Post #7619 by Aussi on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)

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Any sane investor should realize that if real sales for the S&P 500 rise at (say) 2.5%/year in the next 20 years, or whatever figure near that you might choose, then there is no conceivable reason to assume that aggregate net profits will rise any faster than that.

If the mix of companies changes in the S&P 500, why would profit margins not change? The lifespan of a company on the S&P 500 is dropping. 30 years ago the average was 25 to 30 years, now it is about 15 years. So in the next 20 years you could perhaps expect a turnover of maybe 200 companies (10 per year) in the S&P 500 which could have a large positive or negative impact on the change in net aggregate profits compared to sales.

https://qz.com/1587963/how-the-sp-500-is-built-and...

Aussi

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