The difference in valuation multiples between value stocks and growth stocks is at a level "without precedent," higher even than during the dot-com boom, explains Sam Ferraro, founder of Evidente. Stocks like CSL, Ramsay Healthcare, and Domino's Pizza are "in aggregate, trading at far higher multiples than they have in the past." In the past two years, some stocks have experienced large multiple expansions, but with very little expansion in expected earnings. This includes stocks such as Mayne Pharma, Domino's Pizza, Northern Star, GUD Holdings, Technology One, Corporate Travel Management, and Cochlear. "In the last couple of months has been a rotation away from some of those highly priced names…. The risk for these growth stocks is that you see some evidence of valuation compression." Watch the video below for his view on how to be positioned in these stocks.
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