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Paul -

Thanks for sharing. Your goal this year should be to lower your PIV and increase your ER. This is what I try to do every day.

By the way, just as a general comment, you may decide that a 50% decline in earnings in year 6 and then a flat 3% growth rate in year 11 is too pessimistic. That's fine...feel free to manually override the default growth assumptions. As long as you have an intrinsic value estimate you can use PIV-ER.

Also, as for the discount rate, some may say 10% is too low. Here again, this is your call. I tend to use 10% but then I also have a rule not to buy companies unless their PIV is 50%-65%. So my margin of safety, or at least one of my margins of safety, is the low PIV requirement.

When you play around with various growth rates (assuming 50% decline in year 6 and 3% growth beginning in year 11), you find the best PIV-ER companies are the El Cheapos. You can make a lot of money buying single-digit growers selling at single-digit P/E ratios. But the theory works in real life, as the myriad studies in Tweedy Browne's What Has Worked in Investing prove. You can the booklet here: http://www.tweedy.com/content.asp?pageref=reports.


Hewitt

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