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Growth Bubble: Making Money on Companies That Make No Money

LewisBraham
in Other Investing
Interesting article: https://gmo.com/americas/research-library/growth-bubble-making-money-on-companies-that-make-no-money/?utm_source=linkedin&utm_medium=social&utm_campaign=growth_bubble
More than half of U.S. Growth stocks* have negative earnings, yet Growth stocks have dramatically outperformed in the past few years

Comments

  • Sven
    The Russell 3000 Growth Index was up 84% cumulatively over the last two years through August (more than double the return of its Value counterpart).
    Thank you. That is why I preferred actively managed growth over growth-index funds and ETF. I read that small cap stocks in Russel 2000 have even bigger issue.
  • Baseball_Fan
    Interesting article @LewisBraham.

    Hmm. Does this take into account companies are less capital intensive than they were 20-30 years ago? Many growth companies are in the tech segment...building out their eco system and capturing customers ala Apple back in the day. Who cares if the customer is profitable now, they will be way profitable over the next five years. Many companies are bought for their technology before they become profitable...MuleSoft, by Salesforce, CRM. Look at Avalara, not profitable I believe but growing revenues, taking market share.

    Last I checked non profitable companies don't really pay much tax either...think Bezos and AMZN...churned thru money, not profitable, huge free cash flow to invest back in the business, took market share, scaled business, didn't pay much in taxes...anytime they want they can flip the switch and scale profits

    I'm on the fence on this one, respect the wisdom of GMO etc, but wonder if this thought process requires adjustment to today's world?

    Best,

    Baseball Fan
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