Some Valuation Updates

JD

This may have gotten a little frothy.

TTM revenues were $85B (topline growth rate ~25%). If we project same growth rate out for 5 years, revenue ~ 3x at $255B. JD has lot of moving parts, and partial ownership in spinoffs, but ignore that and apply a 2% margin (previous net margin ~ 0-2%) for an EPS of $5.1B/1.6B shares ~ $3/sh, 5 years out.

Suppose it then trades for a P/E of 30x for a fast growing business ($3*30 = $90). If we discount that back at 10%, we get a present value around $55-60. My assumptions of growth rate, profitability, and discount rate are more aggressive than normal. Risks include a price war with BABA, deterioration of US-China relations, VIE structure, dissipation of COVID bump.

With the stock price at $65+, I’ve laddered calls (still juicy) to exit my entire position (August 21 expiry) at an average price of $60.

FB/GOOG

FB has about $21/sh cash. Given quality of company and CEO alignment, 25x NTM EPS of $9.50 gives $255-$260. Plenty of cylinders still left to fire. This is currently my largest position (~11% portfolio), and is trading a tad below my estimate of fair value.

GOOG has about $165/sh cash. A 20x multiple on normalized EPS of $55, plus $300 of other bets yields a fair price around $1550-1600, right around where it is trading these days.

FRFHF/WFC

Both have been crushed this year. Fairfax is down 35% and Wells Fargo has been halved! Both have seen meaningful insider buying activity. Both Fairfax and WFC should be worth at least book, which were $420 and ~$40 at the end of March qtr.

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