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Investors should treat eBay as the ultimate ETF, rather than as a stock. Think about it like this: Financial theory proves that small caps outperform large caps, on average over time. Microcap stocks, the smallest of the small publicly traded companies, outperform the most.


How does this apply to eBay? eBay's success is a direct reflection of its sellers. Put differently, the performance of eBay's stock tracks the performance of the smallest companies in the world, so small that they are not even publicly traded. Hence, eBay can be seen as an ETF - in fact, the only ETF - that tracks the price of the most micro-cap of all micro-cap companies.


To summarize, if there truly is an inverse relationship between market capitalization and investor return, then eBay is positioned to outperform the market in the long-run. Investors have been unable to participate in teh upside potential of the smallest companies in the economy (because they are not publicly traded) - many of whom are eBay sellers. This is clearly a market inefficiency, and where there is inefficiency there are also excess returns to be made!


Invest in eBay, and you will outperform the market in the long-run.

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