Take yourself back to the summer of 2021. After the fastest retracement of a bear market in modern history, the S&P 500 was sitting ~85% above its 2020 low. The bull market was firmly back. Anything you bought made you feel like a genius. NFTs were taking over. Bitcoin was $40,000. Teenagers were selling courses to adults on how to trade options. The blind were leading the blind. It was a wonderful time. It was the best of times.
Then someone1 asked Twitter; “What company is worth less than $10 billion today but you think could be worth $500+ billion in a few decades?”. The thread originally had more than 710 responses, and the author highlighted the top 20 common responses that have “50x potential”. I noticed this thread doing the rounds recently after someone resurfaced it and wanted to add some context. In what has now become a legendary snapshot of investor sentiment during the summer of 2021, the results are telling. With the exclusion of Ozon, which was delisted from the Nasdaq in 2022 after the Russian war, here are the 19 responses. You might notice the majority of these stocks had gone public within the last couple of years. The following year, 16 of these 202 stocks would go on to fall between 50% and 95%.
These were the stocks that fintwit collectively put forward. If you bought an equally weighted basket of these stocks on July 20th, 2021 (the day of the thread) you would be sitting on a ~75% loss compared to the S&P 500’s modest 11% return.
That works out to a ~44% annualised loss over the period, while the S&P compounded at 4.1%. The “50x" Portfolio” would have suffered a maximum drawdown of 82% vs the S&P’s 25%. It’s not all black and white. I am sure maybe one or two of the names on the list will go on to retrace their losses. There might be a couple of good companies in here. As much as people like to dunk on stocks in a drawdown, it’s still far too early to tell for some of these stocks. That said, it’s obvious why these stocks were chosen when they were chosen.