Most of us who’ve been here since 2018 or before have had a pretty good year in 2019, even though we would have been a lot better off if we’d sold everything in July. I’m still up 30%+ so I can’t complain.
We might be tempted to think multiples like P/S ratio are up, too. But check this out: Multiples are actually down for the year!
Ticker Dec 2018 P/S Current P/S
AYX 21.4 19.1
ESTC 24.0 **13.8 !!!!**
MDB 20.5 18.4
ZS 22.1 18.7
SQ 19.8 15.0
TWLO 17.5 14.3
Not everything is down…
Ticker Dec 2018 P/S Current P/S
SMAR 16.2 20.1
OKTA 19.2 25.4
…still, it’s encouraging to see that we’re not in crazy-land with valuations. We’re actually lower, for the most part, than where we started the year!
Just to add to Bear’s multiple contraction observation, I noticed today that (as of writing this) of all the stocks I track, every stock with a P/S greater than 10 (exceptions Naspers and DDOG) was down while most tickers below that P/S figure were up.
Like many here I’m adding to holdings, while trying to understand factors behind some of this month’s high-growth stock selloff despite more attractive multiples. Apart from a risk-off trend in buying and tax related selling, I often hear of funds selling in order to lock in gains.
That makes sense to an extent, but given they’d need to buy back shares to achieve gains in the next period, is there any merit to this possible additional reason for funds to sell high multiple stocks:
Aside from returns in a fund, most analytical tools show overall fund metrics including volatility and overall P/E or P/S.
Given this, do some funds window-dress at month/quarter/yearend by swapping out stocks like ours which score poorly on those metrics and replace them with holdings that typically show better metrics? This might allow funds whose returns were bolstered by high growth stocks to look safer and less volatile while displaying strong returns.
… Given this, do some funds window-dress …
Absolutely, yes. No doubt about it. Is it egregious? Not always, and sometimes maybe it would be called “prudent,” but I am pretty convinced it happens, both from seeing the market results, and from talking to people who would know (folks working in the financials).
I imagine it happens even more so for funds that are supposed to track a specific index such as the MSCI whatever, or S&P 500, etc.
Yes, market sentiment has been against high growth stocks since late July and lately many Wall street banks have made statements favoring value over growth. the typical hi growth portfolio here is barely/slightly doing better than the SP index this year. Between July 26 and today my port is down 25% while SP 500 is up 4.6%, not counting dividends. Not sure what will turn this sentiment around.
Texmex, we don’t even know what turned it to begin with so how would we know what would turn it around as well?
Yes, it will turnaround and probably when you least expect it. I am sure we will see a new tribe of “told you so” despite the fact of not owning AYX, for example since the $20s or $30s (where it crashed back to btw due to Tableau FUD issues).
Or perhaps never again will high growth, high margins, huge markets, high CAP, attract investment capital as the world returns to appreciate the sensibility of manufacturing and traditional economics brought about by a Caterpillar or a Ford or whatever else makes one feel comfortable.
And they could contract further
What I do know is that the company is growing and executing. I can’t control market sentiment.
Numbers courtesy of: https://easystocknumbers.com/ created by a fellow board member
LOL, I was very unlucky and bought at the maximum $27.48.