1/7 Thread: Why this isn't dot-com bubble
I had this Polen Capital think piece open in a tab for months. I finally read it tonight.
Polen shares some interesting data points to argue how much the current cycle differs from the tech bubble.
I had this Polen Capital think piece open in a tab for months. I finally read it tonight.
Polen shares some interesting data points to argue how much the current cycle differs from the tech bubble.
2/7 From 2008-2019, Russell 1000 Growth Index (R1G) beat Russell 1000 Value Index (R1V) by >300%.
There was another era when such wide margin between them existed. It was 1988-1999.
We all know how that ended. So our pattern matching brain is tempted to infer the parallel.
There was another era when such wide margin between them existed. It was 1988-1999.
We all know how that ended. So our pattern matching brain is tempted to infer the parallel.
3/7 Unlike the tech bubble which was propped by multiple expansion, Polen argues much of the outperformance in the current cycle is driven by fundamentals.
These two images comparing the two cycles make that case.
These two images comparing the two cycles make that case.
4/7 The other concern many people share is the concentration risk in the index.
In June 2020, just the top 5 companies had 37% weight in R1G Index. The previous record was 29% in May 2001.
Even in this case, the current cycle fares much better from valuation perspective.
In June 2020, just the top 5 companies had 37% weight in R1G Index. The previous record was 29% in May 2001.
Even in this case, the current cycle fares much better from valuation perspective.
5/7 Of course, this discussion is always incomplete if we don't incorporate the treasury yield into the picture.
The multiple in this cycle is closer to avg of the last 25 years even though treasury yield is much lower now.
The multiple in this cycle is closer to avg of the last 25 years even though treasury yield is much lower now.
6/7 To play devil's advocate, growth stocks can still prove to expensive in the future.
$QQQ was down ~80% following tech bubble. Of course, every other period will pale in comparison. I wonder whether this creates a false sense of complacency every time we look at tech bubble.
$QQQ was down ~80% following tech bubble. Of course, every other period will pale in comparison. I wonder whether this creates a false sense of complacency every time we look at tech bubble.
7/7 Link to the original piece: polencapital.com/wp-content/upl…
All my twitter threads: mbi-deepdives.com/twitter-thread…
All my twitter threads: mbi-deepdives.com/twitter-thread…
*multiple premium of growth over value
• • •
Missing some Tweet in this thread? You can try to
force a refresh
