Citi bruger kræfter på at finde overleverne blandt vækst-aktierne, der generelt har gjort det forrygende i 2020, men hvor mange nu rammes af de stigende renter. Citi siger, det drejer sig om at finde de aktier inden for “unstoppable trends”, som klarer skærene under kurs-korrektioner. Mange stærke selskaber inden for teknologi, kommunikationsservice og health care vil få gode afkast i mange år, vurderer Citi.
Finding Quality Growth amid the Growth Stock Rout
It has been a rocky few weeks for stock markets globally. Bond yields have risen sharply thanks to stronger growth and inflation expectations making investors demand higher returns. As low yields were a key driver of the rally in stocks – particularly the technology sector – the increase has impacted investor sentiment. The yield on the US 10-year treasuries crossed 1.75% for the first time since January 2020 on 18 March 2021 after the Federal Reserve (Fed) pledged to tolerate inflation and keep monetary policy loose through 2023.
Re-evaluation of Growth Stocks
- It is common for rates to rise at the beginning of new economic cycles. The fact that the US Treasury is planning to borrow roughly four times the amount the Fed is lending means that external capital flows may be diverted from other markets in large amounts. This is likely to require higher interest rates. That is fueling uncertainty and volatility in bond markets and other asset classes.
- In particular, “Unstoppable Trends”, which are very much geared towards long-term growth opportunities have been repriced, with some of the most expensive equities sold off the most since February.
Long duration assets paring gains as COVID-19 retreats
Source: Citi Private Bank. As of 14 March 2021.
Citi’s “Unstoppable trends” on sale
- Citi analysts looked at the companies that entered 2021 trading at a large valuation premium to their expected revenue growth, and found that fast-growing firms that have already achieved profitability have underperformed unprofitable or slower-growing firms since interest rates spiked. With the sell-off, investors have also punished companies whose profits and cash flow were already apparent.
- Citi analysts believe this presents an opportunity to add exposure to markets leaders within preferred “Unstoppable Trend” themes where enduring growth in the economy is expected.
- While indexes tracking broad themes indicate that areas like renewable energy, fintech, and cyber security are correcting, Citi analysts seek to identify the strongest firms within each theme, while avoiding weaker “imitators” with less proven business models or track records.
- Among the hardest-hit growth stocks, Citi analysts identify a number of household names in sectors like technology, communications services, and health care that are likely to deliver above-market growth for many years to come.
