Massive Drawdown Recovery: Anecdotal Evidence vs. Research Insights

Reddit users in the r/stocks thread [11] share mixed experiences with recovering from 70-90% drawdowns. Anecdotes include successful recoveries: iamgrzegorz turned a Cloudflare (NET) position from ~79% down to green via averaging down over time; versello’s Palantir (PLTR) position recovered from ~70% down to seven-figure gains by continuing to invest; and StrebLab noted Amazon (AMZN) dropped 85% during the dot-com bust then gained +60,000% from lows. Conversely, s0n0r4 argues ~90% drops often signal serious issues and rarely recover, while MorsCerta69 holds a BlackBerry loss for tax offsets instead of expecting recovery [11].

Research highlights exponential return requirements for recovery: a70% drop needs a233% gain, and a90% drop requires a900% gain [4]. Major indices like the S&P500 have recovered from70-90% drawdowns (e.g., COVID-19, dot-com bust) [3], but individual stock recovery rates lack robust academic data [2]. Documented individual stock recoveries include Meta (META) (77% drop in2022 to all-time highs by2025 [5]), PLTR (2500% gain from2022 lows [6]), NET (70% drop recovery [7]), TSLA (multiple major drawdown recoveries [8]), and NFLX (80% drop recovery in2 years [9]).

Both Reddit anecdotes and research agree recovery from massive drawdowns is possible but rare for individual stocks. Success depends on disciplined averaging down and strong underlying fundamentals (e.g., NET, PLTR, META). Indices have better recovery track records than individual stocks [3], while ~90% drops for stocks are often terminal [11,2].

: ~90% drawdowns usually indicate structural issues (low recovery odds [11]); exponential return barriers (90% drop needs900% gain [4]). : Averaging down on fundamentally sound stocks can yield significant gains (e.g., PLTR’s seven-figure returns [11,6]); indices offer more reliable recovery paths [3].