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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21937 
Subject: Re: Apple from FT
Date: 01/14/23 11:22 AM
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For those Apple lovers. What's your expected EPS growth rate over the next 10 years?. (Assuming $6 2022 as a starting point)

It's possible their biggest (or near-biggest) source of growth in real earnings per share will be buybacks.
They could build out several huge businesses successfully, and it still wouldn't matter much percentage-wise considering the immense scale of what they're doing now.
The fact that the iPhone is the most profitable product in human history by a mile is a high class problem. But it's a problem.

Meaning the biggest single variable in how fast the EPS figure rises might well be how popular the shares are: what the future average valuation multiple is.

In early 2021 they were buying shares at a multiple of 40 on then-recent earnings.
That might well have been a good use of capital, but it's certainly a lot worse than the same dollars spent on the same business at a low multiple.

It's a strange multiplicative effect, hard to get your head around.
A firm with perpetually high multiples will not do so well with huge buybacks because it's a lowish return on that capital: it's a high multiple for a business with a headwind.
Conversely high buybacks for a firm with a forever-cheap share price works wonders--that mere fact makes them a much more attractive investment, worth a higher multiple.
So, other things being equal, a firm doing large ongoing buybacks as their main "expansion capex" is worth a high multiple if it has a low multiple, and vice versa.

Jim

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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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