Buy expensive software stocks after corrections
Following sharp valuation corrections in the software sector, buying the most expensive, high-growth names historically outperforms buying the cheapest ones.
The argument
Citing research by Adam Parker analyzing nine sharp software EV-to-sales contractions since 2000, the hosts argued that the most expensive quintile of software stocks consistently outperforms the cheapest quintile over the subsequent six months because the market correctly prices superior growth outlooks into those higher valuations.
The thesis, stress-tested
✓ What validates it
- ✓Six-month forward relative outperformance of premium-valuation software names over low-multiple peers post-correction.
▸ Risks discussed
- ▸Historical outperformance patterns may fail to hold if AI disruption structurally breaks the growth models of even the premium software players.
Hear it yourself
"For the last twenty years, buying the most expensive software companies outperformed buying the cheap for the six months following these valuation corrections. So Adam's saying, if you wanna add a software name, add a fast growing expansive one like Palo Alto, not Salesforce because it's cheap."
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