COVER STORY
Fallen unicorns
Even the most stubborn value manager would admit the Covid-19 pandemic accelerated long-term growth trends , with the use of video conferencing one of the most obvious examples . Within the space of two years , the physical presence of human beings at a meeting went from being a prerequisite to a quaint and almost eccentric throwback to a bygone era . Why travel to a different country , city or even street when you can get everything you need from a face-to-face interaction without leaving the comfort of your chair ? From an investment point of view , there was no more obvious beneficiary from this trend than Zoom . The company went from being a little-known speculative growth stock to a household name in a matter of weeks , and its share price rocketed five-fold in little over six months from the start of the pandemic . Yet this is where the story takes an unexpected turn . After Zoom peaked at $ 559 in October 2020 , its bubble burst and its shares have now fallen back to $ 103.5 – lower than the price at which they entered March 2020 . While the company ’ s growth is slowing , it is still on an upward trend . Why then , given its revenues , cashflows and profits dwarf those it recorded pre-pandemic , has it lost all the share price gains of the past two years ? And why shouldn ’ t investors use this dip to buy into Zoom and the multitude of other growth stocks that have followed a similar trajectory ?
Not that easy Unsurprisingly , most fund managers pointed out investing isn ’ t as simple as “ buying the dips ”. “ To use a broad-brush term , many growth stocks aren ’ t necessarily cheap , even after these corrections ,” says David Coombs , head of multiasset investments at Rathbones . “ It ’ s much more complicated and
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