With the sharp rise in price this morning DE offers less yield. The combination is still attractive when one looks at the long-term. It is management’s focus on corporate ‘lean’ culture which provides assurance that the long-term performance should continue.
Warren Buffett’s 2018 Activist Investment
Most investors are aware of Warren Buffett's most high profile long-term investments. However, there is one long term investment that is often overlooked. Q2 2020 hedge fund letters, conferences and more This is building materials maker USG, which was owned by Berkshire Hathaway for more than 17 years before it was acquired in 2018. If Read More
I look at corp results in the context of the global context. Currently lower levels of inflation and stupidly high US$, still stupidly low 10yr Treas rates will eventually give way to higher inflation, 35%+ lower US$ and 10yr Treas rates closer to 5%.
Net/net, next 5yrs should see improving business environment for DE with investors eventually becoming overly optimistic. Run a trend line through DE’s peak levels over this chart and you get to a number which will startle you but quite likely as the general climate becomes more optimistic. I will let you do the calculation, but 5yrs out it is in the range calculated by beginning with my trend line price today $90shr, compounding it forward at 10.8% for 5yrs and then multiplying by a factor of 2 to adjust price to a market which is overly optimistic.
For companies which are consistently well run, a dividend yield model works as well. Some use Pr/BV or Pr/Sales which would come to 5x or 2x as high points respectively from current relative levels of 3.5 and 0.9.