Portfolio Fair Value Estimates
4th December 2024
This week we wanted to share our current fair value estimates for each of the positions in our portfolio.
How We Calculate Fair Value
Valuation, we believe, is more of an art than a science. Drawing from Nassim Taleb's critique of forecasting, we value simplicity and accept the inherent unpredictability of the markets. By using a basic discounted cash flow (DCF) calculator, we establish a starting point for fair value and build from there.
We always begin with a 10% discount rate and model three scenarios: bull, base, and bear. Using conservative estimates for EPS growth and exit multiples, our aim isn’t to predict exact outcomes but to establish a reasonable range for fair value.
We focus on being roughly right rather than precisely wrong.
Once we have a rough fair value by choosing the most reasonable assumptions from the range, we aim to buy positions at a discount—our margin of safety. Ideally, we target a 25% margin of safety, which aligns with a 15% target rate of return at a 10% discount rate. However, this margin varies depending on the risk profile of the investment.
Below are our fair value estimates for each of our positions, before that margin of safety is taken into account:
Breakdown:
PayPal Holdings, Inc. (PYPL)
Fair Value: $95
Investment Thesis:
![[FREE] PayPal (PYPL) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F2ec95c38-51d6-4f98-a32f-f4bcfd42102c_2560x1920.jpeg)
Nintendo Co., Ltd. (NTDOY)
Fair Value: $15
Investment Thesis:
![[FREE] Nintendo (NTDOY) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F85de3997-55a8-41ff-b579-f5aaa8bd1af6_400x400.jpeg)
Evolution AB (EVVTY)
Fair Value: $120
Investment Thesis:
![[FREE] Evolution AB (EVO.ST) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F4563cd74-03c3-4c89-b5ee-f7047e980201_700x700.png)
Meta Platforms, Inc. (META)
Fair Value: $550
Investment Thesis: Coming soon…
Alphabet Inc. (GOOGL)
Fair Value: $150
Investment Thesis: Coming soon…
Teqnion AB (TEQ.ST)
Fair Value: SEK 185
Investment Thesis:
![[FREE] Teqnion AB (TEQ.ST) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F56d4cbac-ce13-4176-b750-579dd8124803_1000x1000.png)
BAE Systems plc (BA.L)
Fair Value: £11.5
Investment Thesis:
![[FREE] BAE Systems (BA.L) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fefb4943a-9762-4828-9651-671db8384d00_6690x6352.png)
Nu Holdings Ltd. (NU)
Fair Value: $13.5
Investment Thesis:
![[FREE] Nu Holdings (NU) Equity Research Report](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fbf450a78-515a-4766-a7b9-f43ca6a09672_2135x2120.png)
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The S.C. Team
Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions.