On its face, the 40 percent CAGR sounds so deceptively simple -- even seductive.
It means -- from August 5, 1998 to August 5, 2008, CMGI has to return COMPOUNDED, 40 percent each year. History shows us how difficult it is for a good stock to achieve 40 percent in ONE year. In the proverbial long run, stocks historically average 10-11 percent per year. (Of course, as they say, in the long run, we're all dead!;-)
You're saying it has to AVERAGE 40 percent each year. Assuming you believe there will be inevitable off years (I don't think you can name many stocks that have gone up every year), that means it will have to have numerous "grand slam" years.
I'm aware of no stock that has sustained such a performance in the past 10 years -- not INTC, not MSFT.
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These are the two best tech stocks (arguably) in the middle of the greatest bull run in history. They can't do it, but you're telling me CMGI can??
I consider such a scenario highly unlikely to put it mildly. Anyone suggesting that it is likely (I'm not saying you are, Premier -- you did a smart thing, IMO, by noodling out the numbers) is perhaps falling victim to a mania that is not sustainable. |
