I’m reading The Intelligent Investor painfully slowly. I started about a month ago and I’m still only about 70% of the way through. It doesn’t necessarily make for easy reading – but the effort has been worth it, for it is packed with invaluable investment advice.

One of the areas where it offers the reader some education is in picking stocks. I haven’t really lived through many cycles of the stock market as an investor, so there’s much to learn for me.

However, I’m tracking some stocks, just as an exercise in testing my skills. At this point, I’m looking at $MSTR, just like a lot of other speculators and investors.

Ignoring its software business as a rounding error in the current frenzy, I consider $MSTR book value to be completely made of its $BTC holdings. As of today, $MSTR holds a total of 444262 BTC for a total value of $42B, and the market cap of $MSTR is $81B, which is a ridiculous premium that the market is paying right now. I wouldn’t enter into a buy position in $MSTR unless it was priced more or less half of its current market price.

Even at that fair value, I would still consider the concentration risk of such a big treasury of bitcoins and the custody risk without transparent proof of reserves. But that is more domain knowledge about the prospects of the company. It’s ridiculously priced even from a fundamental quantitative finance point of view.

How does this end? I predict that $MSTR can start signaling they are overvalued, and get share prices more in line with the book value, at the expense of existing shareholders (the management will probably wait until the top of the bitcoin cycle for this, which can be anywhere from the next 1-4 years). Or $MSTR will be priced correctly by the market during the next cycle downturn eventually.

Note: This is not financial advice. I have no positions in $MSTR. $MSTR might continue to ride the speculation frenzy with prices soaring for a while in the future. You have to comfortable in missing out on potential profits considering the margin of safety is missing.