Massive Drawdown Recovery: Reddit Experiences vs. 40 Years of Market Data Insights

Reddit users share mixed experiences with massive drawdown recovery. Success stories include Meta (META) (70%+ 2022 drop to near-tripling), Palantir (PLTR) (-70% to seven figures), Cloudflare (NET) ($215→$45→$255), and AMD (doubled position to lower cost basis from $100 to $2.50 average) [2]. Many emphasize disciplined averaging down and conviction in strong fundamentals as key to recovery, while others view 90%+ drops as near-terminal for most companies [2].

Comprehensive 40-year market data shows recovery from 70-90% drawdowns is rare: 54% of stocks never recover from their worst declines, with the median US stock experiencing an 85% maximum drawdown [1]. However, survivors can deliver exceptional returns—stocks with 95%+ drawdowns averaged ~55% annual returns over 5 years post-trough [1]. Case studies: Meta’s 2022 nadir below $100 to above $700 (600% gain) [3], Palantir’s AI-driven 2023-2024 recovery [5], Cloudflare’s gradual 2022-2024 recovery via consistent revenue growth [4].

Both Reddit and research align on recovery being possible but rare. Reddit’s success stories mirror research’s survivor cases (Meta, PLTR, NET), where strong fundamentals and trend alignment (AI) drove rebounds. However, research quantifies the risk: over half of stocks never recover, which echoes Reddit’s skepticism of 90%+ drops. Averaging down (common in Reddit stories) can work but requires careful position sizing to avoid overexposure to non-recovering stocks.

: Permanent capital loss (54% non-recovery rate [1]), long recovery timelines (6-7 years for 95%+ drawdowns [1]), overconcentration in underperforming stocks. : High upside for survivors (55% annual returns post-trough [1]), AI/trend-driven rebounds (Meta, PLTR, NET examples), disciplined averaging down on fundamentally strong companies.