Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi James, XRO had been a market favourite in the tech space, but with their recent disappointing earnings update, do you still think they are worth accumulating on weakness or has the outlook changed for them? I am thinking in terms of an 18 to 36 month time horizon. Many thanks
Hi Alex,
This is a tough question, it reminds me of a famous Warren Buffett quote – “Price is what you pay but value is what you get”. We didn’t think the result was a bad one, they have simply prioritized growth over profit which the market currently doesn’t like. While we think XRO is a quality growth company, the value contraction in this space has been both huge and deeper than we imagined in this first leg down. We do like the stock into weakness but the trend is down and surprises do usually unfold with the trend hence we wouldn’t be going “all in” anytime soon. This is the largest position in my personal portfolio and we already have a decent exposure via our MM Growth Portfolio.
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