A little history: The period of 2000 to 2003 did not only correct the vast excesses of the 1999 dot com boom, it also served as a launching pad for immense value creation for well positioned business models and exceptionally talented CEOs.
One could focus on and profit from the demise and/or decline of pets.com, theGlobe.com and yahoo etc. but there was a lot value to be had in searching for structural winners poised to benefit from the return to rationality.
Shorting a busted SPAC for some alpha is great but don't ignore finding secular winners that are in the process of forming additional multi-year tail winds from lowered expense bases or improved competitive positioning as capital becomes more scarce.
Some of these attractive outcomes will be driven directly by the current stress in the capital markets. Companies and industries will react relatively quickly if the current weakness lingers on.
Challenger companies will face increased cost for funding which will in turn affect their behavior and appetite to run heavy loss-making operations.
Investors will become less enamored with simple top line growth and demand faster ramps to break-even and more profitability from the start-ups they fund. Hyper rationality will make a much needed return.
More established growth companies will find it easier to hire talent and grow their business with less competition in customer acquisition. Opportunities for strategic M&A to drive further rationality and/or pick up needed skill sets will increasingly present themselves.
The strong will get stronger and the weak will wither and/or die.
Yes you still have to pay the right price. Yes the purge of excesses may have farther to go but you're much more likely to find a real bargain/attractive long-term returns in the current market environment versus one with a surplus of calm participants.
Happy hunting.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
