00:00 Julie
And Scott, I know your team has also written about um applying what you call the the GARP overlay on AI, right? Growth at a reasonable price, which I’ve been amusing myself by thinking of it as AARP, AI at a reasonable pro price.
00:15 Julie
But how do you find? I mean like is there where do you find that at this point?
00:22 Scott
Julie, I’m much closer to the AARP connection than you are, but uh so let’s be clear on that. Um, you know, essentially what it comes down to is is this notion of what’s
00:36 Scott
being implied in the stock price right now, relative to where consensus is. And so when we look down our list of companies, this is where we get go with this growth at a reasonable price. We find companies that are selling at peg ratios that are fairly consistent with overall market averages. I’ll give you an example. The mag 7 in aggregate right now is at a peg ratio. So this is PE to growth of about two times.
01:03 Scott
That’s about the same as for the other 493. So what’s happening here is the market is fairly efficiently pricing in current growth expectations. Now, they’re going to be certain companies that don’t have an underlying earnings component. They’re still very early in their life cycle. Those are a little bit different. But the tried and true companies that are generating positive earnings, positive free cash, that are contributing to this AI infrastructure build, generally speaking are still in pretty decent shape in terms of again, underlying growth, justifying where the valuations are at this point.
