OT: Worth reading

Investment Analysis Clubs Saul’s Investing Discussions
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http://media.corporate-ir.net/media_files/irol/63/63646/annu…

The link above contains Home Depot’s Annual Report from 1983. I’ve posted it for a few reasons:

  1. Because Home Depot price per share has grown 250x (without dividends included) since that annual report was published in 1983.

  2. More importantly than reason number 1 above, I believe Home Depot’s trailing three year financials in 1983 align closely with what Saul and others on this board are looking for when buying stocks.

  3. When most people hear that a stock has returned 100x plus over a certain time period, they say “great, but it was impossible at the time to recognize how well xyz company would perform over the next x years.” I think if you read the annual report above, you will agree that it was quite easy to recognize that Home Depot was growing in such a way that it had a nice runway ahead of it. True, it would be impossible to guarantee just how well the stock would have performed over the long run, but it certainly would have warranted an initial position, just based off the financials alone.

Happy hunting.

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Very interesting look into history!

As I calculate it, at the time of this annual report (1/29/1984):

Stock price $18.25
Earnings $.41
Earnings growth 71%
P/E was 45
1YPEG was .63

A lot of us may have stayed out at this time because of the high PE, although I know there would have been plenty of opportunities to get in at better valuations over time.

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Foodles,

Thanks for providing the p/e at time of publication, I didn’t check it myself.

Reviewing the share price on yahoofinance shows that the price consolidated from Jan 84 to Jan 86 before making its next big move up…so perhaps investors were waiting for earnings to catch up to the share price at this period in time.

I’ve been reviewing a lot of the long term price charts for these 100x baggers lately. With Microsoft being the exception, all of these huge winners have seen pullbacks of 30%-70% during their rises…Wal-Mart, Green Mountain Coffee Roasters, Home Depot, Hansen Natural Beverages, etc.

I mention it because it is so painful as investors to sit through these types of drawdowns when they are occurring, but they are an inevitable part of holding great growth stocks to their full potential.

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When most people hear that a stock has returned 100x plus over a certain time period, they say “great, but it was impossible at the time to recognize how well xyz company would perform over the next x years.” I think if you read the annual report above, you will agree that it was quite easy to recognize that Home Depot was growing in such a way that it had a nice runway ahead of it. True, it would be impossible to guarantee just how well the stock would have performed over the long run, but it certainly would have warranted an initial position, just based off the financials alone.

I think the harder thing is to still hold on after it goes up 4x or 6x. How many people can even hold on after a double. Everyone wants the next HD, CSCO, MSFT, AMZN, but most people are like 4 year olds on a sugar high when they get to a measly 2x.

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I don’t think the methods on this board would ever hold through ups and downs the great companies go through. NFLX, AMZN, FB, AAPL, etc.

They would all get bought and sold (perhaps for the better).

These methods would not have suffered the Nardelli years.

Gator

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These methods would not have suffered the Nardelli years.

A dozen dead years:

http://invest.kleinnet.com/bmw1/stats30/HD.html

I believe in long term investing but not in buy and forget investing.

Denny Schlesinger