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Strategies & Market Trends : Value Investing
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To: Spekulatius who wrote (60769)5/3/2018 11:20:23 AM
From: Graham Osborn  Read Replies (1) of 78752
 
Yes - I have long been exceptionally fearful of the terminal-value concept. The terminal value often accounts for a huge chunk of DCF valuations. Terminal values are like heaven - always believed in, seldom encountered.

There can be no question that select companies like Coke have managed to grow at 10% for many decades (with significant interruptions). But I would argue that from the stock purchaser's perspective, the terminal value should be considered icing on the cake rather than a part of the conservative-purchase-price calculation. That one should seek to identify those 20-30 year plays is undeniable, but I would say the probability of being right is <20% (even for Buffett).

To flip the argument a bit, I would challenge you to come up with some cases where Buffett paid more than the price/ owner earnings figures illustrated in the table. I would argue he is using the same sort of logic I am.
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