Sell-side models automatically fade corporate growth rates in years three through five
Brian Christensen · Brian Christiansen – High-Conviction Growth Investing at Sands Capital (EP.361) · Jan 11, 2024 · at 20:13
Brian Christensen, Executive Managing Director at Sands Capital, explains why their long-term growth estimates deviate from Wall Street consensus.
0:00 / 0:46exact quote · 46.4s
720p mp4 · rendered on demand · StarZero watermark
“Where we typically see the biggest deviations between what we're modeling for a business and sort of what's priced in the stock for looking at sell side models, for example, Is in years three, four, and five, and beyond. And one of the reasons for that is, one, a lot of folks aren't modeling beyond a year or two, and they're spending a disproportionate amount of time on trying to understand the 12 to 18 month period rather than the next five years. Two, is even when folks do model it, the amount of time that they're spending Thinking about those assumptions in the out years is just very different. So they, in years three, four, and five, they'll often just automatically fade the growth.”
quote is from the automated transcript, cleaned for reading: filler sounds and stutters are removed, nothing is rephrased. names can be misheard (the analysis reads context, assessments check outside sources). how →
More from Brian Christensen
A 90x P/E stock compounding at 45% remains an attractive investment
“If it's a 90 times PE company that's growing earnings only 10%, it's really hard to make the math work long term. But if it's a company that can compound earnings at 45% over the next five years, that can actually be very, very attractive. In an expected retur…”
Tesla's valuation requires heavy speculation on autonomous and energy business adjacencies
“At this valuation, we think that you need much more than just car volumes, time, price, equal revenue, and earnings. You have to bake in a lot more for many of the adjacencies, including its autonomous fleet, and depending on where you are on those expectation…”
Sands Capital defines risk as business impairment, not market volatility
“The first type of risk that we're really trying to manage for is the impairment of the business relative to what we were modeling for that business over the next five years. So we call business impairment risk, and we call volatility risk. Volatility. We don't…”
Sands Capital holds five of the Magnificent Seven, excluding Apple and Tesla
“And at the firm wide level, we own five of the seven across our various different portfolios. But two of them, in this case, Apple and Tesla are companies that we have not embraced.”
Stock prices are predominantly driven by business earnings power over 5–7 years
“Really five to seven years is the minimum you need when the horse really starts pulling the cart, and so that's a fundamental sort of relationship that you have to believe in. Now, that doesn't mean you can completely ignore valuation, and valuation is One of …”