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Strategies & Market Trends : Value Investing
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To: Graham Osborn who wrote (61581)12/28/2018 2:15:48 AM
From: Paul Senior1 Recommendation

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Not sure what to make of your requirements:

"someone who buys an asset with the view that the retained or distributed cash flows OVER HIS HOLDING PERIOD will exceed the principal invested, plus inflation and an appropriate risk premium."

So if there were a company that has $1 share in retained or distributed cash flows and over the ten-year holding period has an inflation and risk premium that total 7% compounded, then after 10 years you have received $11 of cash flow (my calculator apparently starts at $1 in year 0) and $5 of compound interest. That total is $16. (I'm not sure what is compounding here - a dollar each year, or the !.07 etc.) Anyway it seems then if you wanted a stock that would meet your requirement, you'd be willing to buy a stock selling for $16 or less x cash flow now with expectation that retained or distributed cash flows in ten years get you $16.

That's 16x retained or distributed cash flow. That seem too loose a criterion in this market -- so many meet this requirement (not growth, FANG though). What are you using for inflation and risk premium? Otoh, if somebody could actually be assured that retained or distributed cash flow could increase over the ten years, then maybe the stock is a buy-and-hold. Do you have any experience in holding on to a stock for ten years? Harder than it seems imo.
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