QVG’s Josh Clark is focused on the numbers, not the fear

It’s often in moments of extreme uncertainty that the best investment opportunities arise. The difficulty, of course, is that by their very nature these moments are also the most challenging times for investors to put money into the market.

How do you separate emotion from rational thinking and go against the crowd when all your natural instincts tell you it is the wrong thing to do?

In a recent investor webinar, Josh Clark, Portfolio Manager of the QVG Long/Short Fund, outlined a framework for doing just that and applied it to the sell-off in ASX-listed software and technology stocks. The sector has collapsed 41% since October 2025, erasing $50 billion of market capitalisation.

The sell-off in technology stocks is an acute example of what Clark says is a broader ‘factor' rotation away from ‘growth’ stocks. The rotation has been driven by changing expectations for the trajectory of long-term interest rates, the impact of AI disruption, and the influence of systematic and momentum-driven strategies aggressively rotating out of growth exposures.

In addition, Clark says redemptions from growth-oriented funds have exacerbated selling pressure, as managers are forced to liquidate positions into an already weak market.

Clark’s fund is facing its own period of challenging performance, having fallen 13% in the past six months, although returns since inception are 13.3% per annum after fees. Drawdowns of this nature have precedent, and in each of the prior periods of underperformance, Clark has been able to recover losses and guide the portfolio to new highs.

Growth stock share prices have fallen more than earnings

Taking a broad view, Clark compiled consensus earnings revisions and compared them to share price data for 27 ASX large-cap growth names over the six months to March 2026. The list includes names such as Life360, REA Group, Hub24, WiseTech and Pinnacle.

The median price change across the 27 stocks is -22.3% versus a median earnings revision of -2.4%. Put simply, prices have fallen far more than earnings, reflecting a multiple de-rating of around 20 percentage points. If you believe that earnings are the ultimate driver of share prices over the long term, then there is a clear disconnect between the two right now.

TechnologyOne (ASX:TNE), arguably one of the ASX’s most reliable technology businesses, has fallen 49% from peak to trough since September 2025. During that time, earnings have been revised 7% higher. The divergence is laid out in the chart below, and Clark says the pattern is consistent across the board.

“If I was to show you all of the 27 stocks that I’ve done this exercise for, most of the charts look like this.”

That analysis looks relatively straightforward, but it hinges heavily on earnings forecasts. While investors are used to dealing with changing interest rate expectations, the big unknown right now is how much AI disruption will impact earnings.

Making decisions in an uncertain earnings outlook

Rather than take a simplistic good-versus-bad approach to how AI will impact earnings, Clark has put forward a structured framework to apply a quantitative overlay to qualitative information.

“In our job it is certainly part science and part art … so coming up with frameworks and mental models is a useful way to turn some of these qualitative insights into quantities.”

Ultimately, Clark says the process is about helping him determine whether there is an adequate risk-return opportunity to justify an investment.

In the case of technology stocks on the ASX, Clark has created a framework that seeks to address a core question: 

Can AI erode the structural advantages that allow for pricing power?

To answer this, Clark scores each company against six qualitative criteria, assigning a score (1–5) for each. The more exposed a company is to each criterion, the lower the score.

• Workflow complexity: How easily can AI replicate the core value with general-purpose tools?
• Data moat quality: Is the data proprietary or commoditised?
• Switching costs: Technical integration and regulatory lock-in are durable. Habit is not.
• Pricing vulnerability: Per-seat models face compression. Value-based and consumption pricing are more resilient.
• Wrapper versus platform: Destinations with ecosystems survive. Conduits that pass data get disintermediated.
• Management response: Genuine AI integration and a willingness to cannibalise existing revenue signal strength.

While many investors could make an assessment across these criteria, it’s worth noting that a deep understanding of the industry, customers, competitors and the business is required.

So what does this framework look like in practice? Clark offered a comparison applying it to Nuix and WiseTech, two ASX-listed software companies.

Based on this framework, WiseTech appears to be in a stronger position, with platform characteristics, regulatory lock-in and network effects, while Nuix is more exposed to competition from native large language models (LLMs).

So does that make WiseTech a screaming buy? Not quite, but Clark says it is a stock he has been adding to the QVG Long/Short Fund portfolio, albeit as a relatively small position

Clark says the key driver of value for the stock is the adoption of its new commercial model. At this stage, larger customers have been slow to transition, and he believes progress here will be critical in assessing both pricing power and the risk of customer churn.

He also points to the need for a clear acceleration in core CargoWise revenue growth. The stock is still trading off recent organic growth trends, and given the long-duration nature of its cashflows, even small changes in growth assumptions can have a meaningful impact on valuation. 

For Clark, the most reliable signal will be evidence of that growth coming through in the numbers.

“We’re waiting to see more evidence before we go harder on that position. The price is so far from where it needs to be if a couple of issues like those are addressed.”

To watch the full webinar replay please visit the QVG Capital website.