As a long-term investor, the time to grab shares in rock-solid companies is when others are heading for the hills.
Strong businesses always come back and the CAGR improves significantly if shares are purchased after a big pullback.
Pull up the long-term charts, you'll see.
Strong businesses always come back and the CAGR improves significantly if shares are purchased after a big pullback.
Pull up the long-term charts, you'll see.
2) Here is Starbucks 20-yr chart - $SBUX
You can see what happened after every scary pullback -
You can see what happened after every scary pullback -
3) Here is Nike 20-yr chart - $NKE
What happened after every scary pullback?
What happened after every scary pullback?
4) Here is Microsoft 20-yr chart - $MSFT
Is the TMT bust even visible on this chart now?
Is the TMT bust even visible on this chart now?
5) Here is Costco 20-yr chart - $COST
Those who panicked and sold any pullback lost out -
Those who panicked and sold any pullback lost out -
6) Finally, here is a company everyone knows - $MCD
In the 00-03 bear-market, its stock fell from $26 to $8!
Those who bought that dip are very happy now. Current price = $207/share.
Investor return = 21.17%CAGR over 17 years!
In the 00-03 bear-market, its stock fell from $26 to $8!
Those who bought that dip are very happy now. Current price = $207/share.
Investor return = 21.17%CAGR over 17 years!
7) Before you start attacking me by saying that I've cherry-picked strong companies and deliberately ignored disasters; please read the top of this thread again.
Compounding only works with rock-solid/strong companies which are able to grow their business over time.
The end.
Compounding only works with rock-solid/strong companies which are able to grow their business over time.
The end.
8) A lot of comments about "survivorship bias" following my thread about compounding.
Of course, a little work is needed when selecting the compounders. What are odds of the following going bust?
$MSFT $FB $BABA $TCEHY $V $MA $MCD $SBUX $AMZN $HD $NKE $WM $UNP $ADBE $GOOGL
Of course, a little work is needed when selecting the compounders. What are odds of the following going bust?
$MSFT $FB $BABA $TCEHY $V $MA $MCD $SBUX $AMZN $HD $NKE $WM $UNP $ADBE $GOOGL
9) Usually, before a company goes bankrupt, its business starts to deteriorate and the worsening picture can easily be spotted by following the quarterly ERs.
An investor can and should exit if the thesis doesn't play out.
Long-term compounding doesn't mean riding ill donkeys!
An investor can and should exit if the thesis doesn't play out.
Long-term compounding doesn't mean riding ill donkeys!
10) Many ways to do this but for me, I close out a position if (without a recession) the YOY revenue growth dips below 15%.
Furthermore, I also avoid highly leveraged companies and cyclical businesses.
Pretty tough to go bankrupt if business is growing rapidly and debt is low.
Furthermore, I also avoid highly leveraged companies and cyclical businesses.
Pretty tough to go bankrupt if business is growing rapidly and debt is low.
