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No. of Recommendations: 6
Ark Invest has a Golden Goose with a 12% probability that Tesla share will hit $22,000 price target...

It amazes me that people get paid for producing this horse manure, but then I remembered that the more outrageous the pronouncement the more clicks they get.
(that's a market cap of $20.5 trillion--I'm pretty confident that the chances of that are smaller than 1 in 8)

The firm can certainly do well, but even if so, to make a profit as an investor you have to rely on one of two things:
* Waiting for it to happen and selling at a fair price, or
* Selling at a high valuation multiple to a greater optimist before it happens.

The second approach is tempting, but not reliable.
Maybe there will be a shortage of optimists when you want to sell, and remember the great future hasn't yet arrived.

Which leaves the first one.
The key factors to consider there are: great future, OK. Let's say that happens.
How soon will it happen, how much are you paying in advance for that today, and therefore what is the implied
rate of return between now and when they inevitably have a multiple under 20 on normal earnings?

e.g., Mr Blodget was right saying in 1998 that Amazon would do very well.
https://www.wsj.com/articles/SB913824043106358000
But his forecast of $10 EPS in five years (by 2003) was too early by a factor of four...it took 20 years.
If he had known then that $10 EPS would be achieved only in 2018, what would he have estimated as the fair value to pay for a share in 1998?
Here's the million dollar question, hard to answer honestly:
Given perfect knowledge on the 20 years of future earnings but not the future stock price trajectory, what number would you have picked in 1998 as a fair price to pay for a share?
The price did much better that anyone had any right to expect...including those who had perfect foresight of the 20 year earnings trajectory.
This is the exception that keeps the rubes gambling.

As an aside, a random clip from that link:
"In addition, Mr. Blodget said that because Amazon is a retailer, its business model will ultimately resemble that of other retailers.
[credit where credit is due!]
...
In fact, Amazon was only the second-most-traded issue on Nasdaq Wednesday. The top spot was taken by Books-A-Million , another online retailer, whose stock soared 80%


Rather surprisingly, Books-A-Million is still in business.
Bought out in 2015 by its chairman for $21 million, down from a little under a billion in 1998 when the article was written.

Jim
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