During the pandemic, fevered demand for fashionable investments was great for Polar Capital (PLR) and its valuation. Shares in the specialist asset manager hit 18 times forward earnings in May 2021 as the tech-is-everything narrative proved irresistible for many investors.
- Continued demand for funds
- Possibility for operational gearing
- Huge dividend yield
- Large cash reserves
- High interest rates dampen values
- Sectoral headwinds for active funds
Today, those who bought Polar shares at those levels will be sitting on some hefty paper losses. However, the company has recently shown enough signs of stability in both market focus and fund flows to suggest that a bottom might be in the stock. If Polar can deliver improved investment performance, particularly from higher valuations for healthcare tech companies, then the possibility of staging a re-rating in profits or the shares’ earnings multiple starts to look more plausible. In this scenario, returning to the long-term average would imply a profitable gain for investors.