1/ How does Warren Buffett calculate his growth rates when valuing businesses?
Here's the answer (in a nutshell): Be conservative!
Full answer from WB below👇
How do you come up with a growth rate? 📈
#valueinvesting #StockMarket #GrowthMindset
Here's the answer (in a nutshell): Be conservative!
Full answer from WB below👇
How do you come up with a growth rate? 📈
#valueinvesting #StockMarket #GrowthMindset
2/ WB: "When the [long-term] growth rate is higher than the discount rate, then [mathematically] the value is infinity.
This is the St. Petersburg Paradox, written about by Durand 30 years ago.
Some managements think this [that the value of their company is infinite]."
This is the St. Petersburg Paradox, written about by Durand 30 years ago.
Some managements think this [that the value of their company is infinite]."
3/ "It gets very dangerous to assume high growth rates to infinity – that’s where people get into a lot of trouble."
The idea of projecting extremely high growth rates for a long period of time has cost investors an awful lot of money."
The idea of projecting extremely high growth rates for a long period of time has cost investors an awful lot of money."
4/ "Go look at top companies 50 years ago: how many have grown at 10% for a long time?
And [those that have grown] 15% is very rarified."
And [those that have grown] 15% is very rarified."
5/ "Charlie (Munger) and I are rarely willing to project high growth rates.
Maybe we’re wrong sometimes and that costs us, but we like to be conservative."
Maybe we’re wrong sometimes and that costs us, but we like to be conservative."
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