# Good Start To 2020

Published: Monday February 3, 2020

It has been a good start to 2020. I found a new job as a developer! Was unemployed for 3 months, worst feeling ever. Thank god!

Since I will have some income now, I am thinking of investing some of it in stocks. The job stability for a web developer is unstable; with contract jobs becoming the norm now. I need to save or invest some of my income.

Saw an ad on YouTube; eToro. Opened an account with them. My take on their platform? Looks great and easy to use (as I have some trading experience).

With my new investment strategy of buying and holding for the long term (read my previous post here), I set aside US$2,000 to invest with a 1-year horizon.

Markets were on a roll in 2019 reaching their all-time highs and this pullback because of the coronavirus scare was my entry point.

I also did some research on the stocks I was going to buy. Better to have some knowledge rather than going in blind. More on my analysis below.

**Cost of Equity**

To calculate the required rate of return of investing in individual stocks, I will be using the opportunity cost of versus investing in the general market such as the S&P 500 index. From Jan 1990 to Jan 2020, the S&P 500 grew from 331.89 to 3,225.52.

331.89*(1+r)^30=3225.52

This means during the last 30 years the average annual return for the market was 7.87%.

**Valuing Alphabet (GOOGL)**

Alphabet’s EPS for the twelve months ending September 30, 2019 was $46.60. I will be using the Gordon Growth Model. I expect the perpetual growth rate of Google’s EPS to be at 5%. This leads us to the formula below:

Fair Value=46.60/(0.08-0.05)

Target price of $1553.3 with an average 2020 quarterly EPS estimate of 12.23. Google releases earnings today.

**Valuing Intel (INTC)**

Intel’s EPS for the twelve months ending December 31, 2019 was $4.71. I will be using the Gordon Growth Model. I expect the perpetual growth rate of Intel’s EPS to be at 3%. This leads us to the formula below:

Fair Value=4.71/(0.08-0.03)

Target price of $94.2 with an average 2020 quarterly EPS estimate of 1.21.

**Valuing Microsoft (MSFT)**

Microsoft’s EPS for the twelve months ending September 30, 2019 was $5.30. I will be using the Gordon Growth Model. I expect the perpetual growth rate of Microsoft’s EPS to be at 5%. This leads us to the formula below:

Fair Value=5.30/(0.08-0.05)

Target price of $176.7 with an average 2020 quarterly EPS estimate of 1.39.

**Valuing Boeing (BA)**

In 2019 Boeing was unprofitable as a result of the MAX crashes. We will be using 2018 results. Boeing’s 2018 annual EPS was $17.85. I will be using the Gordon Growth Model. I expect the perpetual growth rate of Boeing’s EPS to be at 3%. This leads us to the formula below:

Fair Value=17.85/(0.08-0.03)

Target price of $357 with an average 2020 quarterly EPS estimate of 4.6.

**Valuing Alibaba (BABA)**

Alibaba’s 2019 annual EPS was $4.97, a 27.11% increase from 2018. We will be using the Gordon Growth Model. I expect the perpetual growth rate of Alibaba’s EPS to be at 6%. This leads us to the formula below:

Fair Value=4.97/(0.08-0.06)

Target price of $248.5 with an average 2020 quarterly EPS estimate of 1.32.

**Valuing Xiaomi (1810.HK)**

Xiaomi reported 2019 Q3 EPS of RMB$0.106, an average yearly EPS of RMB$0.424. We will be using the Gordon Growth Model. I expect the perpetual growth rate of Xiaomi’s EPS to be at 3%. This leads us to the formula below:

Fair Value=0.424/(0.08-0.03)

Target price of RMB$14.13 or HK$15.68 with an average 2020 quarterly EPS estimate of 1.09.

With my homework done, I am putting US$250 into each stock with some leverage. That’s my 2020 portfolio for you guys.

Follow me here on eToro to copy my trades.