Читать книгу Investing in Gold & Silver For Dummies - Paul Mladjenovic, Paul Mladjenovic, Ted Sudol - Страница 14

When you buy stock, you’re really buying (or participating in) the performance of a company or, more to the point, a company’s executive management. If the company behaves poorly or in a substandard fashion, then the company won’t succeed. This cuts to the heart of the matter: A successful company is profitable.

Profit is the lifeblood of the company, and I could easily make the case that profit is the lifeblood of a successful economy. Without profit, the company fails. If it continues to lose money, its losses will grow and it will ultimately go out of business and end up in bankruptcy. Given that, the stock will go to zero.

In the history of the stock market, thousands of companies went out of business and we witnessed their stock go to zero. Some famous examples are Enron and Bear Stearns, and you can find many others. The Dow Jones Industrial Average (DJIA) has been the most watched stock market barometer for more than a century, and it lists 30 of the largest and most successful companies in the world. Yet the 30 stocks within the DJIA aren’t the same 30 stocks that were first listed in the original average. In fact, only one stock remains (General Electric). The rest either went out of business or were taken over by other companies.

Yes, stocks can fluctuate and can go up or down given the daily interaction of a huge group of buyers and sellers, but if the company’s management team and the overall company itself ceases to perform profitably, then the stock will suffer.

A stock will be only as valuable as the performance of the stock’s counterparty: the company’s performance. Keep in mind that although mining stocks may have counterparty risk (as any other stock), you can mitigate the risk by focusing on the stock’s fundamentals (profit, market, and so on), so check out Chapter 7 for more details.