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Good Soil Investment
EMMET PEPPERS
FOUNDER AND PORTFOLIO MANAGER, AND MATT SMITH, PORTFOLIO MANAGER, GOOD SOIL INVESTMENT MANAGMENT
The past two years saw an extreme uptick in valuations for growth companies, yet we believe investors have had a difficult time identifying which companies will be truly transformative in the long term. Many companies with very little differentiating technology or strategies saw stratospheric valuation multiples, while clear leaders, such as Tesla, are still viewed through a skeptical lens by many of our hedge fund peers.
This landscape sets up an extreme disparity in outcomes among companies which may appear on paper to be peers; many will fail, and a few will be huge winners. In 2022, we believe the market will continue to better differentiate between these two types of companies. The SPAC craze will almost certainly cool, and many companies that listed this way are likely to see their valuations cut. Macro uncertainty around Covid-19, interest rates and inflation will continue to drive skittishness in equity markets. We believe that, even if these issues cause markets in general to weaken, significant return potential still exists for investors who understand the huge technological disruptions which are poised to unfold this decade.
At Good Soil, we believe this dynamic will create huge asymmetric opportunities, both on the long and short side. Alpha generation will be achieved by those investors who have the information advantage in identifying winners and losers in this dynamic.
CHAPTER THREE
CREDIT
