Within our global equity allocation, we continue to bet primarily on value stocks and tend to avoid growth stocks. Given that we are conservative investors with long-term investment horizon, this important equity bet is based primarily on the difference in valuations.
From the global perspective - based on the global stock index MSCI All Country World Value - value stocks are currently trading at EV/EBITDA of 12x. On the other hand, growth stocks, from the global perspective - based on the global stocks index MSCI All Country World Growth - seem to us to be highly overvalued at the moment trading at EV/EBITDA of 22x which is a truly unprecedented value. Therefore discount of value stocks to growth stocks is currently an extreme of 44%!
We believe that such a large valuation discount is by no means justifiable. At the same time, we expect this valuation discount to decrease significantly in the medium term, which should significantly help the relative performance of our investment portfolios vis-à-vis benchmarks.
Michal Stupavský
Investment Strategist at Conseq Investment Management, a.s.