Regardless of the growing unfold of the COVID-19 Delta variant, which has precipitated a pointy decline in U.S. shopper confidence, the inventory market has been resilient sufficient to stay in vary of latest highs. The S&P 500, Nasdaq
This week, indices have begun to drag again a bit and are testing preliminary help at both their 21- or 50-day shifting common. A breach of those might result in a average down leg. On the main Nasdaq index, a pullback to prior highs simply above 14,000 can be a ~6% correction from current highs.
All 12 months, equities have rotated forwards and backwards between these favoring progress and people favoring worth. Whereas these short-term modifications could cause confusion about what business teams to put money into, there are some themes that ought to do nicely no matter whether or not the market favors progress or worth. 5 dynamic themes that I favor proper now are U.S. Infrastructure, World Attire/Equipment, Electrical Car Battery Supplies, Outsourced Tech/Software program Companies, and Bioprocessing and Associated Instruments/Tools. Even when the market corrects, I imagine these themes will likely be rewarding investments for buyers over the subsequent three years, and a correction might provide a horny entry level.
Beneath I present a chart representing every theme, although some indices are extra immediately tied to the theme than others, as they don’t have a precise basket or ETF. I’ll additionally spotlight a number of robust concepts in every theme, both from William O’Neil + Firm’s Focus Lists or which have robust elementary and technical traits from exterior these lists.
1) U.S. Infrastructure (World X U.S. Infrastructure ETF, PAVE): The U.S. Senate not too long ago handed the Bipartisan Infrastructure Framework, and there’s hope it is going to quickly be signed into legislation by President Biden. The $1.2 trillion plan would reinvigorate spending on clear transportation infrastructure, clear water infrastructure, common broadband infrastructure, clear energy infrastructure, remediation of legacy air pollution, and resilience to the altering local weather. There are quite a few corporations that ought to profit from this spending that can make good investments.
2) World Attire/Equipment (O’Neil World Attire/Sneakers and Rel-Mfg Business Group, G3141IG.ZZ): Because the world slowly recovers from COVID-19, shopper steadiness sheets are robust given the shortage of spending in 2020. Individuals are starting to socialize, return to the workplace, and journey, and they’re going to possible refresh their wardrobe after spending little or no on attire and footwear final 12 months. This might be an fascinating funding theme, particularly for corporations with robust manufacturers.
3) EV Battery Supplies (World X Lithium Battery Know-how ETF, LIT): The shift from gasoline and diesel-powered to electrical automobiles is a multi-decade theme. As nations more and more deal with local weather change and governments within the U.S. and EU mandate conversion, the overall addressable marketplace for EV batteries will proceed to extend. World EV gross sales rose greater than 45% in 2020 and lots of estimates name for 60–70% progress in 2021. By 2025, EV penetration might attain the mid-teens from the mid-single digits at the moment.
Many materials producers which can be set to learn are based mostly in South Korea and China. My favourite U.S.-based names on this area are lithium producers Albermarle Company (ALB) and Livent (LTHM) in addition to ON Semiconductor (ON), whose chips are used within the energy techniques of electrical vehicles.
4) Outsourced Tech/Software program Companies (O’Neil World Laptop Tech Service Business Group, G7392IG.ZZ): As extra software program processes and functions shift from on-premise to the Cloud, demand for technical help will enhance. As well as, over the past 12 months, firms have develop into more proficient and comfy provisioning new software program functions and providers fully remotely. Consequently, bookings for know-how outsource corporations and software program providers have grown quickly over the past twelve months.
Favored names on this area embrace Globant SA (GLOB), Indian outsourcing chief Infosys (INE.IN), and consultants Capgemini (CAP.FR) and Accenture
5) Bioprocessing and Associated Instruments/Tools (Franklin Genomic Development ETF, HELX): The astounding advances in medical know-how, particularly within the area of genomics, proceed to rework the healthcare business. Because the current mRNA COVID-19 vaccines from Moderna and Pfizer
Whereas there have already been large inventory winners like Moderna (MRNA) and Biotech (BNTX) over the previous 12 months, present enticing names for funding consideration embrace bio-processing product and tools producer Repligen (RGEN); medical devices producer Danaher (DHR); Avantor (AVTR), a maker of scientific research tools and chemical compounds; and Maravai Lifesciences (MRVI), which produces a drug ingredient utilized in mRNA vaccines and therapeutics, together with the Pfizer COVID-19 vaccine.
U.S. equities stay a market of particular person shares, so if buyers deal with particular successful themes, they’ll discover rewarding investments in any market setting, regardless of the funding crosscurrents. A pair extra concepts to think about given their present breadth of energy embrace non-traditional shopper finance and payments-related corporations like Upstart Holdings (UPST) and dLocal (DLO) and human capital outsourcing and staffing and firms like Paycom (PAYC), Paylocity (PCTY), and Robert Half Intl. (RHI).
Kenley Scott, Director, World Sector Strategist at William O’Neil + Firm, an affiliate of O’Neil World Advisors, made vital contributions to the info compilation, evaluation, and writing for this text.
No a part of my compensation was, is, or will likely be immediately or not directly associated to the particular suggestions or views expressed herein. O’Neil World Advisors, its associates, and/or their respective officers, administrators, or staff could have pursuits, or lengthy or brief positions, and will at any time make purchases or gross sales as a principal or agent of the securities referred to herein.