I have discussed previously that somewhat “growth is a religion,” nowadays.
You may ask: Why did you suddenly get so philosophical, Boris?
Well — it is the life aspect that I mean to point out. It exists in almost all of our surroundings. We all HAVE to grow, no matter what it takes.
From our households to businesses, to ‘stay still’ or not doing anything is frowned upon (or even worse, it is a sin to not grow, or at least “do something with your life” all our parents use to say). To some extent, it is better for you to do something and make mistakes other than not doing anything. Jim, Sucor's Tech Analyst has the Chinese sayings to this, 不怕慢，只怕站 — better to make a progress (even if its a slow one) than no progress at all.
On even larger scale, growth obsession is tied up with political ambition. Try running for office that’s anti-economic growth, or even apathetic vis-a-vis the size of proverbial pie, chances are public will downvote on you and you will be left on bottom bracket of worst political candidate.
But it is what it is. Societal norm has put growth as our religion.
That is also true, for investing.
With the arrival of tech giants in the past couple of years, Growth (with capital g) is something more than an investment style — it is, thematic preference. These companies quite literally account for all things in our life, which in effect, lead to market cap concentration that stays on extreme level.
Expressing Value over Growth may be a stylistic choice, although it has not worked out very well over past couple of years. It is defendable (although some young analyst might say “Value Investing? It’s so Graham 1894!”). But it is also true that underweight or exhibiting an aversion to Growth (say FAAMG) is tantamount to being hostile to growth.
That brings us to the point on how our macro theme will be somewhat maddening for all individuals who believe that growth is religion. Your most important aspect of life might be gone in the next couple of years!
In the US, for instance, I often follow BofA’s Michael Hartnett who consistently argues that “peak profits, [and] peak growth” are key concepts into the back half of 2021.
We have had fiscal tailwind, monetary boost, and 2020 base effects all manifested into post-COVID, post-Lockdown environment. For DM countries such as US, growth will be somewhere in the neighborhood of 6.5% in 2021. That's it.
But, what’s next from there? All religious people may ponder that growth might be peaking soon. All positive things about growth there are have been said. There might be nothing left on the table.
We think there are key points that is very likely for macro:
Downshifting in economic growth is expected
Fiscal headwind as government will unwind (out of political reasons, of course)
… and if so, US economic growth may slow to a (classic) 1.5% annual rate, then so goes the whole world. (Yes, I have thought how China also tighten up following latest Xi’s response to lending market)
Like Mark Zandi who keep saying that fiscal headwind “is like you’re in a car and fiscal and monetary policy are flat on the accelerator.”
“You take your foot off the accelerator — even if you don’t put it on the brake — it feels different,” he said. “All of sudden you start to slow quite significantly.”
Which, brings us back full circle. Despite the the title attach to them (FAAMG) as Growth Stocks, these stocks work best during non-growth, deflationary economic environment. (Sometimes I’m being derisive and sneering at myself too, maybe we have to start calling them as Utility/ Defensive?).
You may read between the lines here. During the flat economic growth that US keeps scoring, Growth stocks have been prevalent on almost every corner of stock market:
Ironic, isn’t?
Luckily for Indonesia, we will start our new era of tech investing. I’d bet, all investors will still label BUKA and GOTO as Growth Stocks nonetheless, despite they are synonymous with today's utilities.
Ultimately, it might not matter what you call them — also what is your preference on investment style (some might call themselves value investors, growth investors, momentum, or mix between all those) I rest my case on Jimmy’s note below on BUKA and genuinely think there are money to be made once it gets listed.
You may read more on his piece here.
Cheers!
Boris, the Stock Broker 🐾
Sucor Sekuritas
