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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch ✹✺ SILVER
SHREWD
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Number: of 22354 
Subject: Re: Berkshire undervalued
Date: 07/22/23 1:08 PM
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No. of Recommendations: 18
And Berkshire?
231 @ 9% BV growth for 10 yrs = 546 x 1.35x bk terminal (5 year average) equates to $737 and 7.92% compounded from current value.


Sounds like a sane notion.

I like after-inflation numbers, since those are what affect how much wealth you get.

My own multi-method valuation metric, a mix of my "two and a half column" calculation and a pinch of book per share, has risen at inflation + 7.3%/year or more for all sorts of time periods ending now.
The slope of the long run trend is 8.25%, so 7.3% represents a bit of a slowdown.
Projecting that 7.3% real growth rate out 10 years gives an increase of that value metric of 202%.
Multiply the current value of that metric by 2.02 and you get a target future value of the metric.
Multiply that future number by the average multiple of that metric seen since 2008 to get a target future market price in today's dollars. (almost spot on a million bucks in today's money with CPI at 305.11).
Divide that by today's price and annualize it, and I get a return target of inflation + 6.48%/year.

But the value metric is probably about to pop upwards as soon as the Q2 statements come out, so there is a pinch of conservatism in it.
Wild guess, that bump alone will add around 1/3% per year to the return forecast because the starting point will be seen to be cheaper.

If you take the difference between your nominal number and my after-inflation one, it looks like collectively we foresee breakeven inflation of only 1.44% : )
I expect inflation to average somewhat more than that, so my nominal forecast return would be a bit higher than yours.

Jim
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 58 recs · 2023
Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
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