Fund Manager Comments on Tech Valuations, PayPal, Expedia and Admiral

(Free on Substack) Reading Materials (META US, PYPL US, EXPE US, ADM LN)

A version of this was also published on my Twitter account.

Introduction: Below are some fund manager comments that we find of interest, on Technology stocks’ valuation (Fundsmith), PayPal (Lindsell Train), Expedia (Miller) and Admiral (Troy).

Technology Stocks Now “Cheaper” Than Consumer Staples

The first half of 2022 was disappointing for many “quality”-focused funds, with the contraction in valuation multiples as a key factor, especially in Technology stocks.

In Fundsmith’s 2022 interim letter, founder and CEO Terry Smith highlighted how the average Free Cash Flow (FCF) Yield in their portfolio had expanded from 2.7% to 3.6% (which means the multiple has shrunk) during H1. The Technology stocks in their portfolio had an average P/E multiple of just 24x at the end of June, and Technology stocks in the S&P 500 index were “cheaper” than Consumer Staples:

“The rotation from ‘growth’ to ‘value’ has also led to a situation where the narrative of the ‘highly-rated tech sector’ has been turned …