Market darling Bellamy's has fallen 35% this morning. It joins a growing list of priced-to-perfection growth stocks that have disappointed investors late in 2016 (APN Outdoor, TPG, Vocus etc etc). It still trades at 20 times last year's earnings. That's a multiple that implies growth, and management is suggesting that this year is going to show a decline. Is this a great chance to buy a growing business suffering a temporary setback? Or was last year the best we will ever see for this company? I don't know. Chinese consumers are notoriously fickle. But Bellamy's clearly has an excellent brand. It could easily go either way. What today's fall does clearly show, though, is the danger of buying a narrative. Our brains are wired to love a story, but in the stock market great stories can be very expensive. Back in March I wrote a piece explaining "Why Coal Could be a Better Bet than Baby Food". It's worth another read in light of today's falls (VIEW LINK)
Starting Forager Funds in 2009, Steve has grown the business to over $370m of funds under management. Offering an Australia and Global equity Fund, Steve focuses on long-term value investing of unloved and undervalued companies.