Growth Got Crushed!The Acquirer's Multiple
In their recent episode of the VALUE: After Hours Podcast, Braziel, Hoffstein, and Carlisle discuss how Growth Got Crushed. Here’s an excerpt from the episode:
Growth Got Crushed!
Tobias: I’ve been saying this more and more recently, but I’ve been completely, totally bamboozled by this market just because the trends is that top line spire is so smooth, and then there’s these huge moves underneath in particularly tech and now value is having a little run as well, which always makes me feel a bit uncomfortable, because I know that that’s coming to an end in the not-too-distant future.
Corey: That spoken like a man who’s just been beaten by value for the last five years. You can’t even have a glimmer of hope.
Tobias: Longer than that. It’s like five years of straight down, but the five years before that wasn’t– The five years before that, it did sort of outperform over that five years, but it was weird, it spent a lot of time going sideways and down. I remember end of 2015, that doesn’t quite make it into these five years, that was savage.
Corey: And then a strong rebound in 2016, right?
Tobias: Yeah. So, we’re having a little run here and the run for me, because I’m quality and value, that’s really only started in the last month or so.
Corey: What’s interesting to me looking at growth is, it has just been beaten in the last quarter. If you start to look at some of the like– not that I’m big on the technicals, if you start to look at some of the technical, compared to 20 years, growth versus value, growth is one of the largest relative drawdowns over a three-month period versus value for the last 20 years. The speed of the selloff, again– and this is what makes this particular environment, I think, so difficult to navigate, or one of the things when I’m looking at the portfolio, I manage so difficult to navigate, is if you take on too much concentration risk and you’re in the wrong undercurrent, it’s a violent unwind for you. So, you have to either play Whac-a-Mole a lot faster and move around a lot faster or potentially take less tracking error risk.
Tobias: I saw a piece today that said that the drawdown in tech has been the biggest drawdown in any of the factors over the last 20 years, I think. Maybe it’s 10 years.
Corey: I wouldn’t be surprised. Growth or tech?
Tobias: It might have been growth, but I think it was in the context of a tech discussion. I think they’re talking about growth, but it’s mostly tech.
Corey: Yeah. I was looking at some numbers from some of the Goldman Sachs baskets that they published this morning, and it is a bloodbath and what’s funny is because I think people think so positively about the FANGs– and the FANGs have just gone sideways. It’s like the top-level pain has not been there, but when you look at the growth basket as a whole, it’s been really bad and then pockets of the growth basket, like your nonprofit double growth, your high enterprise value, or your high multiple stuff– look, just use Ark as a proxy.
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