The puzzle around profitability

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Livewire Markets

The current market has created some crazy moments lately. Profitability, for example, is one metric that seems to have been thrown out the window. It’s a puzzle that has left Dr. Suhas Nayak, Portfolio Manager at Allan Gray Australia, scratching his head. He believes investors seem to be overly paranoid that profitable companies are going to go backwards. 

“But if a company doesn’t have profits, it’s almost as if the market goes ‘no profits, no worries’,” he says. Suhas has also noticed unusual behaviour around defensive and cyclical stocks, with defensive companies at the most expensive they’ve ever been, and cyclical around their cheapest. 

In this short video he discusses why this might be occurring and whether it makes sense for these times, or presents an opportunity.

 

Want to learn more?

Contrarian investing is not for everyone, however there can be rewards for the patient investor who embrace Allan Gray’s approach. To stay up to date with Suhas's latest thinking, hit the follow button here or contact Allan Gray using the button below.

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