Over two years ago on 29 May 2015, I published an article titled 6 Things You Have To Know About Singapore’s Stock Market. The article was the result of an idea I had back then that it could be useful for many investors if I were to collect important historical facts and figures about Singapore’s stock market and present them in a single article.
In my 29 May 2015 article, I wrote that it is a “work in progress, something which I’d update whenever I come across new information.”
As time passed, I’ve managed to find many new facts to bring the total count to 18. Here they are:
I had recently discovered a new piece of information that I think is worthy of adding to the list. But before I share what it is, I would like to point out a concern some of you may have: Why even bother looking at stock market history?
We cannot invest by looking solely at the rearview mirror. But as former Fool Morgan Housel once wrote, “So much of doing well in the stock market comes down to knowing what to expect.” And, it is precisely knowledge of stock market history that helps us know what to expect.
With that, here’s the 19th fact:
19. A stock that has fallen by 90% can go on to fall another 70%
Here’s a quick quiz from investor David Einhorn: “What do you call a stock that’s down 90%?” The humorous answer is: “A stock that was down 80% and then got cut in half.”
Commodities trader Noble Group Limited (SGX: CGP) is a good example of Einhorn’s quiz. From 21 March 2011 to 21 March 2017, the company saw its stock price fall by a massive 90.8% to a split-adjusted price of S$1.91. It’s hard to imagine the stock having much more room to fall for any investor who was looking at Noble Group on 21 March 2017. But the thing is, from then to today, Noble Group’s stock price has stunningly declined by a further 72.8% from S$1.91 to S$0.52.
When investors see a stock that has fallen hard, many of them think that there’s no more room to fall. But the thing about stocks is that the hard floor for prices is zero. And the decline from any price (even a stock price of say, ten cents) to zero is 100%. We can lose all our capital no matter how much a stock has already fallen.
Never assume that there’s no more room for a company’s stock to fall just because the price has been declining sharply. Always look at the fundamentals of the company’s business. If the fundamentals are poor and the prospects of the business bleak, there’s always room for a deeper plunge in the stock price.
For more investing insights and important updates about the share market, you can check out the Motley Fool's investing newsletter Take Stock Singapore. This free newsletter can teach you how to grow your wealth in the years ahead, so do take a look here.
Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.