No. of Recommendations: 15
"What do fellow Shrewds expect BRK returns to be over the next 5 years?"
I think that your estimate of IV growth is about right, about 9%-10% per year, nominal (Unfortunately not 16% as in 2024). I also agree that there will be some multiple contraction, maybe from today's P/B of 1.72 to 1.55, which looks to be Buffett's highest repurchase price. This multiple contraction would knock 2%/yr off the total return. So I would go with a total return of about 8%/yr, nominal.
However, I think that there is a high probability of a major correction in the broad US market (I've been saying this for years, so make of it what you will.) The trailing twelve month P/E of the S&P 500 today is about 28, versus a fair value of 17 or 18, so a 35% correction is not unlikely. If the broad market falls 35%, then BRK.B will fall with it, maybe by 25%. A 25% fall in one year of the coming five years, with 10% gains in the other four years, would bring Berkshire's 5-year annualized return down to 2%, in spite of the IV growth. Berkshire would need some years with high price gains to make up for its undeserved correction. Over 10-15 years this would be likely, but over five, not so much.
Just FWIW.
