Indeed, Portfolio Adviser has already written recently about the difficulty in accurately valuing companies at present, especially those at the cutting edge of the technological disruption affecting all industries. But, given how highly valued Apple already is, trying to put a number on its long term growth is even more challenging.
But, it also serves to highlight another phenomenon at play within markets, the disjuncture between valuations and earnings expectations.
Company earnings are reflecting a very bearish scenario at the moment, Gavin Marriott told Portfolio Adviser’s sister publication, International Adviser recently.
But, while consensus earnings expectations have been significantly hit by concerns about global growth, the product manager for global and international equities at Schroders believes that many companies have actually made concerted effort to take costs out of their businesses.
As a result, he said: “Even a marginal uptick in the aggregate level of growth will be supportive for earnings.”
Asked what is going to drive that forward earnings growth, Marriott said it is likely to be self-help in the main.
“We are definitely in an environment of slower top line growth and lower growth generally, so it is companies that have taken costs out of the business and companies where they have preserved and, in some cases, enhanced margins that are really going to be the beneficiaries.”
Whether or not Apple falls into that category remains to be seen, but it would seem that, at least for now, Buffett thinks that to be the case.
