Taking a closer look at underlying sector and thematic rotations that have occurred over the past two years, we’ve identified four distinct market environments that have existed. Importantly, these have been driven by investors’ collective perceptions of (1) the Fed’s overall tone (i.e., dovishness or hawkishness), and (2) the global growth outlook.
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Taking a closer look at underlying sector and thematic rotations over the past two years, we’ve identified four distinct market environments that have existed. These have been driven by investors’ collective perceptions of (1) the Fed’s overall tone (i.e., dovishness or hawkishness), and (2) the global growth outlook. The market is currently in a Defensive Growth environment. However, we expect another Value Trade to reemerge once coronavirus headwinds fade.
Year-to-date, growth stocks have handily outperformed value (R1G +8% vs. R1V +1%) in the face of coronavirus fears and some other near-term economic headwinds. Over the very near-term, we expect this trend to continue into choppy global economic data and potential uncertainty around the March 3rd ‘Super Tuesday’ democratic primaries. However, looking out from now to year-end, we expect global cyclical economic data to surprise to the upside as coronavirus fears fade and a rebound in global trade occurs. This should drive a sharp reversal from Growth to Value stocks.
Ingersoll-Rand (IR, Market Cap ~$35b) announced that February 29th is the expected date for its spin-off/merger of its Industrial segment with Gardner Denver (GDI). The segment is expected to have 2020 adjusted EBITDA of ~$855 mm.
Increasingly, over the past year, we’ve been focused on identifying potential short stock ideas/avoiding stock blow-ups. Our short screens comprise the 14 most potent valuation, earnings quality, capital creation, capital allocation, and sentiment metrics we’ve found to be most useful in searching for ideas on which to complete additional fundamental analysis. These short screens represent the backbone of the process we use into which to dig deeper and identify the most compelling short ideas.
Each month, we publish our favorite long idea stock screens. They encompass many investment styles and themes including value, growth, capital creation, cash usage, corporate actions, dividends, and financial institutions.
Crude oil prices have now plummeted by roughly -19% over the past five weeks into coronavirus fears and intensifying global growth concerns. Sharply lower oil prices obviously create significant near-term headwinds for oil producing companies and countries. Persistently low prices also have the potential to create energy-related credit losses, which can negatively impact the high yield credit market as well as bank loan loss trends. (Although, we haven’t yet seen significant signs of stress.)
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