Much ado about inflation

Commentary10 days ago
We believe the markets are in a period of transition, from a world of pandemic-driven emergency settings to something resembling a new normal.
The contours of this post-”peak COVID” world are still emerging, but one prominent feature of the transition is clear: higher inflation and rising interest rates.
In October, prices for consumers rose 6.2% from the year prior, the fastest pace since 1990. Consumers are, understandably, less than thrilled with this development.
According to the University of Michigan’s widely-followed survey, consumer sentiment is at its lowest level in a decade amid rising prices for homes, vehicles, and other durable goods like furniture and appliances. A recent Harris Poll of U.S. consumers revealed that a staggering 90% of respondents were either “somewhat concerned” or “very concerned” about inflation.
To state the obvious: what we don’t know is the ultimate magnitude of these price increases and how long they’ll stick around. But we believe we can confidently prepare for a more volatile period for financial markets amid this transition.
As discussed in last week’s Quick Thought, diversifying Titan clients’ exposure across sectors of the economy is one key way we believe we may mitigate some of the risks that emerge in today’s transitional moment.
Our recent purchases of Thermo Fisher (TMO) and Avantor (AVTR) for clients in Titan’s Flagship and Opportunities portfolios are, respectively, examples of what we believe to be high-quality businesses operating in the healthcare space, an area to which our portfolios previously had no exposure.
Healthcare is a sector we believe may be positioned to benefit in a higher-cost environment, as spending in this sector is less discretionary than other components of household or corporate budgets. As a result, these companies may be able to raise prices to cover their costs and protect profit margins.
According to data from Goldman Sachs, healthcare has historically been one of the best performing sectors in the market during periods of high inflation.
As we wrote to clients back in September, at Titan we aim to be macro-aware, not macro-driven. Historical data on similar market environments may help inform and reinforce our conviction in owning a given company against a given macro backdrop. But as investors, we don’t view inflation as a black-and-white backdrop that tells us we must buy this or sell that company.
For instance, higher inflation and higher interest rates may result in high-growth tech companies temporarily falling out of favor with investors. But as long-term investors, that doesn’t mean we don’t still see opportunities in some of these businesses.
For example, we recently increased our position in CarGurus (CARG), a company at the center of digitizing the auto market, for Titan clients in our Opportunities strategy. Late last month we also increased our holdings in Twilio (TWLO), a leader in cloud communications, for Titan clients in our Flagship strategy. We believe that in every period of transition, there may be opportunities.
As consumers, we understand today’s frustrations with inflation: whether you’re worth $1 or $1 billion, a bigger bill at the grocery store or the gas pump is never a welcomed sight. As investors, we believe the question to answer is not whether higher prices are good or bad, but whether this inflation backdrop warrants a change in our current holdings.
And as is often the case, the answer can be both yes and no, and as active, long-term, research-driven investors, we’ll keep tabs on your portfolio through this transition so that you don’t have to.

Become a Titan investor today.

Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
© Copyright 2021 Titan Global Capital Management USA, Inc. All Rights Reserved.