OGIG Cheapest in 3 Years. Buying Opportunity?

September 2, 2021

Internet & E-commerce

Summary

  • 20% cheaper based on 3-year average. Time to invest?
  • What happened last time internet stocks were this cheap?

20% Cheaper Based on 3-Year Average. Time to invest?

What if someone told you that stocks that have grown revenue by over 40% on average were at their cheapest level in over 3 years? Global tech has been impacted by China’s crackdown on large internet companies which could present one of the best buying opportunities in the past 3 years. The relative forward price/sales ratio between the O’Shares Global Internet Giants Index (OGIGX), the index that ETF OGIG tracks and the Nasdaq 100 Index is 1.14. This is the lowest this ratio has been in 3 years. As points of reference, the 3-year high is 1.59 and the 3-year average is 1.43. This represents a 20% discount to the 3-year average.

Relative Price/Sales Ratio (P/S) – OGIG Index vs. Nasdaq 100 Index (as of 8/18/2021)

    • Current: 1.14
    • 3-year average: 1.43
    • 3-year high: 1.59
    • 3-year low: 1.14

What happened last time internet stocks were this cheap?

The last time the stocks in OGIG were at this level was August 2018. Since then, OGIG has generated a total return of 117% and outperformed the Nasdaq 100 Index which generated 100% as of 8/18/2021. See OGIG standardized performance here.

Source: Bloomberg Finance L.P. Monthly data as of 8/18/2021.
Past performance is no guarantee of future results.

Definitions:

OGIG Index: The O’Shares Global Internet Giants Index (Ticker: OGIGX) is a rules-based index intended to give investors a means of tracking stocks exhibiting quality and growth characteristics in the internet technology and e-commerce business segments and pass screens for gross margin and cash burn sustainability. Companies included in OGIGX derive at least 50% of their revenues from a) internet technology companies whose principal business is to provide the technologies that support internet commerce; and b) internet commerce companies whose principal business is to sell products and services via the internet.

Nasdaq 100 Index: The NASDAQ-100 Index is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No security can have more than a 24% weighting. The index was developed with a base value of 125 as of February 1, 1985. Prior to December 21,1998 the Nasdaq 100 was a cap-weighted index.

Price/Sales Ratio: The price-to-sales ratio is a valuation ratio that compares a company’s stock price to its revenues.

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