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But if you don't understand the company, if you just buy based on the fact that the stock falls from $26 to $16 and then to $10, what do you do when it goes to $9? What do you do when it goes to $8? What do you do when it goes to $7? This is the problem people face; they sell the stock because they don't know why they bought it, then it goes down and they don't know what to do.
Now, if you flip a coin, you should learn history. History is important, you should learn from it. What you learn from history is that the market goes down, it goes down a lot. The math is very simple. It's been 93 years, a century. This is also easy to do. The market has had 50 drops of 10% or more.
50 drops in 93 years, about every two years, the market drops 10%. We call that a correction. It means, ironically, because you 've lost a lot of money quickly. We call it a fix. 50 drops in Over 93 years, the market has dropped by about 10% every two years. Of those 50 drops, 15 were 25% or more, known as bear markets.
We've experienced 15 of those drops in 93 years, so every six years the market will drop by 25%. That's all you need to know. You need to know that the market will occasionally go down. If you're not ready for that, you shouldn't own any stocks. And it's great when it happens. If you like a stock when it's at $14, it falls to $6.
It's great when you understand a company, you look at the balance sheet, and they're doing well. You expect it to go up to $22. From $14 to $2 is great, but from $6 to $22 is even better. So take advantage of these dips; they will happen. Nobody knows when they will happen. People tell you about it after they predict it, but they've predicted it 53 times, so you can.
Take advantage of market volatility if you understand what you own. I want to give you a few rules that I find very helpful. Many times people buy on the basis of stocks that have dropped significantly in price. How do you know how much further it can go? I remember when Paragoi went from $130 to $100.
People said, "This is great, a great record for the company." However, when it goes below $100, you just buy when you know all the shares and it can go below $100. Now the price is $95. What are you buying? Within a year it has fallen to $18, and these are companies with no debt because it was actually overvalued.
I remember in my first or second year, in a few years, it went from $26 to $16. I said, " How much further could it go?" $16. I think we bought the biggest block in the industry at $14. I said, " You know it went from $26 to $16." How much lower could it go? Good at $10. I called my mom and said, " Mom, look at Kaizer Industry.
I mean, how much lower could the industry go?" It went from $26 to $10. Good. It went down to $6, $5, $4, and three dollars. And I was done. Luckily, it kept going. I was still working at Stop & Stop, but it went fast. I was able to do this. Let's condense these things, and at $3, I figured it out. You know, there's something very wrong here because Kaizer owns 40% of steel, 40% of aluminum, and 32% of cement.
They own their own Kaiser media channel. They own the Kaiser miners, the Kaizer engineers. They own the ships, they own the business, and they have no debt. Now I've learned this very early on. This can be a breakthrough for some people. It's very hard to go bankrupt if you don't have any debt. It's hard for some people.
That's accessible. That 's a real achievement. But they had no debt, and the whole company was worth $3. It was sold for about $75 million, and that's equivalent to buying a Boeing 747. I said there was something wrong with this company selling for $75 million. I bought a little early at $12. But I said everything was fine, and in the end, this was successful.
And what they did was give all their shares to shareholders. They skipped sharing information about Kaizer Cement, Kaizer Aluminum, Kaizer Steel. They sold all those businesses, and you get about $50 a share. But if you don't understand the company, if you just buy on the fact that the stock has dropped from $26 plus $16 and then it drops to $10, what do you do when it goes down to $9, $8, $7?
This is the problem for most people; they answer the stock because they don't know why they bought it, and then it... They go downstairs and they don't know what to do now. Do you flip a coin? Do you walk around the house? You should know what you're doing.
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