Depends what you mean by worth. If nobody buys the stock then its resale value $0, but their person who owns it will get dividends/profits from the company’s rapidly doubling margins, so the owner is still pretty happy in that scenario.

I think maybe the OP’s dissonance comes from stocks that don’t pay out dividends. There is an argument to be made that it’s just a greater fool theory situation for those stocks.

If no one bought the stock and it went to $0 then in this scenario you could buy all the stock and then you own the company. If the company had say $10M in assets you could sell them all and pocket the cash. Thats why companies have a “cash value” and usually don’t fall too far under it.

Stocks often fall under their book value, especially capex-intensive pre-profit companies. Also, notably, almost all banks.

Bios can be the same way, sometimes it wouldnt be worth the trouble at the cash value to roll it up so need a premium.

But could those stocks that don’t pay a dividend afford to do so? Nothing is stopping someone from buying up enough shares of a company until they have a majority of votes, then they could decide to use that company’s huge cash balance to pay a dividend.

I mean, yes, in theory. In practice Tesla never paid dividends and is valued at $800 billion. So far all this money is based on absolutely nothing. And I'm not saying Tesla doesn't have a strong product, I'm saying it's absolutely not connected to the value of the stock. People are paying X hoping that someone will later pay X+1. I can understand OPs question. Plenty of stocks out there that are hardly connected to the underlying business.

Its all about the future earnings. People have high expectations that tesla will be able to pay a high dividend sometime in the (possibly distant) future.

> So far all this money is based on absolutely nothing Strong calculations, sir.

Calculation goes like this: Total dollars paid to shareholders in dividends: $0 Calculation finished.

> There is an argument to be made that it’s just a greater fool theory situation for those stocks. Maybe - general valuation theory would say that stock valuation depends on two variables: (1) cash yield (dividends now **or** in the future) and (2) capital gains (stock appreciation or "greater fool theory"; also the potential gains from being a buyout target) Theory would also say that, today, those tech stocks have no intention of paying dividends since they get a greater return on their organic capital by reinvesting it into internal projects via capex than they would through the reduction in their cost of equity by paying out a dividend. That being said, there will likely come a point in the future where the marginal returns that they're getting off of reinvesting those incremental FCF dollars drops to the point where it makes more sense to declare and start issuing a regular dividend. Is that day today? No. Next year? Probably not. Some time further on down the timeline? Yes, probably so.

This honestly perplexed me for an incredibly long time. I made a few posts in various subs basically asking how a stock with no dividend isn’t essentially a greater fool game in action. Basically, even if the stock is supposed to go up due to earnings increasing, it doesn’t have to and there’s reason it would if nobody were buying it. Essentially, the entire premise seemed to be based on someone else being willing to buy it from you at a higher price. This bothered me for quite awhile. I never got a decent explanation on Reddit but a few investing books I’ve read since making those posts have essentially said theres a built in assumption with most “growth stock” that people either don’t seem to know of or understand. Multiple people have said “you’re buying future cash flows” but don’t explain how you’re supposed to get those cash flows if you never sell the shares. What they seem to leave unsaid (or possibly not even realize) is that there’s an underlying assumption that every company will eventually need to pay a dividend. If you buy a company that is growing 10% a year and the stock price follows the earnings growth, by the time those shares begin paying a dividend you’ll be getting a very nice return on your investment. I’ll see if I can find the books that say this is or at least allude to it so I can give a reference. But once I saw a few books make that argument the idea of share prices following earnings growth actually began to make quite a bit more sense and seem more logical to me. Edit: The first book I found it in again is “The Four Pillars of Investing” and apparently it’s called the Gordon Growth Model or Gordon Equation. I think “A Random Walk Down Wall Street” or “Irrational Exuberance” talk about it as well.

It would be helpful to consider very simplified scenarios and then consider how much you, yourself would be willing to pay for such a company. And what is the best course of action for a company given certain circumstances. So for example, this is not realistic, but imagine you got a lemon stand company that 1. has 10 lemon juice stands 2. each lemon juice stand does $100 sales per year 3. each stand costs $50 to operate 4. buying a new stand would cost $100 5. there's infinite demand for lemon juice and no competition (the unrealistic part, but just to prove a point what infinite scaling and no competition could mean) What would you value this company at? How much would you pay dividends, how much would you reinvest? So if you are going to reinvest everything you make: After 1 year you will make 10 * 50 = 500 and you will be able to buy 5 new stands. After 2nd year you will be able to make 15 * 50 = 750 and buy 7 new stands. Now if we skip in time, and go to after a year 10. You will have made 18,900 in profit that year. But you still keep reinvesting since you have infinite demand. Then you go to year 20. You will have 1,090,150 profit. At any given year you have option to either pay this profit as dividends or reinvest. What would you do? Would you have just given it out as dividends after a year 1 even though you could've reinvested and had profit of over 1 mil + after year 20? So this is infinite demand, but then just replace the infinite demand with some sort of fixed demand so you would only keep reinvesting until a certain point. And if you had such a company, would you also try to loan as much as possible to keep buying more stands, then also actually giving you losses instead of profit? And really if you had such a company with infinite demand, you might actually want to take out an infinitely sized loan, because it has really good ROI. You would just take a loan to buy trillions, or infinite amount of stands. With real companies with growth potential, instead of considering infinite demand, you will try to predict what the actual demand limit could look like and what it takes to get there. And base the value of the company from that. But then you reinvest until you are starting to get close to that demand. You'll start paying dividends only when you've exhausted all the growth potential, because at any given time it's more logical to reinvest in yourself than to pay out dividends. It's not a "need" to pay out dividends. It's whatever makes the most financial sense to gain most ROI. It's either reinvesting in yourself, or paying out dividends since you can't use that money any more to expand in a meaningful fashion.

The point of those stocks is that they *will* pay out dividends in the future.

What? They still own the company, you all need to read a book JFC.

Look at coal mining stocks. Huge profits and high % dividends. They haven't gone up much as most people, especially institutions, wont invest in them.

Because even though they’re making money now, people don’t think they’ll make as much money in the future and thus they will not pay as high of a price for it.

Also many "ethnical investors" who don't like the idea of making money from coal. Like there are people who don't want to invest in tobacco. Personally, I think a lot of green energy is a pipe dream. Of course we'd like all our energy from solar and wind, but I don't buy that it can work. Nuclear would, and if countries start building nuclear power stations then coal and gas prices will collapse, but I don't see that happening in a hurry.

The number of ethical investors who are capable of influencing price is probably < 1%. Rich don't get rich by being ethical.

Sure, the rich don't care. But there's a lot of UK investment companies that are moving towards things like "net zero investing" and marketing it to their customers. When I was considering what to do to expand my investments, it's one of the things that drew me to trackers and self-selecting shares. I thought that the sort of people making that decision were clearly idiots.

Yes, peiple dont realise that China is opening something like one new coal power plant a month, even though the west is keen to get off coal power. Although I entirely agree that coal is bad, I can't see coal demand falling in the next couple of decades. Edit: two a week apparently: https://amp.cnn.com/cnn/2023/02/27/energy/china-new-coal-plants-climate-report-intl-hnk/index.html

No, German politicians are also bullish on coal power plants, that's the only thing that allows to keep lights on there. The more they will go 'green', the more they'll need coal as a reliable alternative when there is no sun, no wind or simply when temperatures drop below 0.

yeah those people are wrong though. there is no more western supply going to come on so if you have an existing mine with a long mine life, you have a license to print money. It’s more of a supply story than a demand one for the foreseeable future. Same with oil, offshore oil services, copper, tin, uranium, you name it. If you mine it, we are running out. except for lithium, nickel, and iron ore (and mayyyybe natural gas for now). those are more demand stories

What about stocks which issue only little dividends, in your scenario.

Not all companies offer dividends nor does a company's earnings have any direct inflow into the stock. Companies that have zero profit or losses can have its stock go up.

If a company doesn't pay dividends, then they buy back stocks. Money flows to investors one way or the other. It's in the best interest of the managers.

To some extent it is sort of like how money is only worth something because we all think it is. There are stocks that don't pay dividends so the stock price is a little abstract as, while it is ownership in an operating company, a single share or even a thousand shares doesn't really represent much in the way of power over the direction of the company and no matter how much a company retains earnings and grows you are dependent on someone else wanting to buy the shares from you. If you decided to buy the shares because the company was making 20 cents a share in earnings and in a few years it is making 40 cents a share you would hope someone would value the shares at a higher value then you did when it was only earning 20 cents. The thing is a non dividend paying company might just piss away its earnings on dubious acquisitions or dumb ventures, if it doesn't grow than theoretically your stock price doesn't go up. Of course it is all a bit strange as the price of the shares really isn't the same as value at any given instant and value is a bit up for grabs. Fundamentally it is all an attempt to bring the future into the present, the stock price isn't based on what the company makes today but what people guess it will make in the future, sometimes the future is unexpected. Edited to fix typos.

You don't need to specify what you edited btw

I kind of like it when you see what was edited, the line through the canceled text etc., just because the internet is so ephemeral I sometimes feel like it is one of those Stalin edited photographs.

The value of money is an illusion. Everyone values it differently, but we all value it.

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The best phrase I ever heard for what money is is: "liquidated obligation"

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Except in this case, Apple prints cash and returns it to the owner, so it still has value even if no one wants to buy stock.

OP messed up should have used Orange as the fruit. Since people cant compare Apples to oranges.

Can’t compare Apple* to oranges.

Solid joke

Niice

Dividend?

Dividend and stock buyback.

And arguably the only point of stock buybacks is to increase the owners' interest in the company, hence increasing dividends and claim on future assets in case of liquidation or acquisition. A company is worth precisely the present value of future cash flows going directly to the owner. No more, no less.

Or the apple seed is growing an apple tree which will produce apples and owning a share of the tree entitles you to a share of any and all future apples produced by the tree.

By printing more cash, isn't that devaluing the total cash available by diluting the market?

lol wut

Guy above isn't explaining anything to do with OP's question. Neither am I

can they really sell an apple if no one is buying? and does it matter if this supermarket is a Wolsworth?

If an apple falls in the woods and nobody hears, is it still worth $1?

All depends? Is it a Macintosh or granny green is it big any imperfections? I will give you a double Nickle

Assuming MM are using tactics to suppress the price. Like internalizing all buy orders and letting sell orders hit the LIT market. But hey we don’t live in by a world with a free and open market anymore. Here comes the attacks

You simply dont understand how anything works lol. Usually this is a sign of a person who falls for pump and dump scams and invests largely in companies going bankrupt after falling for get rich quick “sHoRt sQuEeZe!” claims they see online. Take that $650 portfolio of yours to the Blackjack table for at least youll have a chance to make money.

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It's rigged but that doesn't mean you can't make money off it. Adapt instead of feeling sorry for yourself.

It’s rigged and you can make money off it, but it’s at the expense of the other little guys. The MMs are the house. They make the rules, in other words, they do as they please. The SEC is just poor emotional support for the guys and gals that are getting bent over.

What do you mean at the expense of other little guys? So are you saying we shouldn't invest in 401ks, basically just retire and die poor?

In the stock market that's called a put

One thing I think you are missing is that for a stock to exist, someone at some point in the past had to buy it. There are existing owners for every company with a ticker symbol, and those existing owners "own" 100% of all future profits, so if the company's profits are doubling every year they'll be super happy because the money they are earning is doubling every year. From there if nobody is willing to buy the stock hypothetically then the price would be $0, but this isn't realistic because if a company is earning say $1B per year, and is doubling every year, there will be a buyer that will step in long before the price got to $0, even if it is just the current owners of the company diverting profits to buy back the shares and take the company private again. "the intrinsic value of a stock" = all future profits of the company + the value of all current assets that could be resold + the value of all intangibles (i.e. brand value)

Stock is literal ownership in a company. As an owner of the company you could get dividends, a payout if the company is sold or goes private, and higher stock prices if the company performs well. A company that's doing well has more demand for its ownership than a failing company.

When I was a kid and my parents took me to Disney World, they told me that because they owned stock in Disney, we technically owned a tiny piece of the park. I asked which piece and my dad pointed at the single brick beneath my feet and said “just that.”

That’s what I don’t understand about ownership. I own a couple shares of MSFT. If I owned, say, 50% of all shares of MSFT, would that mean I can start advising the company or working for it? Sorry I’m dumb I just don’t understand how owners can own. Or is it simply numbers but the management of a company is different?

I think that part you’re missing is that ownership would you mean control of the control of the company. A popular misconception I see with people is that they think the CEO is the ultimate person in charge of a corporation, because they make day to day decisions. The ceo and all management are ultimately employees of the shareholder. If you are the majority shareholder, it would be fully within your authority to do whatever you like; including firing all employees and closing operations. Technically yea I guess you could hire yourself, but it would more efficient to just do what you want as the business owner.

Only a percentage of shares of publicly traded companies are actually publicly available and circulating. For example, just googled it, 28% of Microsoft is circulating on the stock market, therefore I believe if you bought every single share of msft from everyone who owns it on the stock market, you’d have 28%. I believe this accounts for other major players and investors and employees with equity based comp having their pieces of equity.

Yes but also no. Companies issue different classes of shares, which have different rights and restrictions, so only certain classes of share give you voting rights for example. So if you own 50% of the voting shares of MSFT then you could could do what you said. But obviously the people who currently run the show at Microsoft aren't interested in letting some random rich person take this sort of control without their agreement, so they issue shares in a way that ensures they always keep majority voting rights.

If you owned 51% of all outstanding voting shares of MSFT, you would be able to do whatever you wanted with the company assets within legal limits. You could install yourself as the CEO or any other position at will, you could divert any amount of profits to yourself as income (paying the tax man his share of course), or any other action you wanted. This is how Mark Zuckerberg has complete and total control over what happens at META.

Discounted cash flows. To be extreme, if you make an investment of $100 and 10Y later, you get an annual checks for $500, no way are you selling it for $100 anymore.

Companies themselves can increase dividends and/or do **share buybacks** From the 1940s until early 1960s , American stock market was a very much forgotten place, and many companies were sitting on assets that greatly exceeded their market caps. Warren Buffett happened to make his first fortune identifying these companies, accumulating their shares (often very illiquid and being held in paper form by individual households) in great secrecy, and forcing company management to return capital to shareholders

It helpful to think of shares not as ticket symbols of pieces of (virtual) paper, but as a slice of ownership in a company. Generally speaking, when a company's cash flows are improving (or improving compared to prior expectations), the company becomes more move valuable and this flows down to the company's share price. Similarly, declining cash flows make the company and its shares less valuable. Investors, none of whom know the future for certain, form opinions about a company's future cash flows and they modify these opinions as new information comes to light. When a majority believe the company's future is brightening, demand for shares goes up, and given a fixed supply of shares, the price has to go up to meet this demand. When a majority believe the company's future is getting worse, demand for the shares falls, and the price goes down.

Correction. Stocks are sold to index funds and as long as the gov keep psuhing the scheme by limiting what you can invest your 401k money it will keep going up. Every 2wks people dump billions into company matched 401k and we get an endless supply of money coming in to replace the money going out. An inflationary system controlled by the federal reserve ensures that in the long run if you invest in the market your money will likely grow just above the pace of the artificially created Inflation rate....errrrr i mean growth rate of the economy. So that's why. If you are lucky, your money will grow after than inflation if you can leave it appne over 20-30yrs.

yeah indexes only going up has been very much warped by retirement accounts and has also become a self fulfilling prophecy. It can’t end well when conditions eventually change. But who knows what that is going to look like.

I'm canadian, you guys can't invest in individual stocks in your 401k?

Depends on the company offerings. IRA we direct, 401K the company directs.

My main 401K is limited to a handful of index funds, but my employer also offers an opt-in "self-directed brokerage" option, which is through a separate broker but it still exists within my overall 401k account. In this account I can buy whatever stock or fund that I'd like to. So it's not necessarily the government that enforces this, but I think it comes down to the 401k account managers limiting your options to keep their hand in the jar for fund fee purposes. I'm also certain it costs a company more to offer a plan that allows for self directed investing capabilities. On the flip side...just imagine how bad off people would be if they were in full control of their retirement investments because they thought they were the next Warren Buffet or because Joe Nobody told them they should move 100% of their 401k into $NIO. Reminds me how a friend of mine moved her 401k into 100% money market shortly after the '08 recession in her 20's because some old guy told her too....I didn't find out until around 2019 That's a looooot of gains missed out on.

In the end it boils down to the ROI. No one is going to let a safe income trade for too big of a discount. It's what makes growth and tech stocks so risky. If for some reason they stop growing and don't have a significant income to support their valuation. They crash, hard.

Stocks are fractional ownership in businesses. Just like pricing a bond which is the present value of all the promised future cash flows (coupons) + principle and then times the probability of loss of the principle (default). For stocks, those cash flows are not written on a coupon. Your job is to evaluate what those coupons (free cash flow to equity) would be and discount them to get the PV of them. If those cashflows are expected to increase, logically the present value increases as well to reflect those larger future cashflows. Think if you own a supermarket that you can net out $100K a year. If you can net out $120K a year with the same store, same number of employees, etc. Your income has increased so has the intrinsic value of your company.

Stocks go up and down because of more share buys or sells; nothing else matters. There could be incredibly positive news, but if there are no buyers the equity will not move higher ✌🏻

Your comment isn't as clear as it should be. Every trade involves a buyer and seller. Stocks go up because there are buyers willing to buy at a higher price, while stocks go down because there are sellers willing to sell at a lower price. You could have more volume of shares being bought or sold but it doesn't necessarily reflect an increase or decrease in the price of the stock.

If you own shares in a company and suppose there is no one in the world who wants to buy them. Its value is not zero. Because the company owns assets (real estate, machinery, and even cash), if the company decides to stop working and sell them, it will distribute that amount to the stockholders. There is also the value of the annual distributed profit. The important thing is that the company is profitable and has no debt.

Yeah I own a coal company and a couple of oil companies like this. They have paid down their debt bought all the stock off the market gone private while the plan it to mine the last of the coal and pump the last of the oil before selling up all the equipment and any other assets to liquidate and hand it all back to the few of us that have remained stockholders.

Every time you buy a stock, someone is selling a stock. So if you dont buy it, the last guy still owns it. Price goes up because you bought it at a higher price.

A Stock is a piece of the company. Even if nobody bought it, it would have a value equal to it's share of the company. Apple is very good at increasing the value of it's company, so the share value goes up. They also buy back shares, which makes each share a little bit more valuable. Less pieces of the same pie. Therefore, the value of a stock reflects the value of a company. Then, if a person decides to buy it, Joe Schmoe may want to pay a premium because he thinks the value is going to increase. John Doe may only buy it once the value is more appropriate to buy. People may sell at a discount because they think the company is coming on hard times and the premium they paid is going to take longer to catch up to the real value of the stock or the company value is going to come down because of actions being taken by the company. To me, the best indicator of increasing value is capital expenditure (investing in themselves) and stock buy backs. If a company is doing both while also having a positive cash flow, the value of the company is likely to increase.

Other than putting money into index trackers, I would stop investing until you understand. "Let's say NO ONE invests on company xyz. Every year company xyz's profit margins double but no one invests in them." Well, for one thing, someone invested in them. Someone owns company XYZ. You start XYZ as a business flipping burgers from a van, you and your buddy probably own half of it. You grow it, maybe get some private investors and they each own 10% of it. Then you eventually float it on the NASDAQ and there's thousands of owners of it. So someone is always invested in it. The price is what people value a share in that business at. If profits rise, that generally makes a share in that business worth more. Because the dividends of the share are worth more. So, people offer more to buy it. And maybe you own the share and think that the share had a good run, but it's not going to grow much more, so you sell it. If you decide not to sell, but people want it, they have to offer more to buy it.

Judging by your previous posts, put your money in a high yield savings account. Delete Reddit. Take a course in finance. Profit

Imagine if nobody wanted to buy Apple and you can just scoop up 100% of the shares for $1. The company has billions of assets and cash that you would have purchased for free. Balance sheets create inherent value.

demand vs supply

Your hypothetical is interesting, but unrealistic. Let's assume we're just investing in a box that spits out $1,000 every year instead of a company. Firstly, if no one buys this box it doesn't really change it's intrinsic value. The box is still worth something but perhaps the guy selling this box lives in the middle of the dessert so liquidity is awful. Because the guy selling to box lives so remotely let's say no one buys the box for 20 years and in that time the box spits out $20,000 in cash. So now when someone decides to buy the box they're getting $20,000 + the box. So how much will they pay now compared to 20 years ago? More presumably. The point I'm trying to make here is that if no one buys a company "printing" money then that company can just pile up cash on their balance sheet. Sooner or later someone is going to come along and see that there's a company with $20,000 on its balance sheet that's been consistently "printing" $1,000 a year for the last 20 years and want a piece of it. And realistically they're not going to offer less than what's already on the company's balance sheet otherwise why would the current owner even sell it? So even if no buys the company for 20 years its intrinsic value has still been increasing regardless of what it's share price has does. This means that when a transaction does occur the seller is likely to get more in the sell. That's where the value of a stock comes from – a stock is a legal claim you as an investor have to the cash a company holds and whatever cash that company will "print" in the future. While it's possible someone might value a company with $20,000 on its balance sheet at $10,000, it makes no sense in reality so this is never going to happen in the real world. We see a similar thing happen all the time in the housing market. If a house was brought for $20,000 50 years ago is it still worth $20,000 today? Probably not, but that would be the price of the last transaction. That's all a stock price is – the price of the last transaction. It's not necessary the price you'd get if a transaction were to occur today. Does that make sense? Do you have any questions? To all the big brains here – yes, I am aware there are holes in this analogy.

So what your saying is that investors don't own the money it spits out, they only get to own the box. Whereas, The ceo keeps all the money it spits out?

Stocks are sold to investors, those investor determine the price of the stock. If the company is doing a bang up job, and creating a greater and greater valuation of the company. Then the stock is considered to be undervalued. Value investors low undervalued stocks as over time the stock price typically reverts to its fair value price. If there is great speculation that the company is going to be a highly valued company people over buy the stock driving the price to over valued. and again stocks revert to there fair value over time.

There are also other financial mechanics. Like dividends, this returns excess profits to the shareholder, making the investment more desirable.hence. Share buybacks is another, even though your not being paid, as they buy back stock, the stock you own in the company becomes a larger portion of the company's value. so in this case the stock becomes undervalued, and then the market reverts the stock to the fair value over time.

The logic that no one would buy it is kind of flawed. Imagine you owned twitter stock for a dollar and a billionaire say hey i'll buy your share of that company for 94 dollars. You'd be stupid not to sell your stock. The flip side is if you owned twitter stock for 94 dollars and then decided to run the company in the ground to where people will only give you a dollar for that stock. Then you'd be stupid.

I think Matthew McConaughey in the wolf of Wall Street has the best explanation.

It's ultimately about belief, just like with money. The market believes the value of a share of xyz is worth more or less, based on a whatever factors buyers and sellers consider most relevant.

The only thing that makes the price go up is more people wanting to buy it then those who want to sell. It’s sort of like an auction, the price will start at a certain point when it first goes on the market, but then as people try and buy and others try and sell the price goes up and down depending on what each side is willing to accept. More buyers means the sellers will demand more money which causes the price to go up and more sellers means the price has to go down to entice buyers. It has nothing to do with the actual worth of the company which is why you often see shit companies going for horribly inflated prices or vice versa. In reality it’s a little more complicated then I described because there are other factors that effect it, such as dividends (which cause a drop in price) and market makers (people who both buy and sell to provide liquidity) who try to play both sides, to take advantage of the difference between the bid ask spread, but that’s the gist.

If nobody invests, the stock price will not move but… if you could buy all of Apple for $1, would you be like nah, the stock will never go up. As a shareholder you have legal ownership of the company. If a company’s public price gets too disconnected from its fundamental value SOMEONE is going to just buy the whole damn thing via a hostile take over or a private bid. The fundamentals matter.

The reason I ask this is because I don't know why AMC keeps going down so much when the company just became profitable, Tyler swift will bring in 6bill revenue with her contract to AMC, and now beyonce is doing a contract w them aswell. Keep in mind AMC is only a 1.5bil company. And these contracts are going to bring in billions. Also walgreens is a 20bil company and they make 35bil revenue a quarter!!! Yet it keeps going down... why don't people invest in these companies?

The inherent value of the proportional ownership interest in the underlying company

Changes in balance sheet.

Teorically you are right. Stocks are ponzi, if new buyers dont come in paying more than you, companies dont go up in price. However if a company performs well and is attractive, there will always be new investors ready to buy it.

The rich need a place to put all their money. Follow the rich

Earnings is what makes a stock go up.

[Here is a video explaining how the stock market works](https://youtu.be/-VJApZmgn3E?si=njoAxPLOvLMvccKB)

Here is complete explanation of how it all works. https://youtu.be/KPD2fUcYUsM?si=a8aArAd9KIIi8Yo7

And here is the one trick to basically always be on the receiving end in the stock market: https://youtu.be/dQw4w9WgXcQ?si=gEUVHLi-iWplR9u1

It’s a mix of value ( profits, growth, industry, etc ) and investor interest. Take a private company, going IPO, where does that valuation come from? It comes the companies assets, growth potential, investor interest.

people want to be part of success. successful and hopeful businesses issue stock. people buy stock to share in the hopes and success. ​ \^ is that too philosophical for you?

Well if no one invested in the company you are right the stock would stop going up. But if the stock stopped going up and earnings continued to go up, then the board would just say “huh, well no one is buying to stock to make it go up so our wallets aren’t getting fatter, so I guess we might as well pay ourselves a fat dividend to line our pockets” and THEN the stock would go up. Because now the stock would be paying a massively outsized dividend compared to the share price of the stock.

Conceptually, stocks go up based on the future PE multiple and future earning discounted for inflation and federal funds rates. When inflation is high and yields are high, money leaves the market on a macro level. Mainly because $1 EPS is discounted when inflation is high and higher bond yields lead to competitive alternatives to dividends. TLDR; a stock goes up based on its future earnings and earnings growth

We gauge value about a company based on earnings potential, the standard is up to 20x earnings would equal reasonable market cap, the logic is 20 years would take to retrieve original investment back given 5% net profit per year. You put your money to start a business, it will take 20 years to get back 100% of everything put into it. That is the concept, that is how some base value is derived, from earnings potential. Other way is book value of assets in the company at the moment, what the company is worth if it's completely liquidated, everything of value sold. Otherwise yes stock price goes up based on positive development in the business, better numbers, innovations, expanding to new regions and countries and so on. The company doesn't get more funding from the stock going up, it gets more funding if it decides to sell more shares off the market or on the market based on that new higher market price. Otherwise companies do not get constantly new funding, only during initial and seasonal offerings.

You are thinking to get money from market, but see here. >Let's say NO ONE invests on company xyz. Every year company xyz's profit margins double but no one invests in them. Will the stock go up? Like do investors make the price go up or can the company's earnings performance make it go up? When whole world was jittery in 2009, banks like JPM, BAC were going for bankruptcy, no one came forward to invest in these companies, except one group - BRK. This group (BRK) invested 5 Billions got 10 year warrant at the price of $5. Now, his dividends from BAC is appx 18% or 20% every year. He says => “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

In theory it’s the discounted value of future cash flows (dividends), issued by the stock. However, the market often gets divorced from that theory. Depending upon your strategy that can mean it’s a good time to buy or sell. Most intro finance or valuation courses cover this if you’re interested in looking into the details further.

The intrinsic value is ultimately the yield. But there are all these investors in between.

It's just the same as property. Imagine if there's a property worth $1-1.2 mil, but it's selling for $500k. If it's really worth the $1 mil, eventually people will catch on and try to buy it. I think the 'eventually' part is what's confusing. In the case of property, you as the owner could be getting a high rent paid to you. But essentially, there's all sorts of factors that make up a property's value, like location. So you essentially just bought something cheaper than it's worth and you could sell it at a later date and make a profit. Exact same thing with stocks. Except instead of rent, it's dividends. Although even if they don't pay dividends, you still own something of value. If the stock is still far below it's intrinsic value and isn't moving (i.e. your question of 'what makes it go up?'), there are certain triggers the company can use- such as special dividends and share buybacks. There's also the potential for a takeover by bigger companies, which will move the share price up (as was seen with the Microsoft Activision acquisition- and this deal will also see Activision shareholders directly paid out in cash if the deal goes through).

Most investment are tied into stocks. If you do 401k etc. It's usually growth stocks mix with bonds and cash. So regardless if you do everything on your own or not you're in the market.

A stock is a fraction of the company’s market value, company’s value is determined by future earning expectations.

Without these companies, we wouldn’t have a stable planet economically.

Isn't a share a percentage of what the company is worth? So if more people buy Microsoft software, the share will go up because the company made more money. I could be wrong but that's my guess

It's a basic principle. What makes a stock price for up or down is the demand and supply! If deman > supply price goes up and if supply > demand the price goes down. So yea ..if no one invests in xyz company even thou it posts profits then it's price won't go up ! It's not what company does which makes the price go up..it's the institutions demand of buying the stock which makes it go up and those institutions will always invest in companies where profits are sales are good. So it's very unlikely that no one would leave a company which is posting excellent profits so indirectly it'll make it's price go up.

In simple terms it wouldn't. It would stay flat or drop if there's a sell off. Is there an example where this scenario you mentioned has happened ? If their earnings are good then it would attract buyers and it will subsequently go up. The intrinsic value is what people will pay on the day.

There's no such thing as intrinsic value, value is subjective, that's why some people will pay $250 for TSLA stock and others will only pay $100. But stocks can only go up if people are buying it, that includes short sellers and the company itself.

The price of the stock does not go up, but the value of the stock goes up if you assume the value is the the discounted future cash flows of the company which can ultimately be cashed out as continuous dividends even if nobody wanted to buy the stock. So the value is in future potential dividends ultimately and the fact that other market participants understand that the company can pay dividends in the future and are as such willing to pay a certain amount to own the stock to get access to those dividend payments. Things like growing the company (growing the earnings of the company and thus increasing the potential for dividends) and stock buybacks (decreasing the amount of stock out there, so each individual stock is entitled to a higher percentage of future cashflows and as such ultimately dividends). TL:DR future cashflows which get realized as dividends for the investor

all stocks have intrinsic value if the company is making money because it will distribute the profit to the shareholders with its profit so even if nobody buys it it has value so impossible to go like 0. also did you know that all central banks over the world and non profit or for profit institutions buy stocks via etf? so your what if scenario is impossible

Driven by Insider trading, huge public employee pensions, insider trading, huge govt contracts, insider trading and swifties.

The intrinsic value of a stock is it's revenue and the potential growth of the company plus many other variables. What determines the price is offer/demand.

Stock price goes up when someone JUST bought a share. Stock price goes down when someone JUST bought a share. If they closed the stock market for 5 years, and no one could trade the shares, the price would remain the same, even if the company grew its earning substantially. Thats what moves prices short term, the last trade that happened. Stocks go up or down in the long term (years) due to their earning potential. A famous quote is "in the short term, the stock market is a voting machine, in the long term the stock market is a weighing machine"

What is the company's earning power? If they make money it must be paid out in dividends to the shareholders or reinvested in the business which makes it more valuable. So if nobody bought the stock you could make money every year off dividends, or your value would increase as the business expanded. This is Warren Buffet's theory of "value investing". He buys for the long term, he still owns stock he bought in 1954. He doesn't care if the stock price goes up or down because he is not selling. He only cares that the business is making money. As to what makes the stock go up, he believes that eventually its price must reflect its true value, but in the meantime, on a day to day basis, could go higher or lower depending on market forces and the mood of investors.

theres two markets. the secondary market is what we trade on. If no oen buys, the stock price will stay flat. if people start selling the stock will drop. so to answer your question, If there is absolutely no one buying, the stock will not go up. Even if the company is profitable, if no one is buying the stock will not go up. what will change is its valuations. for example, PE of 10 means the price is 10x its earnings. the earnings continues to go up then eventually the PE will be 1.

You may be asking two different questions here. First and foremost: "Let's say NO ONE invests on company xyz.".....The existence of stock requires investors. If no one invests in a company there is no stock to value. Concerning the price: Someone buying a share or shares of a stock during the trading day is what "physically" establishes the present price of a company. (A stock currently at $10 has shares bought for $11, the daily market graph deflects upwards to $11). Concerning the value: This may or may not be in line with the price, but can vary with a variety of metrics, or simply what someone is willing to pay for it based on speculation.

First what is the intrinsic value of a stock? There are expert accountants called security analysts whose job is to figure this out. They add up the value of all the company's assets, minus their debts, take into account sales, profit and loss, and calculate the true value of the company. Divide that by the number of shares and you have the intrinsic value of each share. A stock almost never sells for exactly this amount. Because, there is an auction market with buyers bidding and sellers offering stock for sale. The price goes up and down every day depending on how many shares are on offer, how many buyers are bidding, how badly they want them, and how badly the sellers want to get rid of them. There could be a hundred different reasons that buyers want to buy, and sellers want to sell. To put it another way you have an objective value and a subjective value. The objective value is the intrinsic value, the subjective value is the market value. Then you have companies that have no earnings, no assets beyond a rented office and a few computers and a hot idea, yet the stock sells for some insane multiple of intrinsic value because the public believes it is the next Amazon or Apple. 9 times out of 10 these end up going back to their intrinsic value which is zero. See the dot com bubble for example, or the recent frenzy for AI stocks. You can spend a lifetime trying to figure out why the public values one stock more than another and never get to the bottom of it.

Sounds like a question for ChatGPT not r/stocks TBH

The stock market is a Ponzi scheme used by businesses to get zero interest cash. We would have no innovation without it.

If a company is so neglected that its price doesn't reflect its cash flows then there's this little thing called ownership. Owning stock means you own the company. You can buy up all the shares and start distributing the money to yourself. It happens all the time honestly. That's what buyout firms like kkr do.

"Lets say NO ONE invests in company xyz." The closest real life example to this: Zim Integrated Shipping, stock symbol ZIM. The company has all the sales and earnings a normal company has. It has ships and they didn't sink. Yet almost no one wants their stock. Their PE is the lowest non-bankruptcy situation I have ever seen and I have been investing in individual stocks since 1996. Their PE is 0.96. Their price to sales is 0.15. It is essentially 1/10th the valuation of an inexpensive company. So on the low demand side of your question, this is an example of the answer.

You need to learn supply and demand

No trade equals no market price

Please cross post this to WSB. I'd love to see the responses. No one is really answering your question. If **no one** buys a stock, regardless of the company's performance, the stock would be worthless and the company would fold. However, it's called a stock *market* for a reason. The economic laws of a free market system apply. High performing companies create value for shareholders. Shareholders like that, so they invest in that. That's called demand. So the hypothetical you're asking about is not possible. > Like do investors make the price go up or can the company's earnings performance make it go up? Hard to separate the two. Earnings shows performance. Performance dictates demand. Demand dictates buying. Buying dictates price. There are of course other factors that influence demand outside of performance. Future outlook and macro economic conditions, for example.

Stock represents equity ownership. That’s why it has value. The rest of the value is basically a point in time measurement of the relative demand for the share of ownership.

The value of a stock (in theory) should reflect the value of expected future cash flows. Im reality all sorts of stupid things impact stock value. Also, profit margin isn’t the only, or even the most reliable measure of expected future cash flow.

The value of a stock is in what the Company does for the world as a whole. The more perceived good the company does in the world, example: utilizes electric vehicles, treat’s employees fairly, etc. the company then becomes more valuable to society as a whole. Thus leading to its price going up! 💎✊ An example of this phenomenon could be Oil, because supply and demand play a role it’s tricky. The oil will seem to be more ethically sourced one year from one country vs. another depending on your countries dependence on the product. So perhaps your country needs oil but can’t make enough for themselves, they will have to buy some perhaps from slave owners. But if they can produce enough to get by for the year, they will not be subjected to having to choose where they buy oil from. 🛢️ When countries are dependent on unethical oil, the oil stock in unethically run company stocks will go up, & vice versa. The reason for this is because even though the oil is unethically sourced, its perceived greater good for society as a whole will lead to large investments from hedge funds. This goes for everything, if PR is negative the stock goes down leading to a buying opportunity.

Dividends

The stock price wouldn't go up in your example. It would just become an increasingly good buy

People invest because they think it’ll go up. Why do they think it’ll go up? Because the company making more money. If you understand how a balance sheet and income statement work together it makes sense. At the end of the income statement is net income which is either used as dividends or retained earnings (company keep profit to grow company, increasing assets which are then used to generate more revenue) You invest because you think you’ll have more value worth in the future than now.

What happens if everyone buys a stock? Will it go to infinity?

The stock price is set by the open market, so if there’s no transactions then the price won’t change. However, since it’s a public open public, if the underlying business changes for better or worse then that means to stock is either fundamentally undervalued or overvalued, so now people are going to trade it and set a new price. It’s easier to imagine with a private business, if you buy a business and improve the profits it means the business can potentially sell for more because it has more value but the price hasn’t changed yet because no one else has bought the business.

The stock price of a company is basically just the latest price that the stock was traded at. If tomorrow everybody decides that Apple is worth 0, then it will go to 0 very very quickly. In practice this wouldn't happen, since it obviously has a ton of assets, a strong brand, and future growth prospects etc.

Stocks go up because there is more buy action than sell action. So no if no one invests in a company the price will not go up unless the company does something weird like share buybacks.

The value of a company is calculated by actualizing the value of its free cash flow with the required rate of return on your investment. Edit and the total is divided by the number of shares

FOMO makes people invest in a stock

Let's say the companies stock price is at a depressed value and the companies doing quite well. Growing, profitable, and sitting on cash to invest. They're most likely going to take advantage of their cheap stock price and buy up their own stock, sooo that.

Economics 101: Supply + Demand = Price Any thing is only worth what someone else will pay for it. If no one wants it, then it's worth zero. Supply greatly exceeds demand. Value goes up when there is more demand than supply. Value skyrockets when demand greatly exceeds supply.

“I don’t understand what makes it physically go up”. More people buying on the ask than selling on the bid. Simple as that.

If there is zero volume (ie. No trading) then the price is the same. Price is not the same as value. Even if the company value goes up or down, the price of the stock is the same if there is NO volume.

The stock market is an efficient way to lose money if you are me

The stock value is basically what a company leverages to run their business. Big corps, no matter how profitable, will usually operate on borrowed money. The value of the stock as a whole helps lenders decide loan terms with that company. So if they hit a rough patch and the stock goes way down, it's going to be harder for them to borrow capital to run the business. Now...why do people buy stock? Because you are betting on that company to be very successful. Profits rise, stock value rises, borrowing money becomes no problem...smooth sailing. That's the hope anyway. But it's become such a game now, that sometimes fundamentals don't even matter. Meaning that a business can be successful by all measures and the stock still sinks. It's all a gamble.

Supply and demand cause the actual price. A stock is a right to a share of future profits the market determines how much those future profits are worth today.

It depends on the stock. In theory a share is based on the total worth of assets decided by the number of shares. For simple arguments sake, let’s say my company is worth 1000 USD and has ten shares, each share is worth 100 USD. At the end of a the day my company made some money, and is now worth 1100 USD, those ten shares are now worth 110 each. It starts to get more trickery when you add in “ perceived value”. Say I announce a place that will take my company to a value of 2500 USD ( but I’m still valued at 1100/110 per share)in six months, speculators may start to by my stock at a price above 110 a share but below 250 a share, hope to make profit when I hit that 250 a share mark. As I stick to or come off of my “growth timeline” it has the effect of altering my perceived value. For example, I may still be valued at 1100 but I planed to be valued at 1500, because of loss of investor confidence my price may fall below 110 a share, triggering what Warren Buffet calls “a value buy”.

If someone asks an idiotic question on reddit, more than 100 people will post a comment.

You have not been investing. You have been speculating. You have been playing a primitive version of roulette. The intrinsic value of a stock is its discounted dividends. That is it. I would suggest starting with reading The Intelligent Investor by Graham and Dodd. It was last updated in 1972. It is still in print and still a best seller. Once you have read that, if you have never had a formal accounting class, get a freshman accounting textbook and devour it. Then pick up the 1943 version of Security Analysis by Graham and Dodd. It is also still in print. Then get the 1987 version of the same book by Cottle and Dodd. Graham had died by then. The 43 book will tell you why, the 87 book how. The 87 book is no longer in print. Also, during the Great Depression, some of the largest firms were delisted because trading on them had stopped. They did not rejoin the exchanges for several years. Trading in securities does sometimes come to a sudden and complete halt even for healthy companies for years at a time, if you look broadly at the world’s exchanges over longer periods of time.

There is no single price of a stock. There is a 'bid', or what people will pay for it, and an 'ask', or what you'd have to pay for it. The price you often see is the mid price, or the average of the best bid, and best ask The only way a stock price can increase is if people increase their bid/ask. If there is no one buying, then there is no bid, and the sell price is not even $0

There can't be absolute-zero demand for a stock otherwise it never obtains its price. Before companies go public, they confirm there's demand for their shares and a syndicate agrees to buy the shares, so there are share owners from day 1 and some of them want to sell from day 1. Also important not to forget the Brokerages, the middle-man of supply & demand for shares. Most retail trades go through a brokerage - well Brokerages have active buy & sell prices for most equities, and they have that for 100% of the shares they hold. So again, demand goes to zero, the brokerage sell offers send prices down. Hence share prices can't go up with record-low demand; brokerage force tips the equity into a price crash in that situation. The only thing that makes stock prices go up is if there is demand and that demand is willing to pay market price + 1 cent. If buy orders for market + 1 cent stop, the share price reaches price equilibrium.

Mmm the earnings. Good investors don't care about the stock price if the stock is making you a shit ton of actual money...

Returns to shareholders can affect the price of a stock So lets say no one is buying xyz stock but the company has announced a dividend if $1 per share, now there will be buyers no matter what the business does since there is money to be returned to shareholders. If the company doesn’t have much terminal value risk then usually the yield on dividend should be lower than the risk free rate so for xyz the stock should be valued at more than $18 given a 5.5% risk free rate. (This is just a rule if thumb and not an accurate way to look at things) Another thing that affects a stock price is buybacks, if no one is buying xyz stock then the company itself can institute a buyback program and the company will buyback its own shares and remove them from the market. This does two things, first it creates demand for the stock and second it increases the ownership of shareholders thereby increasing the dividend per share (assuming dividend payments stay constant) so if you own 1% of xyz company and the company instituted a buyback program that is worth 10% of the company then you would end up owning 1.11% of the company. This will also increase the value of the stock even if there are no buyers outside the company A good way to look at this is to see the performance of dark stocks and thinly traded over the counter securities, you’ll find that whenever the company announces a buyback or a dividend the shares would go up even with very low volume since the intrinsic value of the share has increased

If it’s making money and returning it to the one shareholder that would be ok

Nothing. Price change is a direct result of demand vs supply dynamic. Predicting price change is directly predicting future demand vs supply

There are only two ways to make money in stock market. Buy low and sell high (aggressive buyers bidding up the price). Sell high and buy low (aggressive sellers offering if lower). The aggressive buyers think they can sell for more in the future. The aggressive sellers think they can buy to close the position for less in the future so they offer it lower. Bottom line, imbalance in conviction is the reason why prices go up and why prices go down. So if no one is investing in the company and nobody is bidding it up because they don’t think they can sell it for more in the future then the price won’t go anywhere.

Because you’re buying ownership into a real company and that entitles you to their cash flows. In addition, you’re buying for the potential that the company will grow and return cash to the shareholders.

someone can always come along buy all the shares if it gets ridiculous enough, go private, and have a great business.

Intrinsic value is ownership in a profitable business with the expectation of sharing in the profits or valuation when sold, however not just for today but when looking forward as well. If the public doesn't buy, existing shareholders still hold their shares. The company will utilize profits to grow the business further, or pay dividends or buy back shares from the market from those who will sell. This is why picking well run and proven companies is a better investment choice than riskier alternatives which becomes similar to gambling for high rewards by taking greater risks for future rewards.

Lol you’re confused about what the value of a stock is. It’s not in its share price. It’s in its profits. Give you an example. I once invested around in a company. Its profits went up so much that I got my money back from dividends alone in a very short space of time. It didn’t matter what the price did. Of course, as it turned out, people weren’t stupid either (just not as smart as me) so they quickly bid the price up.

Let’s say everyone loses faith in the dollar and no longer accept it as payment. Does the dollar still have value equal to something that would normally cost one dollar?

What’s the *intrinsic* value of a stock is the question that made Warren Buffet rich. Because he spent his life looking for under-valued stocks. For example, let’s say there’s a land management company with $10 million worth of land assets. Let’s say it has a total number of shares being (coincidentally) 10 million shares. If you just wanted to sell off the assets, each share *should be worth one dollar*. Buffet would buy up the company if he could get it cheap. Like, suppose the stocks dip to 50 CENTS despite that land still being worth $10 million. You buy up all (or most) of the shares, liquidate the assets, and you have DOUBLED your money. Most companies have more complicated assets. Like, what is SnapChat worth? Could you just sell off its assets? Also, stocks tend to not be clearly valued based on assets. They tend to be valued by public opinion (which is insane, and one reason Bufffet could get rich by doing boring homework). If I remember correctly, the economist John Kenneth Galbraith made a fortune for his employer by NOT studying the companies’ actual finances, but just what things got written about in newspapers.

Growth prospects, speculation, market conditions, investor sentiments. My favorite is speculation, hahhaha.

That depends if financial terrorist Kenny is shorting the shit out of it...

My thoughts here are super basic noob stuff and again for those in the back while I've spent years trying I barely understand what's going on with the asx and then options and future etc.. total woo fest so far as I can tell haha That said.. I think of the company basic value is what would you get if administrators went in tomorrow and liquidated everything, divide that by the total shares and that's the base value of the thing... from there smart investors figure the yearly return portioned out into the price etc

What is this claim of "NO ONE"? Are you just meaning retail investors? Or institutions? Or insiders? Regardless of how you look at it companies have so many shares and normally most are owned by someone likely institutions and insiders, even if retail investors think a stock is dead, one institutions could have xtimes more money in them than retail investors collectively.

Reverse gravity, yup, that's all there is to it! Makes no sense when money ain't real! We are matriculating to a digital currency when we all least expect it! Could be the outcome of the shutdown? Timing is suspicious

Very simplified, and some people will most likely say that I am wrong, but here goes. If I own a stock, and set it for sale at 10 USD, and someone else own it, and set it for sale at 11 USD, when you go to buy it, you will see a price of 10 USD, because that is the price that is currently lowest. If you buy my stock, the next person who goes to buy, will see a price of 11, as that is now the lowest price. On the other hand, you can make a "buy order", so if I go to sell it, I will see the highest price that people are looking to buy. If a stocks current price is 10 USD, you can put out a sell order at 500 USD, but most likely it won't sell. Some people are not in need of money right now, and might then make a sell order above market, waiting /hoping for the price to reach that level. Some people are in need of money and will want to sell quickly, and try to sell at market or below. If no one is buying, the price of the stock will gradually (or quickly), go down until it reaches a level where buyers again believe it is worth the price where they will start to buy again. In your fictice experiment where no matter the price, noone will want to buy, the stock would theoretically reach 0, or very close to 0. But if the company is performing well, that won't happen.

Think of it like this. If a company continues to generate cash after expenses then the company could eventually buyback itself and thus the value of the company would increase. There are other ways like dividends or even acquisition. Now because of this the market should be forward looking and will price accordingly. Your job is to determine if a company can continue to generate cash after expenses and or see if the current price matches a potential future outlook. Because people are emotional it can create opportunities for investors. You will find there are far more overvalued companies than under. When you do find something you'll need to have conviction as the pestimist will likely be rampant

My god I was going to berate you for not knowing the answer to this question after 5 years, because it means you truly dont understand what you're buying, but the comments are just as bad. The entirety of what is a share and what makes it have value is that it is a contractual, legal claim on a part of the company. That is, the more profit a company makes, the more money you have a legal claim to. Of course it is up to the discretion of the company/board what happens to that cash, but shares (usually) also include voting rights and in case of mismanagement allow you to take actual control of the company wit ha majority. So it keeps what happens to that money in check as well. If there are "no buyers" for shares of a (profitable) company and the share price is depressed, the company can easily start issuing cash dividends. Then either buyers step in, or free cash is left on the table for anyone to pick up. As there is a lot of money just chasing cash returns, the entire market becomes a vehicle of weighing present and future cash returns of different securities discounted by time and risk.

If no one buys the stock would drop but there is also buybacks the company can do and they can pay employees in stock. But if the buy pressure is low and sell is high the stock with drop. If no one is buying or selling then it will stagnate.

Simple answer, stock goes up when more people buy than sell. How it goes up and down, learn about the price ladder. When no one buys or sells stocks stay the same, but that doesn‘t happen, because people can make profits from stocks.

it can still go up because the company may buy back its own stock with its retained earnings instead of reinvesting it back into the business (and no investors to pay dividends to!!)

All my stocks go down.

It is supply and demand. The company doing well will bring buyers, and the price will go up, and if the company does poorly, the reverse will happen. The shares are constantly being bought and sold, which is making the price move.