SOME SOBERING THOUGHTS...
I certainly have no desire to add anything to the "Irrational Pessimism" which have overcome the stock market lately, or this particular stock's 98% nose dive from it's high of 138.5/share just over a year ago. However, I came across this SI post today (#reply-15523980). The post contains a few excerpts from a New York Times article published last Sunday, on 3/18/2001. It did make me stop and "think," which I've really REALLY tried to completely avoid doing at all lately.
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New York Times article excerpts
3/18/2001 (sorry no direct link, bold added):
There are signs of suffering in indicators like consumer confidence and purchases of consumer goods and capital goods, argued Peter J. Tanous, president of Lynx Investment Advisory Inc., a money management concern in Washington. "My sense is that the anguish that people are feeling, they are keeping to themselves because the losses are so big," he said. "Investors are internalizing the pain but it's being reflected in the economy. People are sitting on their hands and their wallets."
Mr. Tanous, author of "Investment Gurus: Road Map to Wealth From the World's Best Money Managers," makes investor psychology something of a study. He fears that many investors are holding onto decimated stocks in the hopes that they will make a quick comeback, as some have in the past.
A big mistake, in Mr. Tanous' view. And he provides a bit of arithmetic to demonstrate why.
Take a popular stock like Intel, which has fallen 63 percent from its high of $75.81 in August. Many investors feel that Intel's dominance in microprocessors makes it a prime comeback candidate.
Assume that Intel's shares rise 15 percent a year going forward, an enviable return by any investor's reckoning. How long would it take for the shares to get back to their high of just seven months ago?
Seven long years.
Plug in the same assumptions of 15 percent annual returns for the rest of the most popular shares in America and the picture is sobering indeed. These stocks may certainly come back, but if they do, it will more likely be over a period of years, not months.
At 15 percent a year, Cisco shareholders would need to wait a decade for their stock to get back to its high of $82, seen last March. AT&T would climb back to its peak of last March in seven years. General Electric, which has lost a relatively modest 33 percent since its peak of last August, would need three years to return there.
Microsoft would see $115 again in six years, while Oracle shareholders would have to wait nine years to regain their shares' peak. Nine years would also have to pass before Sun Microsystems stockholders would again see the stock's high of $64.66.
Because it has fallen so precipitously in the past year, Yahoo would require even more patience from its stockholders: 20 years of 15 percent gains.
This exercise is not meant to advise investors to dump these shares. Rather, Mr. Tanous wants to show how investors will have to temper their expectations and learn to be satisfied with the lower returns that are more typical of the stock market.
While pundits and strategists quibble over whether the market has bottomed or has further to fall, Mr. Tanous said investors should instead bury any notion they may harbor that the bull market of the last decade will stir again.
"I can state with a great degree of conviction that most of us will never see a decade in the market like the '90's in our lifetime again," Mr. Tanous said. "And until investors taper their expectations to more normalized returns, they're going to be in for trouble."
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SUMMARY (of the figures in the above article)...
Based on the assumption of using an "historically" excellent share price increase of 15%/year average going forward every year (which many experts would say is extremely optimistic), it would take the following companies the amount of time indicated below for their stock's price to reach previous highs:
1. INTEL...7 years
2. CSCO...10 years
4. AT&T...7 years
5. GE...3 years
6. MSFT...6 years
7. ORCL...9 years
8. SUNW...9 years
9. YHOO...20 years
Oh, and I calculated it for our beloved stock...
10. INSP...27+ years (to reach previous high of $138.5/shr)
WORLD'S FIRST TRILLION DOLLAR COMPANY?
Just for the heck of it, I calculated how long it will take INSP to reach a market cap value of ONE TRILLION DOLLARS. Using that figure of course, because as most of you know, the company's Founder, CEO, and Chairman of the Board (and all-around "visionary," who likes to be called an AA) has been quoted as telling the World that INSP will be the very first company (in the entire history of our planet, which covers a pretty long time) to be worth a trillion dollars.
The following is based on our beloved BobZ's calculations, estimating that the stock will have to reach $3250/share (based on today's share price of about $3/share), to reach a trillion market cap.
Any guesses???...
If INSP share price can just increase 15%/year,
by my calculations it will take EXACTLY
FIFTY YEARS for INSP to become a trillion dollar company
I don't know about you other "longs," but I've already penciled in that date on my calendar, five decades from now. Well, I must admit, I did fudge a little bit and rounded the date up to April 1, 2052 (which seemed to be a much more fitting date). <g>
But, we're already off to a really bad start for both 2000 and 2001. And like many other DotBombs, they sure better start making lots and lots of money (it's called EARNINGS, by Wall Street) pretty darn soon, or they will cease to exist as a company "sooner rather than later."
Roger
PS. Be careful investors. It's a jungle out there.
Lots of "Lions and Tigers and BEARS...Oh My"! |
