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Stocks B / Berkshire Hathaway


Subject:  Re: Berkshire buys Heinz Date:  2/14/2013  9:08 AM
Author:  LONGREITS Number:  198553 of 235760

"That makes current earnings yield 5.0% and pretax earnings yield about 6.25%.
If earnings grow 60% in real terms from here, it doesn't really matter
very much how long that takes provided it's certain enough and then sustainable."

Mungo, could you pls walk through the logic? I'm just trying to understand the reasoning (I don't doubt you).

If pre-tax earnings yield is 6.25% and grows 60% then we're at a 10% pre-tax yield. So you're saying that as long as it grows 60%, to get to a 10% pre-tax yield, and then there is sustainable growth, the time frame it takes to get to the 10% pre-tax yield doesn't matter as long as there is sustainable growth above that? If so, what rate of growth?

Just trying to understand.

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