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Rekenthaler Report

With GameStop, Hedge Funds Might Enjoy the Last Laugh

Do individuals stand to benefit from penny stocks in the long term? Not likely.

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The day that I interviewed for a position at Morningstar, on Feb. 6, 1988, the Dow Jones Industrial Average closed at 1,910. Most Wall Street veterans were cautious. Stocks had righted themselves since October’s “Black Monday” crash, thereby averting disaster, but the Dow Jones had nevertheless gained 150% over the preceding six years. The market’s glory days appeared to be behind it.

Equities then began to rise. They grew by 15% for the rest of 1988, and double that amount in 1989. With only brief respites, stock prices increased for another decade. It became the greatest bull market in U.S. history. Throughout that ascendancy, the old guard muttered that stocks had become foolishly overpriced. Eventually, I paid them no more heed.

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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.