After last year’s selloff, we’re much closer to the end of the young unprofitable companies/mega-valued unprofitable companies repricing than the beginning. By the time Peloton is priced at 1x sales rather than its peak level of 19x sales at the end of 2020, it’s time to start thinking about whether unprofitable companies can become profitable or not. Many unprofitable companies are in that position since the market did not require them to be profitable. The aftermath of the 2000-2002 dot-com crash is interesting in this regard: The chart above shows the performance of tech companies from 2000 to 2004 based on their initial and subsequent profitability. Companies that remained unprofitable continued to languish. However, unprofitable companies that became profitable by 2004 rallied sharply, catching up to companies that had been profitable all along. This incorporates the benefit of perfect hindsight; still, it does indicate that for stock pickers that sift through the wreckage to try and identify survivors, there may be attractive opportunities. The size of [“unprofitable in 2000” cohort that became profitable by 2004] was roughly 50% of the “unprofitable in 2000” universe.
- Date Posted:
- January 3, 2023
There is clear evidence that more people are drinking too much. Deaths from alcohol-induced causes rose from 39,043 in 2019 to 54,258 in 2021, according to the Centers for Disease Control and Prevention, and the population-adjusted death rate is now more than double what it was in the 2000s. Provisional data also show an encouraging decline in alcohol-induced deaths in the first half of 2022, although that trend could change as final numbers become available. Even after the big increases of the past couple of years, US alcohol consumption likely still lags that of many affluent countries, especially in Europe. And yes, Americans drank lots more back in the 1970s — not to mention the 1830s, when estimated per-capita consumption was nearly three times what it was in 2020.