I wasn’t familiar with TDM Growth Partners out of Australia until someone posted their recent missive to LPs on the seemingly confusing tech crash or lack thereof.
First, they clearly outline where the crash is and where it isn’t:
Furthermore they looked at EV / Sales metrics for the BVP Index and dropped a few major outliers representing nosebleed valuations that have persisted and the result is EV / Sales is basically within spitting distance of the long term average:
They go out to outline reasons why, with an appreciable acknowledgement of their basic of call of maybe this time is different, what is demanded of these businesses by the stock market today in terms of growth isn’t aggressive, and that it potentially indicates downright cheapness. Furthermore they go on to make accommodations for higher rates, lower exit multiples, etc. and continue to think that today’s prices are attractive.
The only thing they don’t fully acknowledge, in my opinion, is the potential for capital scarcity in the economy. Said more plainly, if the economy slows and the Fed has withdrawn its dramatic firehose of liquidity. The early 70s are symbolic of a time in which dramatic undervaluation in the market was persistent but no capital wanted to enter the market. But that is a scenario that may affect all types of businesses, not just technology. A pessimist may argue that tech stocks have further to drop in a downside scenario. An optimist, however, may rightfully say that ignores the dramatic upside that may exist.
To that end, tech stocks don’t typically pay material dividends to their shareholders, and in many cases for good reason. However it doesn’t fit my process and to that end, while fun to keep tabs on the economy broadly speaking, these stocks ultimately aren’t a fit for me.