As long-time readers may know, I started out as a value investor. I became a growth investor, kind of by accident, as I got heavily involved in the Hong Kong and Australian stock markets in the 1980s. There, mid-sized, fast growing companies were also the ones trading at the lowest PEs and price/book. At the same time, they were major beneficiaries of Deng’s turn to “Socialism with Chinese Characteristics,” i.e. capitalism, at the start of this decade.
I think we’re in a somewhat analogous position today with early-stage tech stocks in the US–ex SPACs, at least for the most part. These stocks have been beaten down very badly during the past year or so. For some, the story is simply that the price decline has made them much less risky than they previously were–think Peleton. Others have the much stronger attraction that if we view them through their cash flows rather than their reported earnings, they show themselves as much healthier than the market realizes. Not that it matters, I’m not sure why these stocks are so unloved. My guess is that AI is doing the selling and that computers are blissfully unaware of the finer points of tech stock accounting.
Details start tomorrow.