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I posted this in a different section. Thought someone might want to read it here. Basically it shows a head to head performance comparison over a period of approximately eleven years related to a stock that was mentioned.

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I just ran a performance illustration on Microsoft stock. If you would have put $25,000 into their stock early 2000, for the last eleven years or so your annual rate of return comes to barely 1%. This includes a stock split in 2003 plus their divis since 2003 reinvested in MSFT stock.

Your current position value of the stock present day is somewhere in the neighborhood of $27,500.

Now lets say you had put that same $25,000 into a medium term investment quality grade corporate bond with a 5.5% coupon like Boeing or Walmart etc., paid face value for the bond and reinvested the interest annually.

Today this bond position would be worth $45,052.

Bottom line is every stock and/or whatever asset type/class position is unique to that specific point in time. You can not necessarily always be looking in the rear view mirror. I merely posted this information because I am obsessed with the mathematics side of this game. You have to find something that works for your own objectives. There is no universal solution for everyone
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For that very reason, many people would think MSFT is a horrible investment and not touch it. For the same reasons it might have been overvalued 10 years ago, it could be undervalued today. Same thing with KO. Told a family member KO is a decent investment at today's price and they said it hadn't gone anywhere in 10 years, and I told them, that's why it's priced reasonably (it grew into the valuation)!

Yacktman would have given you 3-3.5x your money over the past 10. I'd bet he does it again.

PG at 8% FCF yield + 5-7% cash flow growth.
KO at 5.5% FCF yield + 5% cash flow growth.
PEP priced a little more attractively than KO.

I can't analyze all his holdings, but the few that I own (above), all conceptually track what he has done the last 10 years. Of course this assumes multiples don't expand or contract violently.

To the above you could add WMT, BRK.B, maybe MCD, maybe WFC and USB, PM, KFT, NSRGY.

I don't think it's going to be difficult to to get to 10%+ 10 year returns from here if multiples stay constant. Either way, the intrinsic value of these businesses will grow.
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I merely posted this information because I am obsessed with the mathematics side of this game.

Because I respect the above statement I reply in turn with an 'academic' critique.

Now lets say you had put that same $25,000 into a medium term investment quality grade corporate bond with a 5.5% coupon like Boeing or Walmart etc., paid face value for the bond and reinvested the interest annually.

Is it plausible to buy these at face value when in 2000 there was a huge "flight to safety" movement going on? I know there were opportunities when non-correlated assets correlated during the panic, a brief window like the one we recently went through. It assumes a fair amount, that folks would have both the wits and the skills to take advantage of the moment.

I just ran a performance illustration on Microsoft stock. If you would have put $25,000 into their stock early 2000, for the last eleven years or so your annual rate of return comes to barely 1%. This includes a stock split in 2003 plus their divis since 2003 reinvested in MSFT stock.

If one chose a different tech stock, say AMZN, the head to head results change. AMZN roughly returned 4.86% over the same period, not dramatically different then the assumed bond result.

The point is once we get into head to head, individual issue v individual issue it is very hard to create an apples to apples comparison. There are far too many arbitrary and/or unseen and unintentional biases to control for.

A better case study may be IBM debt v IBM equity or similar company that had both debt and equity circulating during the same period. It is a far more apples to apples debt v. equity comparison. Better still would be to pull together a dozen or so of these comparisons. Our other choice would be to pick a sample of 100 stocks and a sample of 100 bonds and work out the returns of both baskets while managing the samples for bias. The hard part is getting historical quotes for the bonds.

just kicking the tires

Bottom line is every stock and/or whatever asset type/class position is unique to that specific point in time. You can not necessarily always be looking in the rear view mirror.

Is an excellent point.

jack
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