounting for stock splits over 40 years it would do that. Only problem with the lesson was that it is unlikely anyone would have ever invested that large of an amount 40 years ago so while the lesson does show the power of compounding it would probably be better to use lower (reasonable) amounts and teach a "real life" example on the potential.
Wait I take it all back. Dor said the price was 6 cents 40 years back. 6 cents is a split-adjusted price. The actual price paid in 1976 would have been more like $20, $50, or even $100. So the number of shares purchased, 166,000, is incorrect. Assuming the non-split-adjusted price was $20 then $10,000 would have bought 500 shares. Eleven 2:1 splits would result in current ownership of 1,028,000 shares. Times $80 only gives $81.92M. A billion is 1000 million in the USA. I think in Great Britain a billion is 100 million. Maybe Dor's broker/educator is British. Edit: Or the non-split-adjusted price in 1976 was $2.00. $10,000/$2 = 5000 shares then 5000 x 2048 = 10,240,000 shares now 10,240,000 x $80 = $819.2M
Classic lines: "I'm comfortably well-off" at about 2:00 minutes and "I can't help it, I'm a greedy slob....." at about 4:30 minutes.
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