Covid-19

[karlmarx]

Given the many unknowns, I often wonder how we can say for sure the intrinsic value and thus the margin of safety.
Using the discounted cash flow model, for example, a lot of assumption about the future has to be made. Or else, the model just won't work.

If you have a bearish model of the future, you will assign a lower value to your investment (say $1), and hence, the price you are willing to pay for it will also be lower (say $0.50).

If you have a bullish model of the future, you will assign a higher value to your investment (say, $2), and hence, the price you are willing to pay may also be higher (say $1). 

So depending on the assumptions you use in modelling the future, you will buy between a range of $0.50 and $1.

Of course, you will always want to buy cheaper. But you may never get that price. The future could indeed be bullish. And you would have missed out if you were holding out for a cheaper price.

But if the future turns out to be more bearish than you assumed, you will likely suffer losses from paying too high a price.

If you're too bearish, you miss gains. If you're too bullish, you suffer losses.

I prefer to miss gains than suffer losses, but everyone has their own preference towards the game.

My personal perception is that the market tends to be more optimistic (or bullish) most all of the time. Recall that SATS was still trading at $4 (20x trailing p/e) after the pandemic hit China pretty badly, was only beginning in Europe, and was known to be highly contagious.

So there is no "for sure." A lot of things happen beyond people's expectations. 

The kind of upward revenue/profit trajectory projected in analyst reports are often very optimistic scenarios, in a world where the company in question has everything going for it.