Thanks to Rich for bringing this one up.
A recent post on Mashable asks what would have happened if you had invested $1,000 in various tech IPOs. Then it shows the chart to the right.
What's the take-away? Amazon rulez? LinkedIn is a worse investment than Google? Um, no. It's that poorly charted data can tell big fat lies if you're not careful. And here, Mashable was most decidedly not careful.
- What about the vast differences in time since investment?
- Where's pets.com on this chart, and other tech flops?
A far better choice would be to calculate the average annual rate of return of each investment and compare it to the return of all tech IPOs, although we're still comparing short-run to long-run with the time-scale discrepancies here. But let's that slide for now.
Now here's a chart that tells a much better (and more truthful) story. I didn't bother to slap labels on there, because I'm lazy and did this in like 2 minutes, so just pretend that the first row on the bottom says "IPO date" and the second says "Present value of $1k investment". Thanks.
So here we see that hey, all of these are returning pretty awesome average annual returns. And Facebook isn't looking so hot. But then again, the IPO was only a year and a half ago, so we still don't know how that compares to the early life stage of the other tech stocks listed. But whatever, at least it doesn't look like Amazon is completely crushing everyone else. I mean, they're rocking it for sure, and a nearly 20 percentage point better average return than, say, Yahoo is nothing to sneeze at, but it's not like Yahoo's been a slouch over the long run either.