Sometimes I worry that our portfolios don’t have enough growth in them, and sometimes I worry that they don’t have enough “sizzle” in them, e.g. enough of “the market darlings”.
The job is partly all about worrying, so that’s fine, and you can get more concrete by saying “am I exposed to a well-diversified factor portfolio of time varying premia” in the right amounts, including momentum.
So I often find myself revisiting the tech sector, and, almost as quickly, moving on again.
If we are in a world with a positive real interest rate (where the Fed projects ~+160bps), then I don’t see the appeal in paying 10x revenues for tech (not that I saw it before, either, with the Sun Microsystems guy never too far from the mind).
You can swap to EV/Sales to a similar enough outcome.
IRE we like, despite being burned by a downgrade we didn’t expect, and XRO we like, but deep down, are not totally confident of how well they can take on the world. It’s a tough market, out there. Mind you, everyone has the same view, that’s why the stock halved, so, we aren’t adding much value with that observation.
ALU, we’ve owned in the past, and done tremendously well out of. But I find I can’t convince myself to own it at 10x revenue.
Oh well, boring old banks, insurance, select commodities, teleco’s and healthcare it is. Reporting season is just around the corner, perhaps we will find more inspired trades then.
Cliff Asness, of AQR fame, continue to make the point that the factor dispersion between growth stocks, and value stocks, is still extraordinarily high. In other words, the value factor looks great, and, at the least, the growth factor overcooked. That’s the view we are essentially espousing above.
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