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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (33167)	12/31/2008 3:53:36 PM
From: Jurgis Bekepuris	Read Replies (1) of 78625

Paul, "I'm not understanding how 11% is derived from 18% roe." I use Mike Burry's Buffettology spreadsheet for this, which extrapolates 10 year earnings based on 18% ROE and assumes terminal 15 PE and calculates the return rate after tax backwards. "but for any buys now at $309, that would still be a 121/309 = 39% gain within 12 months. If it could happen, for me, imo, that's not "too low in this market"" No, it is. Most stocks I hold are expected to return from 2X to 3X current price in 12 months. Sure, they probably won't but expectation of 39% gain is way too low except for very conservative stocks. And BTW I use historical earnings not "analyst earnings estimate", so I get more conservative result. My question would be: why buy GOOG instead of KO or PEP. But your answer will be that you buy both or you are "looking for ways to include stocks". Which makes very hard to have any reasonable discussion. Sorry. :/

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