I looked up Morningstar’s fair value growth rates for 100 companies, not randomly selected, for the 5-year period ending Dec 31, 2021. Morningstar’s annualized fair value growth rate ranged from 83% for NVDA to -9% for WBA. Their estimate for BRK/A was 13%. The average growth rate for the 100 companies was 14%, and the standard deviation was 14%. As you might guess, eight of the top ten were tech companies. I’m not sure that I believe Morningstar’s estimates, but I do believe that the range of growth rates was large, and it will be large again for the next five years and 25 years.
Does anyone here have a guess for a company that will have a high fair value growth rate over the next 5 years, or better yet over the next 25 years? Berkshire grew BV by 29%/yr over the period Dec 1980 through Dec 1999.
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I’m a little disappointed that nobody ventured a guess for a company that might grow fair value at a high rate over the next five or 25 years. Maybe if I show the list of 100 companies, then someone might venture a guess. Note that the list is not random; it came from various sources.
How about something like TROW? They’re very profitable, 35% ROE with no debt. Could TROW grow fair value at 22% for the next 25 years? It depends primarily, I think, on whether they have to cut fees in order to maintain assets under management.
company… 5-year annualized FV growth… P/FV… 5-year average dividend yield… ttm dividend yield… FV growth plus ttm dividend yield
NVDA 83 1.52 0.25 0.06 83
AMD 79 0.88 0.00 0.00 79
TSM 43 0.84 2.78 1.52 45
AMAT 42 1.11 1.20 0.62 43
MSFT 40 0.97 1.40 0.73 41
INTU 39 1.26 0.73 0.45 39
AMZN 35 0.81 0.00 0.00 35
JD 34 0.62 0.00 0.00 34
GOOG 33 0.81 0.00 0.00 33
AAPL 30 1.39 1.18 0.50 31
MCO 30 1.13 0.93 0.67 31
ADSK 28 1.35 0.00 0.00 28
TCEHY 28 0.58 0.24 0.36 28
BBY 26 0.88 2.34 2.73 29
COST 26 1.27 0.91 0.57 27
MA 25 1.05 0.52 0.49 25
FB 24 1.05 0.00 0.00 24
UNH 24 1.31 1.39 1.22 25
CAT 22 1.15 2.51 1.91 24
TROW 22 0.93 2.97 4.32 26
DE 21 1.27 1.62 1.03 22
PGR 21 1.30 2.47 1.65 23
APD 20 0.89 2.22 2.02 22
JKHY 20 1.05 1.08 1.08 21
PAYX 20 1.24 2.91 2.02 22
TGT 19 1.37 2.71 1.37 20
SWKS 18 0.74 1.40 1.37 19
FDS 17 1.69 1.03 0.73 18
LOW 17 1.40 1.66 1.12 18
NKE 17 1.30 0.99 0.72 18
AXP 16 1.04 1.40 0.99 17
BF.B 16 1.00 1.15 1.07 17
BHP 16 1.04 4.75 9.35 25
INTC 16 0.79 2.48 2.60 19
V 16 0.98 0.60 0.62 17
CMCSA 15 0.84 1.82 2.00 17
CSCO 15 1.17 2.95 2.42 17
JPM 15 1.06 2.50 2.27 17
BAC 14 1.17 1.88 1.59 16
BAX 14 1.00 1.05 1.24 15
FAST 14 1.64 2.44 1.85 16
HD 14 1.70 2.11 1.68 16
LH 14 1.16 0.00 0.00 14
WMT 14 1.00 2.00 1.52 16
BRK.A 13 1.00 0.00 0.00 13
MCD 13 1.12 2.37 1.97 15
ROST 13 1.06 0.83 1.09 14
BABA 12 0.63 0.00 0.00 12
TJX 12 1.17 1.31 1.40 13
GS 11 1.07 1.61 1.64 13
ORCL 11 1.38 1.53 1.46 12
SBUX 11 1.07 1.81 1.71 13
UNP 11 1.33 2.01 1.68 13
BA 10 0.81 2.36 0.84 11
BDX 10 0.82 1.30 1.32 11
TM 10 1.04 2.81 2.27 12
UPS 10 1.24 2.95 1.87 12
CHKP 9 0.85 0.00 0.00 9
GM 9 0.86 3.96 0.65 10
GPC 9 1.03 2.98 2.50 12
GWW 9 1.50 1.87 1.26 10
MDT 9 0.80 2.08 2.35 11
MRK 9 0.82 2.98 3.29 12
SYY 9 1.11 2.36 2.31 11
BKNG 8 0.91 0.00 0.00 8
JNJ 8 1.02 2.60 2.41 10
PEP 8 1.13 2.85 2.44 10
CHRW 7 1.13 2.28 1.92 9
CTSH 7 0.93 1.06 1.10 8
SEIC 7 0.86 1.13 1.22 8
TRV 7 0.96 2.35 2.10 9
BWA 6 0.65 1.58 1.40 7
CLX 6 1.08 2.44 2.52 9
CVX 6 0.92 4.49 4.25 10
DD 6 0.84 2.65 1.44 7
HSY 6 1.36 2.24 1.74 8
KO 6 1.00 3.21 2.78 9
NSRGY 6 1.31 2.60 2.22 8
RHHBY 6 0.89 3.05 2.36 8
USB 6 0.94 2.89 2.89 9
DIS 5 0.91 1.37 0.52 6
DLTR 5 1.33 0.00 0.00 5
PFE 5 1.30 3.67 2.80 8
PG 5 1.39 2.77 2.09 7
UL 5 1.01 3.15 3.80 9
GD 3 1.09 2.18 2.20 5
VZ 3 0.90 4.46 4.67 8
BIIB 2 0.66 0.00 0.00 2
HRL 2 1.32 1.87 1.97 4
MMM 2 0.95 2.94 3.29 5
RTX 2 1.01 2.54 2.22 4
BIDU 0 0.81 0.00 0.00 0
CL 0 1.17 2.33 2.12 2
BMY -1 0.90 2.94 3.20 2
XOM -1 0.81 5.33 5.07 4
MO -2 0.91 6.06 7.07 5
WFC -2 0.87 3.43 1.10 -1
IBM -3 1.12 4.57 4.86 2
BUD -6 0.67 2.96 0.95 -5
KHC -6 0.72 4.61 4.28 -2
WBA -9 1.19 3.10 3.51 -5
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“It depends primarily, I think, on whether they have to cut fees in order to maintain assets under management.”
I guess it also depends on how well they can deploy all the cash that they bring in.