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Strategies & Market Trends : Value Investing

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To: Mattyice who wrote (51158)	3/26/2013 8:48:06 AM
From: Chid	Read Replies (2) of 78753

Hi Matt thanks for the extensive work that you've done. While I see no fault in forecasting revenue growth to return to overall GDP growth rates, the question is always one of when that's going to happen. There are so many knobs in the DCF and the error rate basically multiplies with each knob that I would rather take a sledghammer to the ROE rates and a sledgehammer to the P/E and P/B to arrive at a range of reasonable values using buffetology. Coming to the Buffetology method which is my personal favorite your ROE is a little low. I have BBBY earning in excess of 15% ROE. The only caveat is a lot of it's FCF is used to buyback shares so BVPS is not growing anywhere close that rate (probably close to your 6%). But have seen management track record for the last 10 years I would expect them to earn at least 15% in any given year on that year's BVPS. There are also tailwinds given the announced buyback and the recovering housing story to think that the expectation isn't all that outlandish. Does that make sense or is that overly optimistic for the BBBY? Chid

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