Estimate future earnings

When Charlie (Munger) and I buy stocks – which we think of as small portions of businesses – our analysis is very similar to that which we use in buying entire businesses. We have to decide whether we can sensibly estimate an earnings range for five years out, or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings – which is usually the case – we simply move on to other prospects.