Stuart pointed to COVID, when people were doing all their shopping, including groceries, online, buying gyms to work out at home, and thinking they’d never return to the office. Companies, such as Zoom and Peloton, profited from that pandemic lockdown narrative. But, Stuart said advisors who were influenced by that may not have considered those companies’ valuation and business perspective.
Zoom, for instance, may be a great company, but it peaked at $161 billion in late 2020, or 6.5 times its pre-pandemic level of $25 billion, and now is only worth $23 billion. It’s also continuing to add employees, even though it’s not adding more growth. So, it’s grown from 2,532 pre-pandemic to 4,422 at the pandemic height and 6,787 now. Stuart noted that’s not a good business model.
“It is a great company. But it probably wasn’t worth that $161 billion peak,” said Stuart. “I would say the people were overpaying by probably about tenfold what it was actually worth. With its stock, that euphoria caused it to get disconnected from the business.”
Stuart said today’s equivalent to the pandemic story is that inflation will be like the 1970s with interest rates continuing to increase, so people are repositioning or opting out of the market.
“Don’t get too connected with the story of the day and believe that it’s going to continue indefinitely and let it influence your portfolio behaviour too much,” he said. “Often, it can end badly, either because you pay too much for something or because you have become way too conservative.”
