Author Topic: Buffett looking for 10x pre-tax?  (Read 3730 times)

Liberty

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Buffett looking for 10x pre-tax?
« on: March 30, 2014, 08:32:02 AM »
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wellmont

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Re: Buffett looking for 10x pre-tax?
« Reply #1 on: March 30, 2014, 02:11:16 PM »
this is big cap Buffett. I believe he could find better pre tax yields when he wasn't managing such a big asset base. but it's a good rule of thumb for investors who think they need to always buy things dirt cheap. buy better than average companies at prices lower than the market multiple. (btw this is a cooperman tactic as well).
« Last Edit: March 30, 2014, 04:58:06 PM by wellmont »

Aurelius

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Re: Buffett looking for 10x pre-tax?
« Reply #2 on: March 30, 2014, 03:36:45 PM »
Quote
"You can translate that 10x pretax into a 15x after tax p/e ratio, and that wouldn't be far off from the 100 year or so long term average of U.S. listed businesses.   Since Buffett buys quality, above average businesses, paying 10x pretax is like paying an average price for an above average business."

Makes sense!

Here Alice Scroeder saying all he ever wanted was a 15% return on day 1(Starts at 18.08):
http://www.youtube.com/watch?v=PnTm2F6kiRQ
« Last Edit: March 30, 2014, 04:00:18 PM by Aurelius »

Liberty

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Re: Buffett looking for 10x pre-tax?
« Reply #3 on: April 01, 2014, 09:06:28 AM »
Here's Geoff Gannon riffing on this idea:

http://gannonandhoangoninvesting.com/blog/2014/4/1/stock-price-guidelines

I liked this part:

Quote
Another Buffett quote explains why the exact price paid may not be the most important consideration:

One of the things you will find, which is interesting and people donít think of it enough, with most businesses and with most individuals, life tends to snap you at your weakest link. So it isnít the strongest link youíre looking for among the individuals in the room. It isnít even the average strength of the chain. Itís the weakest link that causes the problem.

For most investors, price is the weakest link in their process. Most investors are not value investors. They simply pay too much for popular stocks. They may have other weak links. They may trade too much. They may be greedy when others are greedy and fearful when others are fearful.

Remember, you arenít most investors. Most investors arenít reading this blog. You are. That means price probably isnít your weakest link.

So, donít focus on price. Just figure out a way to make sure the price you pay is good enough. And then work on correcting the errors you've historically made.

Iíve made a lot of mistakes as an investor. I canít think of any case where my mistake was paying too high a price relative to some measure of earnings. I canít look at any investment that went badly and say: ďOh, if only Iíd gotten that at an EV/EBITDA of 4. That wouldíve solved everything.Ē

Iíve misjudged people. Iíve misjudged societal change. Iíve misjudged solvency. Iíve sold too soon. And Iíve tried to do too much.

Those are potential weak links for me. And so my quality assurance time is better spent carefully checking those problem areas than worrying about price.

This is not true for everyone. Iím very unlikely to get so excited about a business, Iíll pay any price for it. Iíve followed businesses I love trade publicly for 5-10 years and never touched them because of price. If youíre like me in that respect, price is something you shouldnít obsess about.
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sleepydragon

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Re: Buffett looking for 10x pre-tax?
« Reply #4 on: April 06, 2014, 12:18:56 PM »
and DTV is selling below 10x pre tax earning.