IFB54: Company and Industry Maturation in the Stock Market

Welcome to Investing for Beginners podcast this is episode 54. Andrew and I are going to talk about the maturation of different industries. We’re going to discuss how when you’re looking at companies to invest one of the things you want to look at is
how the industry that it’s in is maturing and what stage of growth they might be in along that path.  Without any further ado, I’m going to turn over to Andrew and he’s going to get us started.
Andrew: thanks Dave, this is something that actually really haven’t read anything about when it comes to investing and everything it’s just one of those things I kind of noticed as I was looking through financial statements, kind of trying to observe like how different stocks kind of move throughout the years.
I’ve done a ton of research and a post on my blog about companies that have failed also companies that have really succeeded and looking at the financials and trying to piece together what happened in the very beginning and then how did it play out as the years went on and I’m sure this is probably like common sense stuff for I don’t know business majors econ majors whatever.
But we’re DIY investors and we’re just trying to soak in as much information as we can and  it’s good to keep our eyes open try to be observant in a similar fashion to one of the previous episodes where I talked about unconventional investing rule to have for your portfolio I figured this would be kind of another cool thing to discuss and talk about.
I mean it’s obvious when you look at a single stock standpoint that stocks will mature and they will reach a point where I don’t want to say it’s like too big to fail but they do get to a point where they’re kind of too big to grow in a sense. I talked about this in one of the daily emails several weeks back where if you look at a company like Amazon as they trade today it’s somewhere around 700 almost 800 billion dollars in market cap you have the high valuations and I love the company I absolutely use them I think they’re revolutionizing the world they are changing the world they are making everything convenient I have an Amazon package at my front door probably once a week.
I love the company however as an investment and looking at the valuation metrics it’s just not something that I want to take a bite out of and you’ll see  you’ll continue to see much rationalization when it comes to people who are following the stock and just the average Joe investor who wants to spout his opinion online, and and you can tell a lot of it’s just strictly uneducated they have no concept of valuation no concept of any sort of fundamentals and they’ll just kind of quote random facts that fits their narrative and has a confirmation bias where it it just looks bullish and  they are bullish on the stock.
And I don’t want to say that the stock won’t continue the client from here I mean it could easily climb in our 10 20 percent and I don’t see that as not being out of the realm of possibility. However when I look at stocks I’m looking at the very long term we discussed last week about me selling strategies and I discussed how ideally I would like to hold a stock and hold it for forever that means collecting dividends all along the way that means the stock is growing its dividend I’m reinvesting that dividend. And that also means that the stock is at least growing close to obviously ideally better than the average but close to the average stock market appreciation point which historically has been 10%, and you can see just so many studies out there that have shown that and the US stock market 10 percents been the average for over a hundred years.