Good read, thank you for writing. Counter to your counter - Microsoft was extremely dominant, but the PC market was close to saturated, and then they largely missed on mobile and search. Amazon today on other hand is extremely dominant, but ecommerce and cloud still have huge runways. Not saying that Amazon is indicative of the entire market. These are just two stocks we're discussing.
Aaron, thank you for sharing your experiences. I always learn and expand my thinking reading your insight and research. I am curious how you are thinking of the idiosyncratic risk and Fed action. Would the comparison to 1999 be any less relevant should the Fed continue to buy assets and injecting liquidity into the system, effectively "backstopping" material drawdowns?
Thank you for the kind words. I’m not sure if the Fed will continue to grow its balance and by how much. Also, I’m not entirely sure of what that will mean, that is why I think it could be very dangerous to short stocks. The opportunity in small cap value at least is interesting because the valuations are so low, compared to the larger growth stocks. I think this shields you from negative consequences and provides an uncertain upside. I’m always happy to take an uncertain upside with limited downside.
Great article! Do you have a comparison of the valuation multiples and growth rate between the strongest businesses of 2000 vs Today. Maybe Microsoft, Cisco, Oracle, Adobe vs Shopify, etc
Thank you so much. Consider this: In 1999, $MSFT grew revenue by almost 30% and saw operating margins of 50%. In 2000, despite a recession and the dot com collapse, revenue still grew 16% with a 48% operating margin. Didn’t stop the stock price from collapsing by 50%. I don’t have the specifics, but remember MSFT selling for some absurd valuation. You can look it up.
Good read, thank you for writing. Counter to your counter - Microsoft was extremely dominant, but the PC market was close to saturated, and then they largely missed on mobile and search. Amazon today on other hand is extremely dominant, but ecommerce and cloud still have huge runways. Not saying that Amazon is indicative of the entire market. These are just two stocks we're discussing.
Love the 3rd point in a market frenzy being people poking fun at Buffett saying he lost his touch
Aaron, thank you for sharing your experiences. I always learn and expand my thinking reading your insight and research. I am curious how you are thinking of the idiosyncratic risk and Fed action. Would the comparison to 1999 be any less relevant should the Fed continue to buy assets and injecting liquidity into the system, effectively "backstopping" material drawdowns?
Thank you for the kind words. I’m not sure if the Fed will continue to grow its balance and by how much. Also, I’m not entirely sure of what that will mean, that is why I think it could be very dangerous to short stocks. The opportunity in small cap value at least is interesting because the valuations are so low, compared to the larger growth stocks. I think this shields you from negative consequences and provides an uncertain upside. I’m always happy to take an uncertain upside with limited downside.
Great article! Do you have a comparison of the valuation multiples and growth rate between the strongest businesses of 2000 vs Today. Maybe Microsoft, Cisco, Oracle, Adobe vs Shopify, etc
Thank you so much. Consider this: In 1999, $MSFT grew revenue by almost 30% and saw operating margins of 50%. In 2000, despite a recession and the dot com collapse, revenue still grew 16% with a 48% operating margin. Didn’t stop the stock price from collapsing by 50%. I don’t have the specifics, but remember MSFT selling for some absurd valuation. You can look it up.