 But they feel investors. Well, I just purchased a little bit of Facebook and in this video I want to give you the rationale around Facebook, the analysis, the stock analysis is a risk reward, how it fits my current investment strategy with the large portfolio that I have started where I'm turning my covered stock list into really owned stock list because Walter Schloss said that you need to own something to understand it and that's what I am doing. So here we go with the Facebook analysis and then the portfolio rationale. All right, quick Facebook analysis, really to the point that really matters when it comes to investing in Facebook. Facebook's earnings over the last 12 months were 18.4 billion. If we adjust for the five billion legal charges we are at 23.4 billion. On a market capitalization of 522 billion price earnings ratio is 22. That's in line with the market. SAP 500 price earnings ratio is also around 21. But there is a huge difference with Facebook. Revenue growth was 24%. That's huge, that destroys the market. Therefore, one can immediately say that Facebook is undervalued from a growth valuation perspective. So it is all about growth with Facebook. Facebook is a growth stock and if it continues to grow at 15, 20, 25% per year that will be your return. And I've listened to the last conference call for the fourth quarter of 2019 and Mark was kind enough to explain where does he see more growth coming for Facebook. So in short, the following notes comprehend Mark's view on Facebook's future. It's increasing the private social platform more intimate communities, more commerce and payments, WhatsApp payments, Facebook pay, Libra, et cetera and creating the next computing platform, the next computing platform, AR, VR, of course. And then the number of users I don't expect any growth there because I think it has reached its limit and the growth on this chart is probably from fake accounts and I having a group on Facebook and my page there there are so many fake accounts you can't even believe it. Nevertheless, there are, let's say, two billion monthly users that might be the best base to grow on all the other things that Facebook is doing. Followingly, let's do a Facebook earnings model. I analyzed Facebook and I also publicly discussed the purchases here on YouTube in 2018. And I said in 2018, based on the earnings if there is 20% growth for the first five years, 10% over the subsequent five years, 2029 conservative price earnings ratio of 10 that leads to terminal value of 259 on earnings of 25.9. A required return of 10%, the present value in 2018 was 183. I bought the stock at 174 and 130 something in that year, later sold at 200. So that was then. Now, 2020 April, Facebook grew at a faster rate than 20%, 24% has stronger earnings. And if it continues to grow at 20% for the first five years, 10% from 2025 to 2030, then earnings will be $34 per share in 2030. If we attach a conservative price earnings ratio of just 10 and we have a required return of 15% to calculate the current value, the present value in relation to the future value, the future stock price or the so-called discount rate, then the present value is 168 for a 15% return. The stock price would be 343 in 10 years. The 2020, 20% growth first years, conservative price earnings ratio of 10 required return of 15%, the present value is 168. I'm including the present value of the earnings over the year because they are accumulating cash and they have 55 billion on cash on their balance sheet. So we will see what they will do with the cash flows that are close to the earnings and they might pay them out. Therefore, I'm including them in the present sum valuation because that is how the business looks like. Then on, let's say a more market like valuation, 20% growth, 10% later, 20, 30 conservative price earnings ratio of 15, which is possible if the business continues to grow in the future and the required return of 10%, which is something many are happy with, the present value goes to 421 dollars and the future terminal value goes to 795 dollars. So you buy now something for 175 and the potential is there that it is an 800 stock in five to 10 years. Given the present value range is between 168, depending on your required return and 400 and the stock price is 175, I think Facebook is a stock to buy. That's my view and I want to learn, I want to learn more about the new value which is growth, the number of users, user monetization and then all about the new technologies that Facebook is creating and I want to follow that model, that value, that and also apply to all the other stocks that I research because it will give me a better, let's say, fundamental knowledge about the world we are going into the next 10, 15, 20 years. So I need to own it to know it, I bought 10 shares, I have this portfolio called the large Peter Lin style portfolio, try to build it up to 30, perhaps even 50 positions. This is one of three potential purchases for Facebook. If it goes down, I might add another purchase. So I'm thinking 100,000, 30 stocks between 1,500 and 4,500 per purchase. And this is how I will structure the portfolio from stalwarts, fast growers, cyclicals, asset place, turnarounds and then follow them. And when it is a really great time to buy it then and I know the company really well, then I might go with the other portfolios and source ideas from here. Nevertheless, I'm always trying to make money, find good investments and if Facebook goes to 810 years, it will be a good investment. However, when it comes to investing, you also have to see the risk and reward and how does that fit your portfolio? I had recently great question on my platforms when in every video you say, see how that fits your portfolio, could you elaborate on that? Well, it is about the risk and reward. And then when you invest in something, okay, look at the worst scenario and at the best scenario and then compare it to all the other options in your portfolio and then you see, okay, how does that fit my portfolio? On Facebook, worst case scenario, there are more scandals, there is much more regulation. The government say, Facebook, you know too much, you are too much into people's life with 2 billion people. So we either forbid you to do something, we tax you more or do something and let's say there is a degradation of the business, higher costs, like it has been the case over the last year with the Cambridge Analytica scandal. Then next, there are other platforms that are coming in and taking, let's say, market share. We could see TikTok, we are seeing what's doing, we can see Snapchat, but the longer Facebook exists, the bigger it is mode. However, you never know what can happen. That's something to keep in mind and then if things go worse, let's say earnings stop growing, perhaps even decline a little bit, the market is willing to pay 10 price earnings ratio, then you have a stock that is around half of what it is now. That is a risk and that's something you have to see how it fits your portfolio. On the reward, Facebook continues to grow 20, 25% per year, 15%, depending on the year. It is volatile, it will be volatile, but in 10 years you have a business that stock price is between 350 and 1,000. So that's a compounder, compounding effect, growth effect and then compare the risk and reward with all the other opportunities that you have to invest or in your portfolio. This is what I mean when I say see how it fits your portfolio. Click that like button. It is very important for the algorithm I have been told. So please click that like button. If you like this analysis, I'll share more of the learning portfolio purchases and rationale over time, not all 50 or not all 30 of them, but probably seven to 10 of them. I promise that, so subscribe and click that notification bell. If you want to see all my portfolios, just check my research platform or also check my page for my book or everything that you might find valuable for your investing journey. Thank you for watching. Looking forward to the comments and I'll see you tomorrow in the usually weekly stock market news on Friday.