About this Video

• Video Title: Should I Buy a Stock Near Its 1-Year Low? (Here’s What the Data Says)
• Channel: Dividend Compounders with Cheese
• Speakers: One speaker (name not provided in transcript)
• Duration: 00:11:18

Introduction

This video analyzes data from 6,500 publicly traded stocks (1985-2024) to determine the likelihood of stock recovery after a one-year low. It explores the relationship between the steepness of a decline and the probability of full recovery, offering insights into identifying potentially successful investments during market downturns.

Key Takeaways

• Steeper declines reduce recovery likelihood: The data shows that stocks experiencing steeper declines are less likely to fully recover.
• Median sell-off is significant: The median sell-off from peak to trough was approximately 85% over 2.5 years.
• Recovery probability varies by drawdown: Stocks dropping over 95% have a 16% chance of recovering to their pre-decline price; those dropping 50-55% have a 77% chance.
• Company quality matters: Recovery depends on company fundamentals (financials, management, business model). Strong companies with pricing power, positive cash flow, and consistent dividend growth are more likely to rebound.
• Returns after recovery can be substantial: While riskier, stocks recovering from a 98% drop can yield a 32.6% CAGR over 10 years and a 297% one-year return. Stocks recovering from a 50-55% drop yield a 19.6% CAGR over 10 years and a 65% one-year return.