SEVERE multiple expansion in software since COVID -
Key question - will multiples mean revert?
H/t @jaminball
Key question - will multiples mean revert?
H/t @jaminball
IMHO multiples expanded post COVID due to -
i) TINA - when most of the economy was in lockdown, SaaS was one of the industries which was still growing
ii) Fund managers sold the risky stocks and piled into SaaS to protect capital/show performance
When the economy reopens...
i) TINA - when most of the economy was in lockdown, SaaS was one of the industries which was still growing
ii) Fund managers sold the risky stocks and piled into SaaS to protect capital/show performance
When the economy reopens...
... capital will go back to the beaten down cyclicals which were crushed by the pandemic (this process has already begun) and at some point, valuations for the entire market will normalise.
Finally, when Fed stops buying assets, high multiple names may be especially vulnerable.
Finally, when Fed stops buying assets, high multiple names may be especially vulnerable.
For my part, I've significantly reduced my enterprise software exposure from ~50% to 20% of my portfolio.
I've been investing in int'l growth stocks which appear to be trading at modest valuations $OZON $YNDX
With 30/40/50/100X sales multiples, future returns likely to be low.
I've been investing in int'l growth stocks which appear to be trading at modest valuations $OZON $YNDX
With 30/40/50/100X sales multiples, future returns likely to be low.
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