Possible scenario quick back of the envelope for Alphabet.
Last 3yr average earnings $3.66 @ 12% pa growth x 20PE terminal multiple = $227 in 10 yrs. If you want a 12% return on that the share price now is $73, unrealistic?
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Interestingly… same for meta 3yr Av $10,12% pa growth x 20 pe 10 yrs out is $621. 12% desired return equates to a present value of $199 @ 90 its trading at a 50% discount to this. Anyway just an idea of my basic thought processes.
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Must read on why GOOGL is screaming low risk buy:
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Are you simply ignoring 2022 in calculating a 3 year average, and including 2019? Looks like it.
3Qs in and they’re already at $3.50 for 2022, about a $1 more than 2019 with a quarter to spare.
3 year average, ie last 12 Qs, is safely $4+.
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Yes, i took the past 3 years full annual earnings.
So what is the back-up the truck price on GOOGL and why? Right now in endless liquidation. Next tax loss selling into year end. Has the potential to get stupid cheap on downside. So liquid,…WEB could easily put $30B to work.
Perhaps 15 x last 3 years average earnings? 3.66 x 15 c$55 dollars. Would be my very rough guestimate. (Bear case)
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Have you looked at Apple in a similar fashion?. My 10yr 12%pa return buy price is $99 per share. Bear case 15 x 3 year av earnings is $75 per sharr based on average earnings of $5 per share. If Apple does drop off like Alphabet I think we could also see Berkshire drop to sub $250 bear case. Worth keeping in mind.
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$55 is about 12 times Google’s 2022 earnings.
It’s a bit over 13 times the 3-year average, if you don’t simply ignore the last three reported quarters.
I mean I’d love to buy BRKB at $240, or Google at $20, but I’m not keeping my truck in idle waiting for the opportunity.
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I’ve not said they’re buy prices. They’re my expectations of worse case scenario. Im happy to buy Alphabet if I get a 10% return or better long term so have been buying below 100. See my methodology further up the thread. The discussion is “how low can it go” $55 would take up back to the 2020 low. Ie 1100 pre split.
Similalrly for BRK I like 260 for a long term 10% return but it could go as low as 1.1 times book which is 222 and the levels I purchased at in 2012. Who knows?. If it does youll probably get a 14% return compounded return over the long term from there.
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