Wednesday, August 9th, 2006
A renaissance of growth stocks
Wedgewood Partners has suffered in the growth stock downturn, which in this excellent piece it describes as ‘the perfect storm for growth’. But the manager believes the tide will soon turn:
We believe the stage has been set for a true renaissance of growth stock investing. We could also call it “The Perfect Storm for Value.” Simply put, the three key drivers of outperformance of value over growth, in our view, over the past five years have all reached reversal inflection extremes. The style pendulum swung too far in 2000, its reversal has swung too far in 2006. So, the three drivers for a renaissance of growth stock investing are; excessively cheap valuations, a current environment for corporate profitability that can hardly get better and a current environment of investor sentiment for growth stocks that could hardly get worse.
Wedgewood highlighed Legg Mason and Yahoo! as two ’underperforming stocks’ that are not necessarily ‘underperforming companies.’
It has a simple description of its strategy:
We invest as “owners” (for the true long-term), in relatively few, uniquely profitable businesses, at reasonable valuations. That’s it. What could be more basic?
Word Count: 182. This entry was posted on Wednesday, August 9th, 2006 at 7:53 pm and is filed under GARP, Value Versus Growth. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
