1/5 Thread: S-curve conundrums
Most money is made as long as companies are in the convex part of the S-curve. Most value traps, on the other hand, usually reside in the concave part of the curve.
Being right on the duration of the growth remains a very difficult task.
Most money is made as long as companies are in the convex part of the S-curve. Most value traps, on the other hand, usually reside in the concave part of the curve.
Being right on the duration of the growth remains a very difficult task.
2/5 An initial hyper-growth trajectory may only mean companies will reach the concave part of the curve sooner. Unless, of course, you have a huge TAM.
Without a big TAM, a hyper-growth stock with relatively short duration of convexity can be a painful trap!
Without a big TAM, a hyper-growth stock with relatively short duration of convexity can be a painful trap!
3/5 The most fantastic value investments can be the ones which have slow, steady but an extremely long duration of growth e.g. $PG.
Of course, I'm talking about the past here, no opinion on $PG's ability to sustain this going forward.
Of course, I'm talking about the past here, no opinion on $PG's ability to sustain this going forward.
4/5 The only way mega cap companies can extend the convexity of their S-curve is by adding another S-curve.
$FB added another S-curve with Instagram. $AMZN did it with AWS. $GOOG's "Other bets" are primarily focused on finding a new S-curve.
$FB added another S-curve with Instagram. $AMZN did it with AWS. $GOOG's "Other bets" are primarily focused on finding a new S-curve.
5/5 Whether these companies can add a *new* S-curve is impossible to ascertain.
While the duration of the growth is one of the most important value drivers for any stock, most of our financial models are just complete guesswork when it comes to estimating the implied duration.
While the duration of the growth is one of the most important value drivers for any stock, most of our financial models are just complete guesswork when it comes to estimating the implied duration.
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