How to Play Economic Dispersion
This document is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations).
It isn’t difficult to understand where Americans have been spending their money throughout the Covid-19 pandemic.
Many people have invested in hobbies or fixing up their homes. They haven’t been traveling much, nor spending on leisure or entertainment. We believe some of these lagging areas are due to rebound when a vaccine is widely available, but we believe that it is important to gain exposure to those end-markets with high quality, innovative companies.
- Areas such as spectator sports, live entertainment and movie theaters have been hardest hit by pandemic considerations. Games, toys and hobbies, furniture and furnishings and pets and related products have prospered.
- Some investors believe picking stocks right now is a question of growth vs. value, with value equating to cyclical stocks, i.e., those whose price is affected by macroeconomic or systematic changes in the overall economy. At Alger, we believe value stocks have structural headwinds. Still, we believe there is a sweet spot to be found in growth equities.
- We believe the most potential returns lie in gaining exposure to innovative growth companies that are taking market share, have high return on capital and have exposure to some of the markets we think may potentially rebound. Examples of innovative growth companies include, in our view, digital travel platform company Booking.com, commercial real estate information services business CoStar, automobile voice services company Cerence and energy technology company Core Laboratories.
By Brad Neuman, CFA, Director of Market Strategy, Alger – a La Française partner firm
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