The big comeback for growth and a major setback for travel

The big comeback for growth and a major setback for travel by Saxo Group
June extended the comeback for bubble stocks on the back of falling inflation expectations and a more hawkish FOMC. On the flipside, the emerging Covid-19 Delta variant is causing short-term pain for travel stocks.

June manifested itself as the big comeback month for growth stocks with theme baskets such as NextGen Medicine (up 17.6% in June) and Bubble Stocks (up 10.3% in June) powering ahead fueled by a more hawkish FOMC causing long-term US interest rates and inflation expectations to decline. The NextGen Medicine basket got an additional boost from the major gene editing breakthrough by Intellia Therapeutics which we covered in yesterday’s equity update.

Bubble stocks started their rebound back in mid-May and have since risen 21% likely causing a sigh of relief for Ark Invest and in general growth investors. While growth has staged a comeback and we believe investors should have these growth pockets in their portfolios, we are also still leaning towards inflation will run higher than current market consensus causing interest rates to climb higher over the coming year reducing the tailwind for growth stocks. Below the performance chart on our Bubble Stocks basket we have inserted the companies in the basket and if we look across performance last month the best-performing stock has been Appian.

Appian sells a low-code automation platform and solutions that maximizes resource use for businesses but has been under pressure since the peak back in February. In June, the stock finally rallied without any particular news until 17 June when the stock was added to Hedgeye’s new best idea long based on the views that Appian is doing the right things on pricing, community development and partner integration.

Name Domicile Mkt Cap (USD mn.) 12M Fwd EPS 12M Fwd EV/Sales Diff to PT (%) 5yr return (%)
Kuaishou Technology China 213,499 -0.85 16.2 60.3 NA
Sea Ltd Singapore 140,384 -1.26 17.3 12.3 NA
Airbnb Inc United States 130,635 -1.31 28.1 8.7 NA
NIO Inc China 94,795 -1.59 18.0 11.8 NA
Snowflake Inc United States 84,570 -0.87 71.5 20.1 NA
DoorDash Inc United States 67,743 -0.19 17.6 -6.5 NA
Roku Inc United States 59,111 -0.26 23.1 3.7 NA
Bilibili Inc China 51,601 -4.76 18.2 18.8 NA
Teladoc Health Inc United States 41,124 -0.30 20.3 37.9 928.6
XPeng Inc China 37,228 -2.41 15.0 3.2 NA
Affirm Holdings Inc United States 34,499 -0.89 39.7 14.3 NA
BeiGene Ltd China 34,490 -9.78 35.8 12.4 1,071.9
Unity Software Inc United States 34,299 -0.35 32.7 14.6 NA
Plug Power Inc United States 32,156 -0.18 68.1 34.9 1,702.4
Seagen Inc United States 31,016 -0.11 15.9 16.3 280.4
Cloudflare Inc United States 28,050 -0.08 46.1 -5.6 NA
Splunk Inc United States 27,486 -0.21 10.8 13.3 166.0
MongoDB Inc United States 25,201 -0.98 34.1 1.4 NA
Exact Sciences Corp United States 24,752 -1.14 13.3 22.1 915.2
Gaotu Techedu Inc China 24,455 -3.34 11.8 NA NA
Farfetch Ltd United Kingdom 23,465 -0.66 10.3 21.2 NA
DraftKings Inc United States 23,186 -1.16 26.5 31.9 NA
GDS Holdings Ltd China 20,998 -0.15 18.6 34.2 NA
10X Genomics Inc United States 20,458 -0.32 38.9 7.7 NA
Argenx SE Netherlands 19,397 -10.72 105.2 5.3 2,055.5
Alnylam Pharmaceuticals Inc United States 19,214 -4.77 21.0 2.8 172.2
Ping An Healthcare and Technology Co Ltd China 18,942 -0.91 11.6 27.8 NA
Innovent Biologics Inc China 18,305 -0.61 24.0 16.6 NA
Guardant Health Inc United States 16,826 -1.50 40.5 32.0 NA
Zai Lab Ltd China 15,781 -2.52 87.5 8.4 NA
Kingsoft Cloud Holdings Ltd China 15,710 -2.56 9.6 56.9 NA
Yatsen Holding Ltd China 15,665 -1.17 10.7 40.2 NA
Oak Street Health Inc United States 15,461 -0.46 11.1 23.3 NA
C3.ai Inc United States 15,370 -0.79 69.6 57.7 NA
Bill.com Holdings Inc United States 15,319 -0.19 57.4 -2.5 NA
Canopy Growth Corp Canada 15,279 -0.90 24.2 13.9 990.2
Appian Corp United States 15,229 -0.40 43.3 -22.4 NA
Avalara Inc United States 14,770 -0.16 21.3 14.3 NA
Elastic NV United States 14,429 -0.44 20.6 16.0 NA
Cree Inc United States 14,240 -0.59 21.3 17.5 296.1
Aggregate / median 1,565,141 21.3 14.6 857.9

Source: Bloomberg and Saxo Group

Delta variant is a key risk for travel stocks

The emerging Covid-19 variant called ‘Delta’ is coming a key risk for European tourism which is not only a blow to Southern Europe that is in desperate need of a rebound in their tourist income, but also travel stocks that are down 6.2% in June. While investors have reacted to the uncertainty selling off travel stocks, the recent data from the UK and Israel suggest that while new cases are increasing due to the new Delta variant the number of hospitalizations and severe cases of Covid-19 are not dramatically increasing suggesting that vaccinations are working. The recent selloff in travel stocks is healthy as the rebound in travel stocks has been too much relative to what we can expect of profitability and growth from the industry in the coming years.

Topics: Equities Technology USNAS100.I Health Care

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