I have a watchlist of a hundred or so companies that I update weekly with VL data, and sort based on current price as a percent of estimated fair value (FV), where FV is some combination of current and 3-5 year estimates. My question has to do with the weighting of these two estimates.
On the one hand, I’m inclined to weight current P/FV more heavily than P/3-5 year FV, on the assumption that current FV is likely to be more accurately estimated than future FV. On the other hand, investment returns are all in the future, perhaps arguing for more heavily weighting future FV despite its greater uncertainty. To date I’ve been using a simple average of the two, but the question persists.
I’d very much appreciate learning what others here might think about that, or about any entirely different sorting criteria.
Thanks in advance.
Tom