Another month and another new high in equity valuations, at least relative to sales. Indeed, the median company in our developed world index (which covers the top 85% of companies in each country) just achieved a price to sales ratio that eclipsed the 2000 peak. There are of course fundamental reasons for this ranging from low interest rates to high profit margins, but the fact that valuations today exceed peak bubble valuations of 2000 is a tough nut to swallow for equity investors expecting to achieve an historically average 7% annual rate of return. What’s more, unlike in 2000 when the median valuation was driven higher primarily by tech stocks, leaving plenty of “value” areas to flock to, valuations today are extended across the board, from staples, to industrials to tech to materials. Save energy as the one sector without peak, or near peak valuations. This scenario should put ever more importance on stock picking and risk management going forward.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
Article by Bryce Coward, CFA - Knowledge Leaders Capital