Nice, Jim. Quite a range of 1-year returns, and quite a strong dependence on starting price/value estimate.

I did a similar analysis looking at forward 1-yr, 3-yr, 5-yr and 10-yr returns versus P/estimated value over periods between 1965 and 2022. For the estimated value I used the trendline (power law) of the plot (log-log) of price versus book value since 1965. Price versus book value has an extremely good fit. For 1-yr returns versus P/value over the period Dec 1999 to Sept 2022 I get similar results to yours. As you might guess, the 3-yr forward return versus P/value had considerably less scatter than the 1-yr return vs P/value. Plots for the period Dec 1999-Sept 2022 were much flatter than the plots for Dec 1964-Sept 2022.

The extremely good fit of price versus value is what makes this analysis useful as a predictive tool. Several year ago I looked at price versus sales, book value, operating income and net income for the companies in the S&P 500 from 1962 to 2017. Berkshire Hathaway's price versus book value had the highest r^2, 0.994, of any price versus metric of the S&P 500 companies.

Berkshire Hathaway FAQ

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