The 'Europe is going Japanese' fear has driven a big re-rating and outperformance of growth stocks relative to value year to date.
These types of macro consensus trades tend to present exploitable opportunities, although some optically cheap stocks will prove to be value traps. Bond managers prepare for volatility in Europe as Italy plans new 'currency' We would caution against using the 'Europe is Japan' argument as an alibi to overpay for growth stocks on the basis of using low discount rates. We are also typically wary of excessive optimism in terminal growth rate assumptions. Mean reversion of current growth excitement may be driven by multiple factors - incorrectly extrapolating strong current cyclical f...
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