Post #10834 by Captkerosene on the Berkshire Hathaway board

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

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Here is my thesis. Discounted Cash Flow works ok, for companies with predictable, stable cash flows, and with and earnings history. For young companies without much of a history, it is pretty much useless.

Still do it. You just have very wide error bars. Forces you to focus on the size of the TAM and quality of the business. (The important stuff.) I just use a binary outcome. Assign a probability to the good outcome and a value to that ten years out. Then discount that back. (Divide by three if you want.) Keeps you from ignoring the best businesses - which is where you want to be ... isn't it? Address the increased risk with position sizing.

I know, not Buffett approved.

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