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No. of Recommendations: 5
Where will BRK trade in 2011, per this writer:

"NEW YORK (TheStreet) -- Warren Buffett is rightly famed for creating investor value, but as far as Berkshire Hathaway(BRK.B) shares are concerned, it's harder to see what will trigger a sustained 2011 rally.
This question doesn't mean investors shouldn't be paying attention to Berkshire Hathaway as a potential investment.
In fact, in 2010 many investors were asleep at the wheel while a major opportunity to recognize value in Berkshire Hathaway shares passed them..."

link:

http://www.businessinsider.com/warren-buffetts-berkshire-hat...

John
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No. of Recommendations: 5
"it's harder to see what will trigger a rally next year"

1. "A company's value over long periods of time will grow no faster than it's earnings do" ... so EARNINGS GROWTH

2. Who cares about next year? I'm trying to retire on this thing in 2020 at $400,000 per A share.

Hopefully we do a 30B acquisition every two years giving 2B post-tax earnings each. Another 10 billion of annual cash. Or, buying equivalent fractional interests in businesses. Not much of a difference.
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2. Who cares about next year? I'm trying to retire on this thing in 2020 at $400,000 per A share.

FWIW, my very conservative central estimate for end of 2020 is around $275k/share.
The main attraction isn't the 8.65%/year that this represents from here,
but the very very low likelihood of anything very much lower.

Jim
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FWIW, my very conservative central estimate for end of 2020 is around $275k/share.
The main attraction isn't the 8.65%/year that this represents from here,
but the very very low likelihood of anything very much lower.

Jim


Is that 8.65% inclusive of inflation?

Hockeypop
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Prediction:

--look at the yield curve. The shape is similar to early 2004, which was followed by two-three years of explosive growth in the overall economy.

(The hangover sucked boys & girls but the party was great while it lasted.)

What happens when the economy gets going? All of BRK's components benefit, with the possible exception of insurance underwriting. BRK makes money on the index puts, it makes money on the operating businesses.

So let's say what's going to happen in the next couple of years is basically reinflation of the asset bubble (I love this merry go round don't you?) Not housing, but it looks like it's equities' turn again.

So: BRK, having been an unloved stock, might suddenly get "recognized" and people start dumping money into it like at the end of 2007. Meanwhile the index puts benefit because the entire stock market rises. The operating companies' results improve as the economy strengthens, a triple whammy in BRK's favor.

The only real negative I can see, is that everything I have been reading about P&C is that it is a very soft market, lots of excess capital, underwriting premiums are going down, and supposedly it will remain this way for the foreseeable future.

I think the American stock market is going to be so overheated and sentiment so bullish in 2011 that S&P 500 will hit a new high, surpassing the previous 2007 peak. I think 2011 (maybe 2012?) is going to be pretty much of a replay of 2006-2007.

I will use Brk b because that's what I have. If book value is 63 right now, and it grows by 10ish% over 2011 (conservative if the economy keeps improving) then we are looking at 70/105,000 by year end.

All we need is a little multiple expansion to juice things up appropriately. Right now P/BV is around 1.3 or maybe even closer to 1.25. If it gets to 1.5x BV, then share price should be 100-105/150,000 - 157,500ish by year end. If BRK ever comes "back into fashion" then perhaps it spikes up like at the end of 2007?

Wow I sound like Whitney Tilson now.

On the other hand....
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Jim,

your posts are always very informative, at least the parts that I am capable of understanding.

I think most of us are not just interested in your 2020 end point projection, but anything you care to speculate about "peaks" and "valleys" between here and there.

(I'm sure you've written about this before obviously.)
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Who cares about next year? I'm trying to retire on this thing in 2020 at $400,000 per A share.

Sounds good to me... Hopefully I'll be retiring right there with you!
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Who cares about next year? I'm trying to retire on this thing in 2020 at $400,000 per A share.

That is returns of 12.5% per year. Optimistic.

10% is in the definitely achievable. If you wait till 2022 then we will touch 400k :-}

-ubn
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FWIW, my very conservative central estimate for end of 2020 is around $275k/share.
The main attraction isn't the 8.65%/year that this represents from here,
but the very very low likelihood of anything very much lower.
...
Is that 8.65% inclusive of inflation?


That's nominal.
So, it implicitly assumes that inflation averages something sane like 2%
plus maybe growth of real price in the 6.6% range.
Inflation will be lower than that for quite a long while, then higher later.

Jim
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That's nominal.
So, it implicitly assumes that inflation averages something sane like 2%
plus maybe growth of real price in the 6.6% range.
Inflation will be lower than that for quite a long while, then higher later.

Jim


1. Thank you!

2. I ask because I respect your projections. So, that 2020 stock price assumes a nominal internal rate of return of 8.65% or 6.6% after inflation, with probably no difference in IV vs stock price (and I realize I'm making a bigger thing out of this than you probably intended)?????

Realizing that the S&P is probably 10-20% overvalued compared to its traditional trend lines, isn't this still a pretty conservative estimate for BRK historical data? For my retirement funds this is good news, but I was guessing a little higher.

Thanks.

Hockeypop
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