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Berkshire return over the next 10 years


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Berkshire is trading at 2500$. What return (CAGR) do you expect Berkshire to achieve over the next 10 years (in US currency)?  

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  1. 1. Berkshire is trading at 2500$. What return (CAGR) do you expect Berkshire to achieve over the next 10 years (in US currency)?

    • Negative
    • 1-10%
    • 11-15%
    • 16-20%
    • Over 20%


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If you pay half of intrinsic value and intrinsic value grows by 10% a year I think 20% a year is kinda easy.

 

Oldye, do the math, you return sub 20% if you assume 'fair value' at the end of 10 years.

 

IV today, $1.

Price today, $0.50.

 

IV 10 years --> $10 * (1+.1)^10 = $2.59

 

$0.50 compounding for 10 years to $2.59 is a 18-19% annually.

 

Correct me if I'm wrong.  You will potentially make much more if the gap closes quickly of course.

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Guest ericopoly

Guys, it totally depends on how long prices are silly.

 

11% of Wells Fargo traded yesterday between $11 and $9!  There is enough volume in there for Berkshire to double down... he can't get all the volume, but in a few days of that kind of thing he could.

 

So there alone you're adding maybe $10b of IV, booked on purchase.  If Berkshire does that twice a year over the next few years, IV growth is well above 10%.

 

 

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Guys, it totally depends on how long prices are silly.

 

11% of Wells Fargo traded yesterday between $11 and $9!  There is enough volume in there for Berkshire to double down... he can't get all the volume, but in a few days of that kind of thing he could.

 

So there alone you're adding maybe $10b of IV, booked on purchase.  If Berkshire does that twice a year over the next few years, IV growth is well above 10%.

 

 

What if WFC become a zero due to nationalization?  What does that do for IV?

 

-SFWUSC

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Guest kawikaho

Guys, it totally depends on how long prices are silly.

 

11% of Wells Fargo traded yesterday between $11 and $9!  There is enough volume in there for Berkshire to double down... he can't get all the volume, but in a few days of that kind of thing he could.

 

So there alone you're adding maybe $10b of IV, booked on purchase.  If Berkshire does that twice a year over the next few years, IV growth is well above 10%.

 

 

What if WFC become a zero due to nationalization?   What does that do for IV?

 

-SFWUSC

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Guest ericopoly

What if WFC become a zero due to nationalization?   What does that do for IV?

 

Now you are getting at the problem with IV.  You don't know the future. 

 

What if IV is really below far below the current share price?  You don't know that evil scientists haven't created a superbug that will wipe out 80% of the people on the planet.

 

Reasonable scenarios are all you have to work with.

 

I found this article interesting, with regards to WFC:

 

http://news.morningstar.com/articlenet/article.aspx?id=280935

 

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What if WFC become a zero due to nationalization?   What does that do for IV?

 

Now you are getting at the problem with IV.  You don't know the future. 

 

What if IV is really below far below the current share price?  You don't know that evil scientists haven't created a superbug that will wipe out 80% of the people on the planet.

 

Reasonable scenarios are all you have to work with.

 

I found this article interesting, with regards to WFC:

 

http://news.morningstar.com/articlenet/article.aspx?id=280935

 

 

 

I agree, but the chance of WFC being a zero is real.  Not saying it will be, but the chance is there.  So just assuming it is going to be a homerun is not smart. It might be, but the future isn't known on that either.

 

I think the hit to Berkshire for WFC has already been about $100 a share since 9/30/08...there isn't that much left damage left to do at $10 a share.  I think the total position isn't worth, but about $65 a share now.    All this assuming we still own 290,000,000 shares.

 

-SFWUSC

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FYI, that Morningstar "analysis" was ripped off.  They stole someone's rough spreadsheet analysis from another board.

 

I have no affiliation with M* or the poster who was ripped off, but I thought the fact that an M* analyst would blatanty steal from a source on the Internet without citation or a simple request was deplorable... so I'm spreading the word.

 

He also stole some data typos with it, so it's 100% clear it's a rip off (to me).

 

Just an FYI... in general, I don't disagree with the conclusion... just the method... the guy should be fired tomorrow.

 

Ben

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