The puzzle around profitability

The current market has created some crazy moments lately. Profitability, for example, is one metric that seems to have been thrown out the window. It’s a puzzle that has left Dr. Suhas Nayak, Portfolio Manager at Allan Gray Australia, scratching his head. He believes investors seem to be overly paranoid that profitable companies are going to go backwards. 

“But if a company doesn’t have profits, it’s almost as if the market goes ‘no profits, no worries’,” he says. Suhas has also noticed unusual behaviour around defensive and cyclical stocks, with defensive companies at the most expensive they’ve ever been, and cyclical around their cheapest. 

In this short video he discusses why this might be occurring and whether it makes sense for these times, or presents an opportunity.

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