In Warren Buffet's recent Shareholder Letter, it seemed that no other theme was more prevalent than using long durations to get your success. Buffet looks for investments which have strong long-duration possibilities. This keeps frictional costs low and capital gains taxes minimal. The net-present-value of a 100-year earnings stream is mathematically higher than a 50-year stream, especially in an era of low discount rates. (paraphrasing Bill Smead - http://smeadcap.com/smead-strategies...ies/2014/03/03)
Samuel Lee (morningstar.com) comments "Both Buffett and Munger declare that their favourite holding period is forever. This seems to contradict the fact that at a high enough price, even the most wonderful business in the world will produce less-than-wonderful returns. No doubt part of their hesitance to sell wonderful businesses at any price reflects a philosophical aversion to “gin rummy” investing. I think, though, the main reason they hold on is because they truly believe wonderful businesses are persistently undervalued by the market, even when common valuation metrics suggest otherwise".
"The goal of the long-term investor is to come up with better estimates of intrinsic value than the market and buy stocks trading for below intrinsic value and sell stocks trading above it.
However, if you plug in reasonable-seeming numbers, you quickly discover that the majority of an investment’s present value is often embodied in the cash flows many years out. After inflation, the U.S. stock market has returned about 7% and grown per-share earnings by 2% over the past century. Apply a 7% discount rate to an earnings stream growing by 2% per annum in perpetuity, and you’ll find that the earnings beyond the first five years account for almost 80% of intrinsic value. Earnings beyond 10 years account for more than 60%".
The question is, which ASX listed companies can be considered in this long duration theme? Which companies will not only still be around, but earning appreciably higher profits and paying appreciably higher dividends 5, 10 and 20 years from now? Companies that seem overvalued according to traditional metrics and but deserve their 'lofty' pricing.