COVER STORY The growth correction that ’ s half of the value out of the window .” A rise in interest rates also increases the cost of capital , making it more difficult for unprofitable businesses to access the funding they need to survive until they break into the black . At the start of 2021 , the percentage of the US market that was unprofitable hit an all-time high . The Goldman Sachs Non-Profitable Tech index has been on a downward trend since then , and has been one of the areas hardest hit since the market took a dive .
Reboot Yet profitable growth stocks with strong business models have also sold off this year , and it is here that many managers spot opportunities . Jim Wood-Smith , head of research at Hawksmoor , says he is “ perplexed ” by the fall in Microsoft ’ s share price , which is down by close to 20 % since last year ’ s peak . “ If anyone ever wished to devise a business model with pricing power , it is hard to imagine one better than Microsoft ,” he explains .
Global value spreads 1990-2022
4
3 98th percentile
2
Value spread
1
0
-1 |
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-2 |
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Jan90 |
Jan94 |
Jan98 |
Jan02 |
Jan06 |
Jan10 |
Jan14 |
Jan18 |
Jan22 |
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Source : AQR |
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