Up to this point we have talked a lot about theory, logic and the tools behind the Fairvalue Calculator. It becomes truly interesting at the moment when all of this turns into a sequence of steps that you can actually apply in a real portfolio. That is what this chapter is about: the practical method of moving from the overall market to sectors and then to individual stocks, and using fair value not just as a number you know, but as something you consistently act on.

At its core the Fairvalue Calculator method follows a simple top down idea. First you look at how cheap or expensive the overall market is. Then you ask which sectors look attractive in that environment. Only after that do you choose specific stocks and use the Premium Tools to assess fair value, quality and strength. It is less about intuition and more about a repeatable process that you can run through for every single investment.

The starting point is the market analysis. In the Market Analysis Tool there is no guessing, only calculation. The system looks at all stocks in the database, builds averages for the price earnings ratio, price book ratio, price sales ratio and dividend yield, and compares these averages with their own historical means. From this it creates a value that shows by which factor the market deviates from its “normal” valuation. In addition it incorporates how many stocks in the database are currently considered undervalued and how many are overvalued. All these pieces form a market fair value indicator that is recalculated every day. If this indicator falls clearly below 0.75, history says that this is a very cheap market phase. Between 0.75 and 1 the market is roughly in a fair range. Everything above that signals exaggeration and calls for caution.

In theory it sounds simple. You wait patiently until the market indicator drops below 0.75, invest aggressively at that point and earn brilliant returns. In practice there are two problems. First, phases that cheap are extremely rare and often very short. Second, an expensive market can stay expensive for a long time without an immediate crash. Market timing looks tempting on paper, but it is extremely hard to execute in reality. Crashes arrive with a speed for which there is no reliable early warning signal, and prices usually fall faster than they later climb. In the long run the stock market still rises on average, those famous nine percent per year, but the exact path is bumpy and very hard to predict.

Based on this experience I prefer working with probabilities rather than with crystal balls. In my own portfolio I am basically always invested. In parallel I keep saving regularly, and this additional cash is only pushed into the market step by step when the market analysis shows clearly cheaper valuations. The cheaper the market appears according to the analysis, the more risk you can justify. The more expensive it looks, the more it makes sense to reduce risk, act defensively or simply not buy anything new for a while. Nobody is forced to buy stocks every month just because there happens to be money sitting in the account.

Once the market is roughly classified, the sector level moves into focus. The Sector Analysis Tool does not care about headlines, it cares about ratios. All sectors in the database can be sorted by measures such as price earnings or price book ratio in ascending order. At the bottom of that list you find the areas where valuations are rather compressed in historical comparison. This is where the statistically better bargains tend to appear. At the top of the list you mostly find the darlings of the last few years, the sectors that have done very well recently and are valued accordingly.

Experience suggests that you should be particularly careful with some sectors. Banks and oil stocks are classic examples where complex balance sheets and hard to quantify risks make valuation messy. If you do not truly understand how a major bank or a commodity group works, you are often better off covering that theme through broad ETFs instead of individual stocks where a single balance sheet detail can change everything. For gold or commodities in general, an ETF is usually more appropriate than a single mining company. What matters is that it is really an ETF and not an ETC, because only the ETF is held as segregated assets and would not simply disappear if the provider went bankrupt. If that feels too complicated, there is a very simple solution. You can just avoid these sectors and focus on areas you genuinely understand.

Once it is clear how the market is roughly valued and which sectors look interesting, the real hunt for individual fair value stocks begins. This is where the Premium Tools show their full strength. In the stock screener you can create a list of those stocks whose fair value is above the current market price with just a few clicks. You can add filters for region, market capitalisation, dividend yield or growth rates. The result is not just any hit list but a more focused selection of companies where price and fundamental quality match.

Many investors discover possible candidates through magazines, financial websites, blogs or conversations. Names like Facebook, now Meta, or Tencent used to show up in my notes again and again because they were always present in the media and in forums. The important point is not to confuse that initial visibility with quality. The screener helps to bring that intuition back to reality. If the system shows that fair value is clearly above the current price and the key figures are solid, then a “nice story” becomes a concrete investment candidate. If the valuation does not fit or the metrics are weak, the name goes off the list again, even if the headlines sound euphoric.

The detailed analysis happens on the individual stock page. This is where all strands come together. The automatically calculated fair value, alternative valuation approaches such as discounted cash flow, the sector comparison, growth rates, profitability ratios and relative strength compared with the overall market. When you see several models side by side, you quickly notice whether a single outlier is distorting the entire assessment. One year with an exceptional profit spike, a special situation such as a one off licence deal or a book gain can lift the figures without making the business structurally better. This is why it is crucial to look at rows of numbers over several years instead of just one point in time.

In practice a complete analysis with this method often follows the same pattern. You first check whether the overall market is in a broadly acceptable range. Then you look at which sectors appear comparatively cheap in the Sector Analysis Tool and are not obviously stuck in a dangerous hype zone. From those sectors you use the screener to filter out the stocks whose fair value is clearly above the current price. These candidates go onto your watchlist. You then take the time to examine them calmly on their stock pages, checking quality, fair value and debt. Only when this overall picture makes sense does the path lead to an actual purchase in your portfolio.

In this way a seemingly unmanageable universe of stocks becomes a clear sequence. Classify the market, weigh the sectors, search for individual stocks with a system and then let fair values do their work with patience. Everything else, such as daily moods, headlines and circulating crash forecasts, moves into the background and becomes the permanent noise that will always exist on the stock market but does not have to shape your decisions any more. You can watch fluctuations with confidence and calm, without fear and without stress.