Friday, Aug 21st 2020

A stock picker's market

Commentary

Has the market gotten lazy about distinguishing winners from losers?

The market is experiencing an odd polarity right now. Anything related to software is being deemed a secular winner, while anything non-tech (think: retail stores) is being left by the wayside.

Is this a "stock picker's market?" How will it impact Titan specifically?

A stock picker's market is a concept thrown around in investing circles. It refers to an environment in which the correlation amongst S&P 500 stocks is low - things aren’t just moving up and down unilaterally together, but rather all over the place. Tech seems to be moving like a herd, but many other industries are going in the opposite direction.

Let's dive in a bit.

Today, the buzz around many parts of the tech world seems ubiquitous. Software-as-a-service (SaaS) and electric vehicles (EVs) are two industries in which virtually every company has been declared a winner of late. "Software is eating the world," the saying goes. “EVs will only become more prevalent.”

We think many investors are painting companies in these tech-heavy industries with too identical a brushstroke. Yes, they're probably right about the directional trends, but not every EV company will become the next Tesla. Not every SaaS company will become the next Salesforce.

Does this mean we're bearish on tech stocks? Absolutely not. But we're picky.

The great thing about a market with distinct herd mentalities is that mispricings occur. We're finding many companies trading for increasingly attractive valuations simply because they don't have "cloud" or "electric" in their company description.

In this stock picker’s market, those who can sift through the rocks and find the diamonds in the rough stand to win big.

Back to Research ↗

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