Topic 3: THEMES WE LIKE

WE LIKE 6 THEMES IN THE CURRENT MARKET ENVIRONMENT

1. Smallcap Growth Companies:
Smallcap growth stocks were punished severely over the last 9 months due to rising inflation as their future earnings growth was discounted more. However, if inflation is coming down, this trend should reverse

2. Ukraine War Relative Winners:
We have two subthemes to play Ukraine War relative winners:

  • Defense: The Ukraine conflict is causing a huge spike in defense spending around the world and arms manufacturers will be the winners
  • Country Winners: While US consumers are getting hurt from rising commodity and energy prices (like all consumers around the world), their stock contains many companies that benefit from it. The US is either self-sufficient or a net exporter of energy and most commodities. Furthermore, it has little exposure by way of trade with either Russia or Ukraine

3. Tech Winners:
We have 3 subthemes to play Tech Winners:
  • Semiconductors: Semiconductors are essential to most electronics. Their demand is skyrocketing while supply chain disruptions are increasing
  • Cybersecurity: Cyber-attacks on enemy infrastructure are a big part of modern warfare and countries are strengthening their defenses against such attacks. Cybersecurity software developers will be the winners
  • Mega Cap Growth: Mega Cap Growth stocks with high percentage holdings in tech giants such as Apple/Google/Amazon and Microsoft, with their dominant positions and established supply chains are expected to weather the current market uncertainties the best

4. Infrastructure Spending: Countries across the world are investing in their infrastructure to stay competitive. Global warming trends suggest that this spending may accelerate

5. Recession Risk Winners: In a recessionary or a slow-growth environment, consumer staples and healthcare perform the best

6. Oil: While many commodities have sold off, including Oil, the underlying dynamics of Oil supply and demand point to a prolonged period of higher prices



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