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Strategies & Market Trends : Value Investing

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To: Daniel Chisholm who wrote (8874)	11/4/1999 12:15:00 AM
From: Michael Burry	Read Replies (3) of 78625

"What I can't get a good analytical handle around is, how much of a premium should I rationally pay for an exceptionally high and sustainable ROE? " How do you define premium? With Buffett-like high and sustainable ROE companies, I think looking upon it as a required and expected annualized compounding return on investment above 20% is acceptable. On my ValueStocks.net site, there's a Tools page that has a spreadsheet that does this calculation. On a lot of the already-popular consumer stocks, you'd be surprised how many come out with a ~10% annual expected return despite high ROE's because the price is so high already - effectively, the market is pricing these stocks for average performance. This aspect of the spreadsheet model tells me that it is has worth, if only as an adjunct. Good investing, Mike

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