There are years where an investor can shift between sectors and strategies, constantly rotating between what is in favor and out of far. Then there are years, such as 2019 to this point, where investors are best served to stick to what has been working.
What has been working in 2019 so far?
- SaaS
- Homebuilders
- Publicly listed private equity names
- Select media companies, including social media
All of which has been buoyed by perpetually lower interest rates, allowing for all of the above listed businesses to function more efficiently.
There are businesses during every single economic cycle involving all variations of interest rates that thrive off of different points in the rate cycle. The above listed names happen to do very well at this point in the rate cycle. Of course, it's not just rates that make these sectors attractive, their businesses are levered to trends within the macro-economy that push their business models along the path of least resistance.
2019 may be defined as a year when what has been working will continue to work. This means that being fancy and smart will likely get you in trouble. Simple trend following strategies that buy into the general consensus have worked and will continue working.
While there will be chop, such as what we have experienced recently in the markets, that chop should be approached opportunistically, not to get involved with out of favor sectors that haven't done much in 2019, but rather to allocate into what simply has been working.
That's what Zenolytics has been doing with recent recommendations to get into Disney last week to subscribers, an underappreciated SaaS play that can be dominant in the years ahead and shares of SNAP last month with a price target in the 20s, as the company is just beginning to click.
There will be a time for fancy. Right now isn't it.
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