Post and Pre IPO Value Creation

  • Who reaps the majority of the rewards from venture backed companies – VC or public markets?
  • Over the last decade when measured in terms of total dollars of value creation accruing to pre- and post-IPO investors: post-IPO investor gains have often been substantial.
  • Of the 165 IPOs analysed – the vast majority had a large share of value accrue to public markets (blue region).
  • There are some exceptions (red region), and some shared (yellow region).
  • Source.

Hosking Partners on Value

  • Interesting latest piece (page 15) from Hosking Partners on why the rotation into value stocks will persist.
  • (1) They perform well at the end of recessions (2) stimulus favours value (3) Covid recovery will be long and is only getting underway now in some countries (4) fund managers are entrenched (5) Interesting ESG angle.
  • There is also a full webcast that is worth listening to.

Market Expected Return on Investment

  • Intangible assets matter more and more in the stock market.
  • Yet, they are generally poorly accounted for and valued.
  • This is a useful paper on a new metric – the market expected return on investment – that aims to give a more accurate view of returns in a world increasingly dominated by intangible assets.
  • Though technical it is worth a careful read.

Sector Neutral Value

  • Value stocks’ underperformance against growth (yellow line) is well documented.
  • Things look different at the sector neutral level (blue line) i.e. picking the cheapest stocks within a given sector.
  • This measure actually worked very well from 2002 to 2017/18, while the overall measure continued to fall.
  • It only fell apart in the last few years as growth mania took hold, but has bounced back very sharply.
  • Source.