Cyclicality is Not a Problem Allocating a Portfolio Based on Estimated Risk-Adjusted IRR

Use Earnings Forecasts to Gauge Interest

We’ll estimate what we think earnings can be four to five years out, apply the current multiple to those earnings, and then see what the price would be if discounted back to today using a 20% annual rate. If the price today implies a discount rate of more than 20% per year, we’re interested.