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Hi Silencer, Yeah, that makes sense. But Build 'Em Well, who propounded the original BMW method, used a 30 year CAGR plot to pick the stocks. That was 8-10 years ago (although he had used the method for years before that). There have been many changes, possibly improvements, in the application since then, notably the use of the logarithmic graph and standard deviations rather than historical 30 year lows in the CAGR. My life experience has been that many systems go awry when people begin to use it in ways that it wasn't intended to be used. Maybe comparing the shorter term CAGR graph is a way of improving the predictability of the method but I was hoping that someone had enough experience with the method to give a more definitive opinion. At least for now I've got more prospects than I can properly evaluate and I've been able to narrow the list by focusing on the companies that are well below the -2 RMS with good prospective return factors in the 16- through 25-year time frames as well as the 30-year history.
What was fascinating but puzzling to me was that so many different companies seemed to follow the same timing, with a "new" flat CAGR curve beginning around 2008 but some as early as 2007 and some as late as 2009. I don't think this can be entirely related to the market turmoil then. I wonder if it relates less to actual size of the company than it does to the ability of the company to adapt and thrive in the prevailing economic conditions. The companies that made vinyl records didn't go out of business because of their size but because their product was no longer wanted. Maybe there's something about these companies that handicaps their growth, at least temporarily. It would be great if the factor was something to do with investor sentiment rather than basic market value. If I could figure out what it is I might be able to better judge their potential as an investment.
And maybe I'm just making the whole thing too complicated. As Billy Joel sang, "You may be right...", and you probably are.
D (...I may be crazy)
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