Preparing for the great wildebeest migration
Published on 5 December 2019
Over the last decade in Australian equities, factor returns for growth and momentum-based strategies have been astonishingly successful – versus value and earnings volatility – as investors have been happy to pay up for companies exhibiting strong earnings growth and share price momentum.
This investor desire to own companies growing quickly and or with certain earnings profiles has led to a significant re-rate in the multiple that investors are willing to pay for these companies. This is best illustrated by looking at the USA equity market as JP Morgan does in the below chart which compares the price to earnings (PE) ratios of the different strategies depicted.
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