Compound Annual Growth Rate – CAGR

I can’t help but drift into a pirates accent when I maul the pronunciation of CAGR. I’ll try to slip CAGR in during my first ever podcast. Compound annual growth is one of the cornerstone concepts  of investing and wealth. I first mentioned it in this post, my worst investment in 2008, but have never explained it.

That’s because there’s a fine explanation for it right here along with a good CAGR calculator. The calculator links to an Excel file, if you prefer a simple online version then try moneychimp. The explanation link is to the Google Wonder Wheel feature, which along with the other search options makes Google look most like ‘the next Google‘. Have you checked out all the search options? Wonder Wheel is good.

The key word in CAGR is compound. Compounding results in exponential growth, which is the engine of wealth.

The Google promo continues. Have you checked out Google Wave? It looks good enough to become the dominate communication interface, just as Google search dominates its space. Did I really say the other day that Google was only a six bagger! What is the CAGR on that? It’s not only a six bagger, it is a six bagger in my backyard. Shame on me.

If you get Wave before me then I’d be super darn happy to receive one of your invitations. I’ll make half my invitations available here. [Though you may need to remind me of that promise.] Exclusivity and highly desirable is a category killer mix . At the very least Wave will raise the bar for all communication software. More intuitive spell checking is the least of it.

Google looks like a fairly priced investment even after the double since the Dec08 lows and an EV of $148B. It’s not cheap, there’s no big margin of safety, but I’d hold it if I owned it. GOOG does have good potential and is the number one pick for the Internet A team.

I’m not buying now, but am conceding that Google is all that. Now that I’m a believer I need to look for good value and technical entry points. Maybe I’ll also try looking at it from a momentum perspective, as a small step on my path to assimilating momentum.

Podcast? It’s inevitable. My kids are big time Fred junkies. Pipe Networks will profit handsomely in Australia from the data tsunami building through both the teens, teenagers and the decade. Shame Pipe (PWK) is priced for it. Akamai is my main internet expansion play along with Telstra and four other telecommunications plays in my portfolio; KONG, M2 Telecommunications, Oplink Communications and Harmonic.

Investing cornerstones

Come on help me build a list.

• CAGR, with focus on compounding.
• Probabilities.
• Risk with a focus on margin of safety
• Use market fluctuations to your advantage, for both companies and the market.
• Stocks are both businesses and candles.

I’ll finish by quoting myself from an Oplink post, “The wise rightly disdain on only looking forward one quarter. However, as many investors have the attention span of an ADHD kid supercharged on Coke, it doesn’t hurt to consider what they’re focusing on.” Keep your friends close and your enemies closer. The same goes for those who focus through a TA lens.

Cornerstones?

Here are Mark Sellers’ essential traits from this speech, So You Want To Be The Next Warren Buffett? How’s Your Writing?

Mark Sellers’ seven traits:

1. Ability to buy fear sell greed.
2. Obsessive about investing.
3. Willingness to learn from past mistakes.
4. Inherent sense of risk based on common sense.
5. Confidence in convictions.
6. Both sides of your brain working.
7. Remain true and thoughtful in a volatile environment.

Related posts:

1. OT: Google Wave Invitations