GREY:ATBPF - Post by User
Comment by
Madmanmadoxon Mar 20, 2018 2:36pm
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Post# 27748206
RE:Market correction/ crash
RE:Market correction/ crashI often think about this with small caps. What I do is map out the risk drivers of the return for the stock. Is Beta (Systematic Risk) driving the return? Debt? Expected growth? A contingent litigation event? Muiltples shrinking due to an increase in interest rates (due to inflation) should effect growth stocks the most since the discount rate increases which decreases the terminal value expectation in NPV valuations. P/E ratios tend to decrease overall given the relative risk return tradeoffs between asset classes (Equity vs Tbills Vs Bonds) changes in increasing interest rate environments. What I also look at is Debt & Interest Expense/EBITDA and how that looks for every 25 basis increase in interest rates. I also look at how well can the company pass on inflation to the customer or will its margins compress as COGS rises?
ATE's value in this specific case (in my opinion) is being driven by partnership value or binary events. This is to say it is not immune to Beta market risk (as its proposective partner's likely will be effected) but it is less directly influenced and somewhat (at least relatively) mitigated. That is, my take anyway, market risk is less of a driver of returns for ATE relative to most positions you would likely be comparing it to. It will still effect the discount rate when discounting what a partner will pay but the driver of the return (and therein risk) for ATE shareholders will be can you negotiate a strong partnership deal based on the results of this 2B or not?