✨ 23 Jan 2022 | Value Investing Substack NEWS
Value Investing Substack: How to Create a Low-Vol Value Investing Portfolio, Microsoft's PE < Costco's PE, Why Indonesia Moved Their Capital, ASEAN's Metaverse, Microsoft Office 2021 (80% off promo!)
HIGHLIGHTS
SUBSTACKS + BLOGS + TWITTER
Last week, we covered in-depth how contractionary monetary policy leading to rising rates negatively impacts technology stocks. Since some of these companies focus on achieving growth at an early stage, they burn cash upfront in exchange for revenue growth. The narrative expands to say that these assets are disproportionately punished by a rising rate environment because of the long tail duration of these assets.
However, I think this narrative is being openly violated within the megacap and large cap software space. If we look at a company like Adobe, they drop about 47% of their revenue straight down to free cash flow. What this essentially does is shorten the duration of this asset, which should theoretically insulate it from rising interest rates.
What we are instead seeing is everything grouped together as software is getting thrown down the drain with the more speculative names like Virgin Galactic, that has no revenue and launches people into space, but might have revenue, but who knows…
During such a rapid sell-off within technology names, its important to sharpen your pencils back on fundamentals and focus on the underlying businesses so that you are ready to pounce on opportunities when the tide changes.
LINKS
Stock Markets:
Malaysia's AirAsia eyes air cargo carrier Raya Airways (Malaysia - Airlines)
Macro
ASEAN:
From Syahrini’s NFTs to Axie Infinity, Southeast Asia is waking up to the metaverse (ASEAN - Technology)