The following is a summary of some of the advantages of using STRET and STRETD in Conscious Investor:
(1) The Conscious Investor approach using STRET and STRETD provides you with what an investor needs, namely a calculation of the total return that you will get, with an investment under the investors margin of safety.
(2) The formulas are precise. For example, if the output of STRETD is 15% over the next 5 years, then this will be the exact outcome provided the input numbers are met.
(3) The formulas are stable meaning that small changes in the inputs will result in small changes in the output.
(4) All the input numbers can be tested for accuracy. For example, if the outcome of STRETD is calculated over the next 5 years, only numbers relating to the next 5 years (growth rate or earnings, etc) are needed. Also, the input numbers are forecasts of core financial data (earnings, payout ratio, etc).
