Fourth Quarter | 2024

For profitable companies, most of their value usually comes from beyond the fifth year. Much of what investors react to day to day barely touches that value. This year's Think Piece returns to the fundamentals of valuation: future cash flows discounted at a cost of capital. For Gulf companies, the dollar peg closely ties the cost of capital to the US 10-year Treasury yield, which aggregates more information about inflation, growth and risk than any investor could gather from daily news. The harder part is the cash flows. Corporate lifespans are shortening and technology is reshaping industries faster than forecasts can keep up. We believe companies that can adapt warrant a lower equity risk premium than those that cannot, and we expect Gulf valuations to diverge accordingly: resilient companies trading at elevated multiples, and apparent bargains that turn out to be value traps. Telling the two apart is where our time is best spent.