With so many stocks I hold going through tough times, it been pretty brutal price action to watch here all over the ASX. It actually lead me to doing a bit of research on the ASX in general to see the history, which I found quite eye opening so thought I would share.
Since inception of the ASX there have been around 37 500 companies listed on the ASX, and only around 2 300 left listed today, so only 6% of all listed companies ever listed on ASX are still listed, and of that small percentage of survivors listed only around 500 make money.
Out of those 500 companies (around 20% of the current listed stocks, or just 1.3% of the all companies that have been ever listed in Australia) that are profitable and paying dividends, interestingly but maybe not surprising nearly half of their combined total profits and dividends come from just six companies – the big four banks, BHP and RIO, which are all more than 100 years old.
Around 110 other companies listed (around 5% of companies listed today, or under 0.003% of all companies ever listed ) are profitable but pay no dividends.
That leaves the remaining 75% of currently-listed companies around 1,720 companies that are barely solvent and will probably run out of money at some point and suffer the same fate as the 33,000 other companies over the years that just dissappear from the ASX worthless.
One little ray of sunshine is that basically, about 3% about 1,000 local companies in the data got taken over by other local companies. Now, some of these takeovers were good for the shareholders, like when BHP took over Western Mining, or when 35 banks merged to become the big four.
But, most of the time, it was just a bunch of mining companies getting bought out by people who wanted to make them look good again so they could trick more people into investing. It's happened before too, like when failed mining companies were made to look like dot-coms in the late 90s, or when failed dot-coms were made to look like miners during the 2003-2007 mining boom, then there was the failed mining companies are being made to look like fintechs, like Decimal Software and Bulletproof Group, and then obviously last year they all changed to lithium explorers!
So your looking at around 3% of companies getting taken over in total.
Its quite dismal when you look at the reality of it all, but using that info just shows really it is so hard to get a winner, the overwhelming majority of listed companies in any given era are speculative stocks with nothing but hope and hype and almost all will disappear worthless, it really cant be argued as its data backed that about 97% of stocks listed dissappear worthless.
So who are the real big winners with most of the stocks that end up worthless, its the lead brokers who make money raising for the company, the management and staff of the company who get paid great salaries and performance rights along the way, before the company is worthless. Basically the theme is management win, shareholders lose, a sobering reality.
Im not saying this will be the case here, but it sure looks like its going to be, its good to have this knowledge of the reality here with stocks on the ASX , realise how hard it is to get on a winner and in most cases 97% chance they wont be winners at all, for me the big lesson is we should be taking profits a long the way, that is really the most probable way to make money on ASX taking money off the table along the way and not getting attached.
I hope holders get a chance to take some off again !
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