Growth Stocks by Sector

By pjain      Published April 4, 2021, 10 p.m. in blog Invest   

Market Changes/Rotation --xfr--

Disruptors benefit in Crisis, Ability to Move fast

Legacy businesses weren’t able modify their business plans rapidly, so disruptive companies offering new models were able to capitalize on that.

But it was mainly long term thinking, maybe they upped the ante - “All of our core holdings had been in the fund prior to February 2020, ... We don’t try to outsmart the market, but we look for high-quality businesses able to weather the storms and continue to grow, in businesses that we feel will be much larger in five years’ time." Mr. Baron attributes the outsize gains in many growth companies, and especially among the ranks of smaller stocks, to the fact that the pandemic seems to have accelerated the pace of economic change. “A lot of growth projections we had established for our holdings for the next several years were pulled forward, and realized in a much shorter timespan,” - BPTRX Michael Baron.

  • Z already has captured more attention from eager home buyers (encouraged by ultralow interest rates) reluctant to tour homes in person in the company of a real-estate agent. - BPTRX Michael Baron.

  • TSLA Tesla came to be seen not only as the maker of more environmentally friendly cars, but as a consumer-friendly business in a pandemic. “Fewer people touch the vehicles when they’re made, and there’s no need to go to a dealership and interact with other people to make the purchase or get the vehicle serviced” - BPTRX Michael Baron.

2020 - Obvious Pandemic beneficiaries - EC, Hoarded Staples

For the first half of 2020 market has really been about pandemic beneficiaries

Q3 2020 Nesting, Consumer Discretionary, Pampering

The Driehaus fund's - Jeff James DMCRX has benefited from this decision to try to track the evolution of the pandemic and its impact on an array of businesses. Early on, Mr. James says, the consumer discretionary sector was the worst performer for his fund, but a growing interest in home furnishings and outdoor-related activities had transformed it into the single largest contributor to returns by the first quarter of 2021.

Effective Vaccines -> Reopening

“As it became clear we’d have effective vaccines emerge, I’ve started shifting my emphasis and looking for companies that will benefit most from a reopening,

Apr'21 Rotation to Value on $1.9T stimulus, Infra $1-2T priced in

  • As Growth shifts to Value on reopening and superhigh valuations for growth
  • Value funds tend to be old-economy eg Oil/Mining, etc. hard to think as ESG
  • Also small stocks just not quite ESG - basically noop

LT Growth, Big tech stability -> Cyclical

A number of funds like ARKK and BPTRX outperformed due to managers’ early decision to invest in stable but high-growth businesses.

Apr'21 Health care emerging from low utilization => Pentup & Obamacare 2.0 under Bidn

Avoid obvious but SLOW-MO plays like airlines/cruise/disney take longer

Growth vs Value Stocks --xfr--

Why Disruptors

Disruptors have a willingness to embrace scientific and business change.

Large Companies Screw up Acquisitions -- xfr ---

Yahoo-Google missed opportunity

MSFT messed up Skype

MSFT messed up Nokia

Google screwed Motorola,

Google+ Full-Wood died

Apple-Tesla missed opportunity

Tesla CEO Elon Musk had even said last year that he once tried to start talks to sell the company to Apple, but Cook declined to take a meeting.

“You know, I’ve never spoken to Elon, although I have great admiration and respect for the company he’s built. I think Tesla has done an unbelievable job of not only establishing the lead, but keeping the lead for such a long period of time in the EV space. So I have great appreciation for them,” Cook told Swisher.

Most recently, CNBC reported that Apple was close to finalizing a deal with Hyundai-Kia to manufacture an Apple-branded autonomous electric vehicle at the Kia assembly plant in West Point, Georgia. However, the automakers later walked back on the claims.

ESG Why Growth

MFs 85%+ Growth

  • ESG are "selective" - to keep up with benchmark, need to overload with growth to compensate for "no bad boy stocks" Value does not work for ESGs - * Value funds tend to be old-economy eg Oil/Mining, etc. hard to think as ESG

ESGs overload on small-stocks GROWTH vs phe Lcap growth

  • Also small stocks just not quite ESG - basically noop

ETFS COMPARISONS

VS Morningstar actively managed, diversified stock funds for the past 12 months. (Not included: index, quant and sector funds, and ETFs in general.) Direct 12-month net return for all funds tracked: 47%

MSSGX Morgan Stanley Inception Portfolio

Smallcap focused - Morgan Stanley Inception small-cap growth - Dennis Lynch, head of the Counterpoint Global team at Morgan Stanley Investment Management. “We prioritize long-term thinking over knee-jerk reactions, especially during a period of turmoil and crisis like last year” 12-month net return: 273%

JMIGX Jacob Discovery Fund

12-month net return: 220%
Manager: Darren Chervitz

Baron Partners (BPTRX)

12-month net return: 212%
Manager: Michael Baron

But it was mainly long term thinking, maybe they upped the ante - “All of our core holdings had been in the fund prior to February 2020, ... We don’t try to outsmart the market, but we look for high-quality businesses able to weather the storms and continue to grow, in businesses that we feel will be much larger in five years’ time." Mr. Baron attributes the outsize gains in many growth companies, and especially among the ranks of smaller stocks, to the fact that the pandemic seems to have accelerated the pace of economic change. “A lot of growth projections we had established for our holdings for the next several years were pulled forward, and realized in a much shorter timespan,” - BPTRX Michael Baron.

Hodges Fund (HDPMX)

It employs a “go anywhere” approach that enabled Mr. Hodges to add (and later subtract) pandemic-economy winners Zoom. More recently, the fund has diversified, adding small positions in sports betting firms 12-month net return: 182% Manager: Craig Hodges

  • ZM Zoom Video Communications
  • DKNG DraftKings
  • WTRH Food-delivery companies Waitr Holdings
  • NLS Nautilus

  • ELY Outdoor-sports arena with a stake in Callaway Golf Co. ELY +0.52%

Driehaus Micro Cap Growth (DMCRX)

  • This is closed to new investors, though the Driehaus small-cap fund, which Mr. James says has about a 50% overlap in holdings with the microcap fund, remains open. 12-month net return: 175% Manager: Jeff James

FRPT Freshpet provides pandemic puppies and kittens (as well as other animal companions) with refrigerated fresh foods - Jeff James DMCRX

FLGT Xx Fulgent Genetics developed some of the widely used Covid-19 tests and which now is pushing forward with research and development of many kinds of genetic tests. - Jeff James DMCRX

BALY Bally’s owns casinos in a number of regional markets (including Colorado and Rhode Island), as well as racetracks and an array of online gaming products. “We bought this in the second half of last year, expecting that while online gaming would continue in the reopening, Bally’s would benefit from a surge in activity at its casinos - Jeff James DMCRX

NLS Nautilus (a maker of fitness equipment, whose shares have exploded in value from about $2.50 a year ago to more than $16 by March 31) was among the leaders. - Jeff James DMCRX

LOVE Lovesac a specialist modular furniture maker, whose stock has soared from less than $5 to nearly $60 over the past 12 months was among the leaders. - Jeff James DMCRX

Growth Stocks By Sector Overview

Consumer

EC

  • Retail Space over-supplied, Commercial Space/Mortgage at Risk
  • There were 115,000 shopping centers — a figure that includes strip centers, malls, outlet and other lifestyle centers — across the U.S. at the end of 2020, compared with 112,000 in 2010 and 90,000 in 2000, UBS found. That equates to about 59 square feet of shopping center space per household, it said. UBS is estimating that 80,000 retail stores will shut across the country by 2026. That assumes e-commerce sales rise to represent 27% of total retail sales, up from 18% today.

  • SHOP a top Ark holding

  • JD JD.com - 4.8% ARKX
  • AMZN AMAZON.COM 3.9% ARKX
  • BABA BABA 1.56 % ARKX
  • PDD up70%'2019 - EC+Groupon+Ebay+Amzn

Discretionary

eSports, Gambling, Outdoor Activity esp. under Lockdowns

  • DKNG DraftKings
  • WTRH Food-delivery companies Waitr Holdings

Fitness and Outdoor Activity

Peloton

PLNT

Planet Fitness — Shares of the fitness chain climbed 1.5% after the Wall Street Journal reported that it plans to open up to 100 new locations in the coming fiscal year, adding to its current total of more than 2,100. Chief finance officer Tom Fitzgerald told the newspaper that Planet Fitness will also invest in its app.

NLS Nautilus

ELY Outdoor-sports arena with a stake in Callaway Golf Co. ELY +0.52%

Big-tech

  • GOOG 2.80 % ARKX
  • TENCENT TCEHY 1% ARKX
  • BIDU
  • MSFT
  • ORCL x - stodgy Mgt

Media - massive disruption, streaming, music

  • NETFLIX NFLX 1.27 % ARKX
  • SPOT
  • ROKU
  • MEITUAN-CL.B 3690 .74 % ARKX

Health

Health Tech, Genomics, Devices - ARKG

The top 10 accounted for about 45% of total assets of ARKG

Large pharma

Laggy "proven" investor Buffet holds a lot of Merck and AbbVie ARK has relatively no large pharma stocks, as it is looking at biosciences/genomics disruptors.

  • NVS Novartis

  • MRK) up'2020 28%

  • ABBV up'20 by 20%.

Biotech

  • REGN Regeneron Pharmaceuticals ARKG
  • VRTX Vertex Pharmaceuticals ARKG
  • ARCT Arcturus Therapeutics Holdings is developing mRNA-based vaccines (including another Covid-19 vaccine candidate) but also using the same genetic research to devise therapies able to treat diseases like cystic fibrosis. The stock’s price has tripled over the past 12 months, but it’s the longer-term outlook that Mr. Chervitz OF JMIGX intriguing. “I see the potential for this kind of new medical technology to significantly expand lifespan over the coming decades

Genomics

  • VCYT Veracyte genetic testing 2019 up 122%

Biosciences patents, tech

  • CRSP

  • PACB Health care Pacific Biosciences of California a molecule sequencing equipment are up more than 800% since Mar'20 in 12 months. Wood must expect big gains in the future not yet apparent to analysts. Wall St. analysts think the company will lose 96 cents a share in 2021, even more than the 62 cents a share it lost in 2020. Shares leapt 16% on Feb. 10, after the gene-sequencing company's Q4 results beat Wall Street targets. Pacific Biosciences hasn't turned an annual profit. Sales last year got hurt as many customers shut down temporarily in efforts to curb the pandemic's spread. Analysts expect sales to jump 64% in the current quarter, halting four quarters of declines. The stock's 405% gain last year made it one of the top contributors to the fund's performance.

    "In October, Pacific Biosciences launched the Sequel IIe, a new instrument optimized for High-Fidelity reads that collapses the time to analyze and store a whole human genomic profile by 70% and 90%, respectively," - Cathie Wood

Health Care

  • TDOC Teladoc top holding in ARKG, and is up 42% since Mar'20 12 mos, on top 140% prior. It acquired Livongo Health, which helps remotely monitor patients with chronic diseases like diabetes. However it is still losng money but sales growth is HIGH - stepped up in each of the past four quarters, from 23% in Q3 2019 to 109% in Q3 2020. Analysts expect Q4 revenue to soar 142%

Health Devices, Robotics

  • ISRG x PHE - others to disrupt with AV
  • ALGN - x Dental no growth
  • ATEC Alphatec Holdings under the leadership of a new chief executive, Patrick Miles, fell into that camp, he says, as it has rolled out a series of innovations targeting spinal surgery, such as software that tells surgeons about the health of nerves during operations. - Chervitz OF JMIGX

Industrials, Traditional

Materials, Energy/Oil, Chemicals, Mining - NOT DISRUPTIVE!

## -- Industrials, Machinery, Machine Tools - RAVEN-INDUST RAVN 1.88 % ARKX

Big Industrials tech oriented

SIEGY Siemens AG !45 m51 b75 c83 ROK Rockwell Automation ROP Roper Tech HON

RNSHF Renishaw UK - industrial Machinery measuring HXGBY Hexagon AB Class B - precision measuring m60 b85 c100 KYCCF Keyence Corp - manuf auto sensors,vision,barcode - !300 m355 b405 c467 AME AMETEK industMc

FANUY FANUC Japan

Defense, Aerospace, Space

Space Vehicles, Infrastructure

  • IRDM Iridium - 4.3% ARKX
  • HO:FR Thales SA - 4% ARKX

Space GPS Communications, Satellites

TRMB Trimble - 8.3% ARKX

Trimble — Shares of the digital construction and agriculture company popped nearly 4.6% after Cathie Wood’s Ark Innovation purchased 453,214 of its shares. Based on Thursday’s closing price of around $83 per share, Ark’s purchase was worth north of $37.6 million.

DE DEERE&CO 3.12% ARKX

GARMIN GRMN 2.02 % ARKX

SE Communications services company Sea

Legacy Defense, Aerospace Cos

LMT Lockheed Martin - 4.5% ARKX

BA Boeing - 3.6% ARKX

AIRBUS AIR 1.58 % ARKX

DSY DASSAULT Systems SE R8 2.51 % ARKX

Space Defense, Aerospace Disruptors

Lockheed Martin will buy up to 26 of ABL Space’s RS1 rockets through 2025, with an option for up to 32 additional launches through 2029. Based on ABL’s $12 million price tag for an RS1 rocket, the deal with Lockheed Martin is estimated to be worth nearly $700 million over eight years, assuming the maximum number of launches. The large contract represents a coup for ABL in the medium-lift segment of the launch market, where it is competing with companies including Richard Branson’s Virgin Orbit, Relativity Space, Firefly Aerospace, and Rocket Lab.

AEROVIRONMENT AVAV 1.53 % ARKX

HEICO CORP HEI 1.13 % ARKX

ELBIT SYSTEMS ESLT 1.48 % ARKX

KTOS Kratos - 5.6% ARKX

LHX L3Harris - 5% ARKX

-- Airlines, Space, Tourism

  • SPCE Virgin Galactics 2% ARKX
  • SPR SPIRIT AEROSYSTEMS HOLD-CL A 3.20 % ARKX

Transport, Services, AI, Robotics

IT Services, Business Rengineering, RPA

ACN

Autonomous Cars, Trucking, EVs

  • TSLA - owned by several and largest holding overall - up 26% in 2019 and 74% in Q4'20
  • Tesla came to be seen not only as the maker of more environmentally friendly cars, but as a consumer-friendly business in a pandemic. “Fewer people touch the vehicles when they’re made, and there’s no need to go to a dealership and interact with other people to make the purchase or get the vehicle serviced” - BPTRX Michael Baron.

  • WORKHORSE WKHS 1.06 % ARKX

China Disruptors

Hiwin Tech THK Co Ltd Shenzhen Inovance Tech Ltd Class A SHE:000333 Midea GROUP CO

EduV

HRv

RCRUY R9 !6.2 m8 b8.6 c9.6 - Recruit Holdings, Japan - Indeed

Robotics

  • JP 6301 Komatsu - 4.6% ARKX

REv

Rising Rates, Forbearance, Prevent Evictions

  • Rising mortgage rates don’t help. Most current homeowners have refinanced to record low rates. More than a dozen record lows were set last year. Now rates are higher, meaning whatever they bought next would cost them more in interest payments.

  • UNLIKELY - 1 YEAR EXTENSION. Consumer Financial Protection Bureau proposed a rule Monday that would prevent mortgage servicers from initiating a foreclosure against delinquent borrowers until after Dec. 31, 2021. The rule would apply to all mortgages, both federal and private, on a principal residence. CFPB officials expect 1.7 million borrowers will be at risk of foreclosure around September, when the forbearance program ends — a figure that dwarfs anything mortgage servicers have seen.

  • LOAN MODS 3mo PERIOD MAY BE POSSIBLE. The consumer agency proposed establishing a “temporary Covid-19 emergency pre-foreclosure review period” during which mortgage servicers can’t make an initial notice of foreclosure. This period would last through 2021.

  • Q3'2021 Fall Foreclosures Wave possible if not EXTENDED as set to expire

  • Loans placed in forbearance program early in the pandemic will reach the end of their forbearance period in September or October, the CFPB said. 1.7 million borrowers are expected to exit forbearance programs around that time and be at risk of foreclosure.

  • Q1'21 Housing Super hot - 10-14% up on low mortgage rates

  • Very little supply - This March there were 20% fewer homes listed than last March. In some markets like Boston half supply.
  • Supply reduced as potential sellers have several concerns, the largest being that they are afraid they won’t be able to find or afford another home.
  • Rents are also rising fast also as reopening everywhere and companies asking people to come to offices.
  • Amateur agents losing out to high share. There are about twice as many working real estate agents as available listings.
  • BIDDING WARS. Nationwide, nearly 61% of home offers written by Redfin agents faced bidding wars in February, up from 59% in January. That is the 10th-straight month in which more than half of Redfin offers faced competition. More than a third of homes are also now selling for above list price.

  • H1'20 FORBEARANCES. The federal government let borrowers suspend payments as part of forbearance programs and placed a moratorium on foreclosures. Forbearance doesn’t forgive missed mortgage payments; it only defers them This comes on top of existing protections that disallow such a notice or filing until a borrower’s loan obligation is more than 120 days delinquent. Many homeowners in forbearance are behind more than 120 days, said Diane Thompson, senior advisor to the acting director at the CFPB.

  • Q2'2020 Covid pandemic has led to a stark rise in housing insecurity amid mass unemployment and income loss, stressing homeowners’ ability to pay monthly mortgages.

Z

  • Z Real estate disruption
  • Z already has captured more attention from eager home buyers (encouraged by ultralow interest rates) reluctant to tour homes in person in the company of a real-estate agent. - BPTRX Michael Baron.

SaaS Collaboration

  • ZM Zoom Video Communications

Mobility GIG

  • ARKx does not really hold UBER/LYFT - thesis is Tesla robotaxis will disrupt them

Finance, Fintech

Traditional Finance, Banks - not in high growth funds

ARK has no traditional finance stocks - in fact thinks that between fintech and crypto, their business models will be disrupted away.

Traditional bank stocks are heating up as yield curve rises and on reopening/SME recovery thesis, and bringing value stocks with them. Financials account for a quarter of Buffett's public holdings portfolio.

  • SYF Buffett's top-performing financial stock, on the other hand, is credit card company Synchrony up just 17.1% in 2020 - underperforming the S&P 500's 16.6%

  • BAC slomo - Buffett's largest financial position as he sells out of JPM/WFC a $34 b up just 2.3% in 2020 - underperforming the S&P 500's 16.6%

INVv Disruptors

SCHW

  • rose 2.9% to a 52-week high after Goldman Sachs put the stock on its Conviction List ahead of its earnings on April 15. The firm said Schwab should beat expectations driven by higher net interest margin and trading driven by strong retail engagement. Goldman also hiked its 12-month price target on Schwab to $77 per share from $67 per share.

Robinhood going public

  • but PHE on massive millenial hype

Payments and Mobile Pay - highly disruptive

  • PYPL
  • SQ - ARKFs high conviction holding
  • TCEHY - WeChat and payments

Online banking

  • SI Silvergate Capital 4.3% of ARKF - a bank holding company in La Jolla, Calif.

Crypto

  • GBTC Grayscale Bitcoin and its big contribution to the ARK Invest funds' performance in 2017. Since then, bitcoin has struggled. I see GBTC is no longer in ARKK, but is still a 1.5% position in ARKW. What explains this difference in investment allocation?
  • VYGR cryptocurrency broker, Voyager Digital listed on Canada’s over-the-counter market), whose biggest problems may lie in managing runaway revenue growth, he argues. “Although it has gone from being a penny stock to trading at more than $30 Canadian dollars a share, its valuation is still lower than the one being discussed for Coinbase’s likely initial offering,” - Chervitz OF JMIGX

Systems, Electronics

-- Industrial Electronic, Control Systems

  • HONEYWELL HON 1.09 % ARKX

Semis

  • NVDA 3.4% ARKX
  • TAIWAN SEMI TSM 1.01 % ARKX
  • XILINX XLNX 1% ARKX
  • AMD up 150%'2019
  • SMC

Equipment, Component Manufacturers

  • TERADYNE TER 2.73 % ARKX
  • TELEDYNE TDY 2.57 % ARKX
  • SYNOPSYS SNPS 1 % ARKX

Systems, Old Tech - to be disrupted away

Buffett, too, is highly exposed to consumer oriented technology stocks which are now up to 46% of his public stocks portfolio - AAPL is his by far biggest holding on gains and its buybacks. - SNOW a saas data storage manager is a huge winner

SaaS

FSLY

Fastly's edge-computing technologies helps improve the performance of cloud-based apps, including the kind of online gaming that many Americans flocked to during lockdowns. Fastly’s stock price has soared in the bull market, from lows of $14 a share in mid-March 2020 to $70.31 currently. While that’s well below its high of $126 a share last October, the gain was enough—in combination with big moves by other Inception holdings—to boost the fund to the top of the heap.

Software

PTC m102 b120 b130 c144 - sw ANSYS

Design, CAD, 3D Printing

  • PRNT Ark's own 3d Printing ETF
  • AUTODESK ADSK .81 % ARKX
  • ANSYS ANSS 1% ARKX, Simulation Engineering Software
  • ADBE - ?not owned by ARK

AI eats Sw eats Systems

  • AI diagnoses with tests - VCYT

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