Skip to main content
No. of Recommendations: 6
I sensed a disturbance in the force… I hadn’t visited this drifting death star in a millennium…

The first assumption we make in using the BMW method is that 'Average CAGR' is somewhat predictive of a stock's future CAGR. In other words, there is some expectation that future 'Average CAGR' will be similar to past 'Average CAGR', and that there will be some long-term fluctuation above and below the future Average CAGR line.

Past stock price growth isn’t predictive. Further, the average CAGR line on stock price charts is constantly readjusted to account for recent fluctuations in price. These charts don’t show an average CAGR that the price has swung below and above (although at first glance they may seem to) but rather a bespoke median that is tailored and altered to fit the swings in the stock price. Given this revisionist methodology how on earth can an average CAGR be predictive?

Sure there will be some fluctuations below, and above, the future average CAGR line, but you can't know where that line will be, unless you have a time machine.

F = ( ( ((1+A)^Y) / (R^2) )^(1/Y) ) -1

“Beware of geeks bearing formulas.” —Warren Buffett

“Once you start down the dark path, forever will it dominate your destiny, consume you it will.” —Yoda
Print the post  



The 2009 BMW Method Conference has been cancelled, due to minimum attendance numbers not being met. We hope to continue the annual BMW Method Conference tradition next fall.

Learn about the first four conferences on the BMW Method Website.

The BMW Method FAQ

BMW Method Website
Annual Conference Videos and Other Resources & Services
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.