Growth Back-On & What’s Next For Value

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In their recent episode of the VALUE: After Hours Podcast, Brewster, Taylor, and Carlisle discussed Growth Back-On. Here’s an excerpt from the episode:

Tobias: We had a good little value rally from whenever you want to pin it, September, November, last year, and it ran through until about a month ago. So, for the last month, there’s been recovery in the techie-type names, like Ark has bottomed out at $109 about maybe a month ago, maybe it’s a little bit less than that. It’s had a pretty solid value here. Tesla, too.

As a result, I’ve noticed that all the value stuff’s been sucking wind for a month, I don’t have a view on whether that’s necessarily the end of the value rally, although based on our experience over the last five years, there’s some evidence that might be the case. Once you get a three-month rally in value, it’s all over and then it goes backwards. But there’s also the experience in 1999, 2000, and through 2002, was that there were many, many rallies in the techie or growthier stuff that then ultimately turned around and turned into busts. So, I’m just wondering if you guys have any view on where we are, what’s happening?

Jake: I’ll let Bill take this easy one.

Tobias: [laughs]

Bill: Well, I really don’t. Here’s the thing that’s hard for me to understand. I think that the market can get way crazy. I think we’ve all been fairly consistent saying some of these names will be winners. We don’t really know which ones. I don’t think anybody has promised to be the person that can pick the one. Otherwise, we probably wouldn’t be on a podcast doing this shit. We’d probably just be on the beach.

Tobias: Well, it hasn’t happened yet.

Bill: What? That we’ve made it to the beach? This is the problem.

Tobias: The winner hasn’t come in yet.

Bill: Yeah, well, I agree with that. What I was going to say is, there’s a lot of names that are down 50%. Could they go down 90? Yeah. Could they go down and 75? What’s the old joke about a stock that’s down 90, was down 80 and then halved? So, I don’t know. I’ve never really bought the inflation comments. I’ve always thought it’s transitory. I think if that passes, people are going to buy long-duration assets. These things are probably going to resume growth as the sales forces can get– not sales forces in the ticker, but as the salespeople can get it back out on the road. I don’t see why it should stop. I just don’t know where else the money flows to. Growth is so scarce that if you’ve got an asset that’s growing 50%, 60% with 85% gross margins, I think you can tell yourself any story you want.

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