A fund manager specialising in growth equities has highlighted the importance of understanding the accuracy of stock valuations when assessing whether to invest in companies with strong brands and reputations.
To illustrate the point, Munro Partners co-founder and chief investment officer Nick Griffin compared the upside offered by popular technology companies Tesla and Google.
“We’re not invested in Tesla. [We] love the product, love the entrepreneurialism, so it’s got all the qualities of a company we look for. The problem with Tesla is that everything they say they are going to do seems to get priced into the stock,” Griffin noted at a recent media briefing.
“So [investing in the organisation means] you’re not really getting the benefit of them surprising to the upside if that makes sense.
“[Compare that with Google shares] trading at 17 times earnings, which also has an autonomous taxi business, which also has a cloud business, which also has a YouTube business, which also has a robotics business [and] which also has a really good AI (artificial intelligence) business.
“None of that is priced into the stock so we just feel [when assessing] risk [versus] reward that [Google] is a safer bet than Tesla today, but we really like the company and if the price came down a lot, we would look at it.”
He acknowledged other business arms in the Elon Musk-owned group have the potential to offer solid investment opportunities in the future.
“SpaceX is probably worth more than Tesla and it’s not listed. Starlink is probably going [to introduce] the most disruptive technology on the planet because it could disrupt Telstra, that’s how well it works, and disrupt every mobile phone operator on the planet,” he explained.
“So you wouldn’t bet against [the Musk group in the future], but right now risk/reward, the price is too high for us today.”