The Ugliness of Price Targets
Wednesday, May 29, 2013 at 7:19AMSome have been asking me about our Plug Power ($PLUG) price target. My view about it is that you should get involved with something that has so much potential as to render the exercise of computing it irrelevant.
It's not easy because these opportunities are rare. With Plug Power ($PLUG) we have said that we would be incapable of building the business if you gave us $200mm. Some might be able to do it with $100mm but from our vantage point, we think it can't be done. We will be monitoring how the situation evolves but won't commit to a firm target.
A while back, I wrote the post A Thousandfold Return on Investment about my friend who bought McDonald's ($MCD) in 1965. Can you imagine the results he would have achieved if he had focused on a price target and a discipline of selling the stock if it reached the target?
My friend is still holding the stock to this day and when we talk about the company, I never hear him talk about a price target.
Do price targets force investors to think small?
Written by Michael Bigger. Follow me on Twitter and StockTwits.
Reader Comments (2)
Never looked at it from this point of view, but all some price targets do is make us return to the analyst to constantly seek his/her approval of our investment.
That is awesome. I never thought about it this way either and it makes sense what you are saying.