The growth correction
“ As we seem to conclude each week at the moment , markets are jumpy , skittish and random . There are very few signs that this is about to change ”
Jim Wood-Smith Head of research at Hawksmoor
“ It has grown earnings at 19 % for a decade and no doubt will keep going forever ,” he explains . “ The stock is off from $ 700 to $ 500 , so it ’ s priced in , right ? Nope , it ’ s still on a 50x trailing P / E and in the 1980s you could get a 19 % grower for 20x – and that ’ s where we last saw 7.5 % inflation . “ There is a lot more falling in P / E multiples to be done .” De Lisle notes that if Adobe ’ s earnings continue to grow at 19 % a year , they will have doubled in four years ’ time , thanks to the power of compounding . Yet if inflation remains high , this means Adobe could remain at the same price , but with a trailing P / E of 25x . “ Not a bad outcome , but maybe not where you want to be ? This applies to the other fine names , while the fragile ones will continue to collapse .” He points to a chart showing that despite the recent rotation , the valuation spread between the
Issue 82 - March 2022 / 15 /