Why it’s time to capitalize on the carnage in tech stocks
The current equity correction has taken a lot of the froth out of the market. But caught up in the carnage have been a number of high quality companies with years of growth ahead. Which is why I think this could be a very good time for investors to take a look at some of these businesses, including Pro Medicus, Megaport and REA Group.
January has seen an acceleration of selling that began as a rotation out of high-flying tech stocks in late November and December (the Nasdaq peaked on November 19, 2021). The carnage for technology stocks deteriorated further when the US Federal Reserve’s last policy meeting minutes revealed a more hawkish attitude towards rates and bond purchases than many expected.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Nigel Stemson
:
Hi Roger,
I was facinated by the comment
“As their equity grows so too does their return on equity. Think of a bank account with $1 million earnings interest of one per cent per annum, and as the equity in the bank account grows to $1 billion, the interest rate earned also rises to 40 per cent per year.”
But I could not quite understand the maths, could you please post the formular to calculate that or provide a tabel to show it,
Very interesting
Roger Montgomery
:
Hi Nice, its not a mathematical exercise but a conceptual one. I am saying a company with growing equity and rising ROE is like a bank account whose interest rate rises when the balance goes up. Hope that helps.