I’m not a smart person so I might (or even must) be wrong. But this is the way I look at a 100x PE stock. My bar is a 10% pa return (that would equal the S&P LT returns, barely). This company’s stock, in order to clear my bar, would have to x10 its profits.

X10 over 10 years is a 26% CAGR. X10 over 15 years is 17%. Again, I’m not smart so I’m unable to identify in advance companies that will be able to pull off such a gigantic feat.

Keep in mind that the odds of picking such a company are hugely skewed against you. But “how about Amazon”? Yes, how about them and you anticipating 15 years ago that the bulk of their profits and growth would come from Prime/AWS when even Jeff Bezos didn’t even know about them?

The take away is 1) I’m not smart enough to do this, 2) tech/growth investing is difficult and success is most likely for the 0.01% most intelligent people and 3) Chances are, if you read my post, you don’t belong there...

Other take-aways: 1) Most tech/growth individual investors (including CPAs! True story...) are not approaching this rationally and haven’t even browsed a 10-K in their entire life and 2) Odds of multiple compression for such stocks are higher than a share price increase.

Is it to say that all growth or VC investing is doomed to fail? Of course, not. Look no further than Sequoia and their stellar track record over decades. But this firm is out of this world. And my understanding is they don’t use leverage in a concentrated tech portfolio...

The main problem with most (not all) growth / tech investors is they often want to look (or think they are) smarter than they are. Some also want to be loved and popular so they invest in fashionable “trends”. Unfortunately, over the long run, this can be a recipe for disaster.

There’s no substitute for thinking clearly and rationally. Successful investors (no matter their approach) know this and, more importantly, do it while also understanding exactly the risks they’re taking.