The chart below can be downloaded here.
There is no hard-and-fast rule, but “story stocks” are generally defined as those trading at prices substantially out of line with current fundamentals (revenue, earnings, cash flow, etc.) as a result of a positive story that suggests larger profits down the road.
The chart below (h/t Matisse Capital) shows the performance differential from early 2014 through February between high price-to-sales stocks and the broader market. The teal line is a simple average of over 100 companies totaling over $300 billion in market cap that meet that definition. As interest rates rise, we are finding more opportunities to generate what we believe are attractive returns in areas that rely less on stories about the distant future.
We love a good story as much as the next person, but we also love investments that generate cash flow today. We believe opportunities in the latter are underappreciated relative to the former.
SpringTide Partners, LLC is a Registered Investment Advisor with the state of Illinois and other states jurisdictions where required. Registration with the SEC or any state securities authority does not imply a certain level of skill or training. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. All investing carries risk including risk of principal loss. All statements made on this website are opinions of SpringTide Partners, LLC and are subject to change. SpringTide Partners, LLC assumes no responsibility towards the accuracy of the data included. Statements made on website shall not constitute investment advice.