Eq: Growth (3)
Many investors may not be aware of it, but those with assets in the sector could be sorry. Alcohol stocks, and specifically bourbon shares, are in a bubble. Tech has stolen all the limelight, but whiskey stocks—one of America’s oldest industries—have had a great decade. Millennials have revived American whiskey makers, such as Brown-Forman and MGP Ingredients, the latter of which’s shares have jumped from $6 in 2014 to $98 in 2018! P/E ratios are at about 30x and the stocks have recently started to fall sharply. It looks like the bubble is bursting.
FINSUM: The performance of this sector is pretty amazing—doubled revenues in the last decade. That is outstanding for such an old industry. However, valuations seemed to have significantly outpaced realistic value.
Anyone paying attention will have noticed there has been a change in linguistics surrounding the global climate situation in recent years. What was once called “global warming” is now referred to as “climate change”. However, we think that fact has helped to obscure perhaps the best way to play the changing environment. The world has been getting warmer (whether you think it is human created or not), so what better way to invest in the transformation than in air conditioning companies. HVAC companies, such as Ingersoll-Rand and United Technologies, are also good recession hedges. The companies earn the bulk of their revenue from servicing and repairs, businesses which hold up well even in recession because nobody wants to live without air conditioning.
FINSUM: We see this as a good long-term play with nice short-term downside protection. Asymmetric risk on this idea, heavily skewed to the upside.
Top Wall Street analysts have just published updated outlooks on the best growth stocks. This piece looks at top ranked analyst recommendations. The top 5 growth stocks for this year are: cloud communications platform Twilio, athletics apparel retailer Lululemon, cloud stock MongoDB, Amazon, and healthcare stock Sarepta Therapeutics.
FINSUM: The big question in growth stocks is whether they will continue to outperform value, as they have for several years. We think the trend is your friend here.