A HITCHHIKERS GUIDE TO THE STOCK MARKET
When I was an undergrad at Cornell, I used to walk up the hill past the Johnson Art Museum every day. It was a giant building shaped like an old-fashioned school desk. At the time, I thought the money for the building had come from one of the Seward Johnsons of Johnson and Johnson fame. I learned later, that in fact, the money had come from the other Johnson family, SC Johnson.
Why am I writing about this? Because SC Johnson is the largest privately held company in the world and the maker of such popular products as Windex and Pledge. The family made its fortune on Saran Wrap and they never went public. You cannot buy stock in SC Johnson no matter how much you might want to.
The question I want you to ponder is this: In all of this market turmoil has the value of the SC Johnson company changed?
Stock prices go up and they go down, but the underlying value of the companies that those stocks represent does not change. There is no question that companies like Apple, Coca-Cola, General Electric, and Next Era Energy (Florida Power & Light) have value. There is also no question that most of these companies (and their peers) will have greater value in 5, 10, and 20 years. They will have greater value because they will pay a larger dividend per share than they do today.
I expect that the correction we have seen over the past few days to be short lived. Today’s activity is very informative. Panicked investors stewed over the weekend and lined up to get out this morning. The market went down over 1000 points at the open and then rallied back.
As I write this the market is down around 200 points and a number of stocks we hold have moved into positive territory. My message is, DON’T PANIC. People that gave into their fears over the weekend are already regretting that decision.