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Focus on the earnings, not the noise

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By Michael O’Connor    

Major Indexes reversed gains early in the week to finish nearly 2% lower as tensions on the Russian Ukrainian border prolong the current market uncertainty.

In addition to the feds ability to fight inflation, the prospect of war has been added to the mix.

This uncertainty has led to some dramatic price fluctuations as stocks violently whipsaw.

We have seen mega-cap names trade like penny stocks, as the apparent lack of euphoric outlook continues to bring the valuations of many of these names firmly into focus.

It appears that valuations actually do matter, and growth at any price isn’t a flawless investing strategy. Who would have thought?

IT’S NOT ALL BAD NEWS!

It’s important to highlight that earnings growth has continued over the quarter, the companies that make up these stock market indexes are now more profitable than ever.

The fundamental of these businesses are strong, but the endless growth narrative that pushed many of these names to record valuations is being re-examined.

For example, Netflix’s reported actual earnings per share (EPS) of $1.33 for Q4, which was well above the mean EPS estimate of $0.83.

Not too shabby, right?

Wrong.

The market doesn’t care about what has happened nearly as much as it cares about what will happen.

From January 18 to January 24, the stock price for Netflix fell 24.2% based on disappointing forward guidance.

Despite having five times higher net income, double the revenue and over 100 million extra subscribers, Netflix is now trading below its June 2018 price as its growth outlook is adjusted downwards.

Over this period, Netflix has been a classic case of good company, bad stock. In 2018, too much of the growth story had already been baked into the price, leaving little room for an upside surprise. So, despite the success of the company over this period, the stock has grossly underperformed the broader market.

In short, the huge expectation placed on these high growth names following the onset of the pandemic was simply unsustainable. The market is now re-rating these stocks to account for the more realistic growth outlook.

RETURNING TO NORMAL

Looking at the positives; stock prices have fallen but earnings estimates have increased over recent months.

Many of the growth names that have seen considerable declines have now been re-rated towards more respectable metrics without significant disruption to the broader market.

Facebook, Netflix, Shopify, PayPal, Zoom and Square have lost more than $1.1 trillion in market cap from their peaks seen in 2021.

Yes, it has been particularly painful if you’re holding these individual names (I hold two…unfortunately), but the S&P has managed to eliminate much of the excess without entering correction territory.

This concentrated valuation correction across many of these high profile names now leaves the market in a much healthier position from a valuation standpoint.

For example, the forward 12-month P/E ratio for the S&P 500 is currently 19.2. This is below the 19.5 times forward earnings recorded prior to the pandemic.

While geopolitical events may weigh on markets over the immediate term, recent pull backs have helped to strip the pandemic exuberance out of the market.

These lower valuation metrics as earnings continue to rise offering a more attractive entry point for buyers waiting on the sidelines.

Focus on the earnings, not the noise. Earnings ultimately drive market returns.

To read my full market analysis, go to www.theislandinvestor.com.

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Killarney runner completes Wild Atlantic way challenge

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Killarney runner completes Wild Atlantic way challenge

Killarney endurance runner Seanie Clifford has completed one of the toughest tests ever attempted on Irish soil by running the entire 2,700km length of the Wild Atlantic Way.

Clifford is an ultra-runner, mountain guide and retreat organiser based in Killarney. Through retreats in Ireland and France he combines hiking, running, yoga and healthy food. “The most rewarding feeling is when people leave having stepped outside their comfort zone,” he says.

His Wild Atlantic Way run covered the equivalent of more than 64 marathons back-to-back, cementing his place among Ireland’s top endurance athletes while highlighting the importance of mental health, community and resilience.

Donegal start 

He began in Muff, Co. Donegal, on August 7 and arrived in Kinsale, Co. Cork, 30 days later, beating his own self-imposed deadline by hours.
The route included more than 27,000 metres of climbing and an average of 90–100 kilometres per day. Clifford’s final time was 29 days, 15 hours and 5 minutes.
Clifford, known locally as “Seanie Runner”, undertook the challenge to raise awareness of mental health and the benefits of outdoor activity.

Despite meticulous planning, Clifford hit his lowest point in Kerry on day 21 near Cahersiveen. Severe sickness left him barely able to move. His partner Alicia said: “Any normal person would have stopped. But Sean kept going, covering 70km days in that condition.”

Local support proved vital. Members of the Kerry Way Ultra community gave him food, rest and encouragement. In Waterville, a festival organiser offered shelter on one of his darkest nights. These small gestures kept the challenge alive.

Kinsale finish 

Recovery brought new tests. Crossing the Conor Pass and into Slea Head, Clifford faced storm-force winds. Fellow runners Ailis Brosnan and Niall Foley joined him for parts of the route. Brosnan called it “a quiet kind of legendary”. Foley, who is filming a documentary of the challenge, described Clifford as “a man possessed”.

By the end of the Kerry stages, Clifford had turned his suffering into momentum, showing how local roads can both break and build endurance athletes.
Clifford crossed the Kinsale finish line with just hours to spare before his 30-day deadline. He had promised to return to Kerry to help at the Kerry Way Ultra race – and two days later he was back, volunteering at the event.

Like polar explorer Tom Crean, Clifford showed that greatness can come from ordinary people prepared to go beyond their limits. “People think it’s about running,” he said. “But really, it’s about people. Kerry showed me that. I was broken here, but I was carried home too.”

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Picture This add extra Killarney date to ‘Home for Christmas’ tour

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Due to phenomenal demand, Picture This have added an extra Killarney date to their Home for Christmas tour.

The band will now perform at the Gleneagle Arena on Saturday, 20 December 2025, in addition to their previously announced run of sold-out arena shows.
The band’s stage production features a pub, its garden and a car park, combining the atmosphere of a lock-in with the intimacy of a trad session while showcasing songs from their four albums.
The announcement comes on the back of their new single Heart over Head, a collaboration with German artist Joris and a reworking of his hit Herz über Kopf. The track blends Picture This’s anthemic sound with Joris’ folk-pop style. The accompanying video, filmed in Dublin, has just been released.
Since forming in 2015, Picture This have sold out arenas at home and abroad and built a global fanbase.
Tickets, priced at €67.70/€72.70 plus Ticketmaster service charge (max €10.50), are on sale now at ticketmaster.ie

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