Halls of Shrewd'm / US Policy❤
No. of Recommendations: 3
Diageo getting creamed today after profit warning. Still a bit expensive for my taste but worth watching.
No. of Recommendations: 3
Hard to go broke selling Johnnie Walker and Tanqueray.
Thoughts on fair value? I've looked at in the past and never bought on valuation concerns, and my impression re: the drop is the same as yours -- even with the pullback, it still seems a tad pricey. Modest expectations for growth going forward, etc., and that's assuming they don't revise downward again at some point. Getting closer though.
I don't piggyback, but note that BRK was buying (an admittedly very modest position) at $179 a few months back. Currently trading at around $142, after the selloff.
No. of Recommendations: 1
$7 eps base cade, 10% growth x 5 years x 18 PE = $202. 12% discount rate = $114 IV now. 20% overvalued imo, thoughts?
No. of Recommendations: 9
$7 eps base cade, 10% growth x 5 years x 18 PE = $202. 12% discount rate = $114 IV now. 20% overvalued imo, thoughts?
My thoughts are that this is just another way of saying you can't get 12% returns from a stock that grows its earnings at 10%, if the ratio stays the same as it is now (18).
I think a more straightforward way of presenting these numbers is to say that, if the earnings grow 10% a year, you will get a 10% return, as long as the price to earnings ratio stays at 18. If in 5 years the ratio has gone back to its historical average of about 24, then you'll get a return about 6 points higher than that.
dtb
No. of Recommendations: 3
7 eps base cade, 10% growth x 5 years x 18 PE = $202. 12% discount rate = $114 IV now. 20% overvalued imo, thoughts?
My thoughts are that this is just another way of saying you can't get 12% returns from a stock that grows its earnings at 10%, if the ratio stays the same as it is now (18).
I think a more straightforward way of presenting these numbers is to say that, if the earnings grow 10% a year, you will get a 10% return, as long as the price to earnings ratio stays at 18. If in 5 years the ratio has gone back to its historical average of about 24, then you'll get a return about 6 points higher than that.
That is all trivial math, the hard part is to figure out future growth rates and what multiple Mr. Market will most likely assign. Is margin expansion and 10% growth in earnings really sustainable? I kinda doubt that you can increase margins forever. It's just ancedotal but I observed that friends bought Botanist, Roku, Sapphire, Tanqueray or whatever premium Gin was on sale. I'd like to buy at 15x earnings, no heroic assumptions needed for a decent return.
I couldn't resist and wrote a bunch of April $120 and a couple of $125 puts.
No. of Recommendations: 1
"I don't piggyback, but note that BRK was buying (an admittedly very modest position) at $179 a few months back. "
I might be mistaken but I thought someone on the BRK board spotted it wasn't a new purchase as such but an existing holding in one of the insurance companies (either Gen Re or Alleghany)?
No. of Recommendations: 1
I might be mistaken but I thought someone on the BRK board spotted it wasn't a new purchase as such but an existing holding in one of the insurance companies (either Gen Re or Alleghany)?
My apologies, you're right (as is the spotter on the BRK board), it was not a new purchase in May -- it was one of the holdings caught up in the change in reporting in May. The filing in May newly reported holdings of Gen Re, that were formerly reported out by New England Asset Management. This included newly reporting on the full Diageo position.
No. of Recommendations: 1
I'm ideally seeking 15%-20% per annum to hold individual stocks, otherwise I'll just buy Berkshire or the market, I only purchased Berkshire initially in 2012 @1.1 x book as this suggested to me outperformance going forward and it's worked out to be near c15% to present.
12%pa desired is a figure I use as a starting point to see if current valuation on a conservative basis is anywhere near current.
For my return expectations the company is overvalued, if you are happy with c8-10% then it's at par.
No. of Recommendations: 1
7$ per share earnings base is also my being conservative looking at the last 5 and 10 years earnings peaks and troughs. 5 year eps growth is c4%pa which leads to a lower PE going forward. 18 is more relevant than 24 IMO.
