Quality Growth Weekly Digest #12
Volatility in sector valuations + more growth CAPEX for one of our small caps?
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Without further ado, let’s jump to the first topic.
Volatility in Multiples
It’s very topical these days: rapidly increasing or falling multiples. This isn’t a new phenomenon, but it’s been on the rise as certain themes have emerged and because of a growing crowd looking to make quick gains (i.e. a lot of trading activity).
Our fellow premium CodeCrumple shared an interesting table on valuations in our Discord community. Simply put: IT is the place to be, whereas the more defensive healthcare segment has seen multiples contract slightly over the past 3 months.
What could one usefully deduce from the below table? Turnover in stocks is high. Fund managers who are lagging the benchmark with defensives have started to swap them out, thereby further amplifying the initial relative valuation difference at the beginning of 2023 (and 2024).