Recent reports suggest we'll be waiting for a recovery.
I’m working on a new note for IPO Candy called “quarters in context” after listening to dozens of Q1 earnings calls.
A few things are worth mentioning briefly here that strike me as relevant to timing reentry into growth names here in the US.
Supply chains sound a lot more broken than I thought. It’s routine now to hear that delivery times are pushed out “beyond 120 days” which makes making anything happen in a quarter pretty hard.
It’s not just one thing either. Some companies are running at full production capacity in China but can’t get shipping. Others are missing specific components. What these executives are saying lines up with a large number of personal observations in everything from car parts to laptops, to tennis shoes to garage doors. (In Louisville homebuilders now have to order the garage doors when they pour the foundation!)
We’re looking at a full year of higher costs, slower growth, and lower margin for many companies due to these conditions. We are also likely to see a behavior shift in how companies think about inventory levels and product strategy in a world where securing your supply is no longer easy.
Managements, analysts and investors are *finally* beginning to adjust their expectations and estimates for 2Q and the full year 2022 but they still have more to do.
120 days also feels like the right amount of time to give the stock market to settle down. That puts us into September. That timing might change if we get to a point where we’ve had expectations set to a level where we will see things start to get better rather than worse.
This is a great time to be sharpening your pencil though and starting to *slowly* add back some positions. I’m doing a series of posts looking at performance and valuation. Today I started with “The 2021 IPO Massacre - Looking for Survivors” which is available for download as a PDF. The next steps are drilling into profitability and valuation. I’ll include some videos there as well since the process may be informative.