Value Enticing Relative To Growth | The Acquirer's Multiple®

In their recent episode of the VALUE: After Hours Podcast, Jake Taylor, Bill Brewster, and Tobias Carlisle discussed Value Enticing Relative To Growth. Here’s an excerpt from the episode:

Tobias: So, I retweeted this this morning. It’s just showing the spread of growth over value, and it runs back to about the early or mid-1990s, so you capture that first big ramp. It was the dotcom bubble that fell back a little bit and then it rallied all the way back. Yeah, it is barramundi. Jim, that’s exactly right. We did fish for the barramundi —

Bill: I like barramundi. I’ve had barramundi.

Tobias: Ah, it tastes like sand. Tastes like at the bottom of the river that– [crosstalk]

Bill: Really?

Tobias: Yeah.

Bill: Oh, I liked it. Maybe, it wasn’t barramundi. Maybe it was just marketed as such.

Tobias: Ah, probably. They taste sandy. It’s got a very distinctive sandy taste.

Bill: Fake news barramundi. That’s what you’re telling me I ate?

Tobias: Back to value spread before [crosstalk]

Bill: This is derailed.

Tobias: So, it’s my fault. I derailed it. Then, there was an initial collapse that rallied all the way back. Since then, we’ve now vastly exceeded the value spread that we saw in in 1999. This is in the S&P 500 specifically. So, it rallied, had a little collapse and it’s rallied back. At this point now where either, it’s all-time highs today, that spread. There’s research that it’s updated every now and again. Jake read some ages ago, and there’s some more recent stuff that shows the spread is indicative of future returns. I know I say this all the time. I’m starting to sound like a broken record, but I really do think this is one of those extraordinary opportunities where value is just so enticing relative to growth.

There are two ways that can resolve. Either you get the nasty kind which is where you get a growth collapse, and either value doesn’t collapse as badly or it rallies a little bit, or the nice kind where value just stages this rally. In the early 2000s, we had both. Initially, we had a nasty collapse of growth which had some value. Value got dinged up too initially, and then there was a subsequent period that went on for about four years after the first two-year collapse where growth did nothing, and value was very strong. Obviously, that’s the kind that I’m hoping for, but I suspect we get both. We get the growth collapse along with the value collapse, and then we get some good performance out of value. [sighs] I’ve said that a few times.

Jake: It’s been a good 20 years. Maybe it’s time to mint a whole new batch of gurus.

Tobias: Is there a way I can NFT this?

Bill: Can you NFT this picture? Yeah, but no one wants it bro. You need to NFT the growth stocks. Just a picture of these beautiful compounder growing– [crosstalk]

Tobias: You’re just saying– of those charts.

Bill: Yeah.

Tobias: Those charts are pretty, aren’t they?

Bill: Yeah, they are, and they got nice tickers too.

Tobias: Yeah. Values all in old boring industries too, there’s just nothing sexy about it at all. The only reason you do it is because you get some performance out of it. But you can’t even get performance out of it, there’s just no reason. They’re boring stocks with bad names and no performance.

Bill: Tell you what you can’t do, you can’t drive Substack subscriptions with it.

Tobias: What?

Bill: Ain’t nobody cares about steel stocks.

Jake: What are these, returns for ants? [laughs

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