Author Topic: Berkshire return over the next 10 years  (Read 6013 times)

Partner24

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Berkshire return over the next 10 years
« on: February 19, 2009, 01:22:01 PM »
It is anonymous, so don't be affraid to be wrong  ;)


oldye

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Re: Berkshire return over the next 10 years
« Reply #1 on: February 19, 2009, 01:26:31 PM »
If you pay half of intrinsic value and intrinsic value grows by 10% a year I think 20% a year is kinda easy.

benhacker

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Re: Berkshire return over the next 10 years
« Reply #2 on: February 19, 2009, 02:11:43 PM »
Quote
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.
Ben Hacker
Beaverton, Oregon - USA

oldye

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Re: Berkshire return over the next 10 years
« Reply #3 on: February 19, 2009, 02:39:44 PM »

I'm guilty of being lazy(wrong) with the math because I assume I'm not buying at at exactly half of intrinsic and it won't grow at exactly 10%. 

StubbleJumper

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Re: Berkshire return over the next 10 years
« Reply #4 on: February 19, 2009, 04:19:51 PM »
Yeah, but you're roughly right!

Crip1

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Re: Berkshire return over the next 10 years
« Reply #5 on: February 21, 2009, 07:24:56 AM »
I'd rather be approsimately right than precisely wrong.

ericopoly

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Re: Berkshire return over the next 10 years
« Reply #6 on: February 21, 2009, 07:47:29 AM »
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%.


sfwusc

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Re: Berkshire return over the next 10 years
« Reply #7 on: February 21, 2009, 12:57:14 PM »
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

kawikaho

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Re: Berkshire return over the next 10 years
« Reply #8 on: February 21, 2009, 03:18:51 PM »
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

ericopoly

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Re: Berkshire return over the next 10 years
« Reply #9 on: February 21, 2009, 04:40:38 PM »
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
« Last Edit: February 21, 2009, 04:43:06 PM by ericopoly »