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Stocks B / Berkshire Hathaway


Subject:  A fun exercise Date:  10/6/2012  9:57 AM
Author:  kcanant Number:  194700 of 238934

As an aside, the more a firm is growing the more important the ROE.
A growing firm with an uninteresting ROE is worth nothing extra
 due to its growth rate, and even a slowly growing high ROE 
firm is potentially worth a lot.
The PEG ratio is misleading, as it conflates growth with
 worthwhile growth.
Rather than growth/PE it should be something more like 
(1+ growth rate above inflation times amount by which ROE
 exceeds the long run median) times
(the amount by which the cyclically adjusted earnings yield
 exceeds Siegel's constant of 6.5%).

As a fun exercise, try this calculation for both Amazon and Walmart.

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