Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.
The recently announced intended merger of two key financial technology (fintech) players will be the second-largest deal ever in the global payments sector. Here’s my latest perspective on the broader implications of this major acquisition and the related investment opportunity in the fast-growing “buy now, pay later (BNPL)” space, which I believe has now reached an inflection point in its young storyline.
Given the size of the total addressable market (TAM) for global payments, I’d say fintech companies have been little more than a thorn in the sides of the old guard thus far, but I think that’s poised to change. Indeed, I believe the recent blockbuster transaction noted above may have…
On 23 July 2021, Chinese regulators announced sweeping changes to China’s after-school tutoring (AST) industry, forcing AST companies to transform into nonprofit entities, banning foreign capital flows into the industry, and barring public stock listings for these firms. Following the announcement, the market capitalizations of China’s largest AST players plummeted to around 10% of their trailing 12-month highs.
But take a step back for a moment: Government regulation of Chinese industries is not new by any means. The AST policy move is consistent with the goals of China’s past regulatory actions and had even been foreshadowed through various channels during the first half of 2021.
Here’s a distillation of our China and emerging market (EM) equity specialists’ latest views on this turn of events — including why investors shouldn’t…
Over the past few years, easy monetary policy worldwide hasn’t been enough to fully revive global economic growth. It has, however, helped to catalyze a strong equity rally, concentrated in a fairly small number of stocks — many of them technology and e-commerce businesses — that have been able to consistently “outgrow” the sluggish global economy. This rally has been aided by the advent of growth-focused ETFs, index funds, and smart beta products, along with (more recently) the US day-trading phenomenon that has accelerated amid COVID-19.
But we think the world is starting to change. Driven by unprecedented levels of monetary and fiscal stimulus in response to COVID-19, the economic growth outlook is improving. Commodity and interest-rate markets are grappling with…
Citing consumer welfare and competition concerns, a rising chorus of voices is calling for more government regulation of the most dominant players in the US technology sector. As recently as late 2019, the co-founder of one household tech name even opined that government should step in and regulate the tech giants. The sector’s perceived impact on the upcoming national elections has helped fuel what some observers describe as growing “anti-big-tech” fervor.
So, what might come of it? It depends who you ask, but in my view, probably not a lot. I think federal privacy legislation will be on the roadmap if an agreement can be reached, but changes to antitrust law and/or content regulation seem…
The COVID-19 pandemic has represented a near-perfect storm for the world’s leading technology companies. Both earnings growth and valuation multiples have risen to extraordinary levels. Naturally, this raises questions about the sustainability of the current dynamics and the prospective risks and opportunities for investors.
The technology sector’s strongest companies were already executing at a high level coming into 2020 — growing fast, expanding margins, and reinvesting in their value propositions. The COVID-19 pandemic has accentuated these characteristics by accelerating the need for consumers and enterprises to digitize. In addition to the COVID-19 tailwind, I think these firms deserve significant credit for their agility and decisiveness — as both attributes have allowed them to pivot quickly to capture these growth opportunities. Furthermore, I believe these companies’ unprecedented…
Calls for the impending collapse of growth equities, particularly tech stocks, are getting louder as the market marches higher and the share of the biggest tech players grows larger. Recent investor concerns have focused on frenzied retail trading, high trading volume generally, and the dramatic rise in valuations since late March.
I agree that valuations among the tech leaders are at expensive levels relative to their history. I also concede that the growth segment of the market has taken on some speculative characteristics of late. However, what to do about it is another matter entirely. Go into cash at 0%? Rotate into bonds yielding 60 basis points? Move into more defensive equity sectors? Shift from growth- to value-style investing?
My answer is to not wholesale exit the market, but rather to reassess…
In many ways, the COVID-19 crisis has fundamentally altered the way we live and work (and continues to do so). From an investment standpoint, that has been a big catalyst for long-term value creation across certain sectors. The technology sector is a notable case in point.
To illustrate, consider how my own life has changed over the past several months:
All of this is enabled by technology. None of it is new per se, but what has changed on the back of COVID-19 is the speed and alacrity with which…
Innovation may be an overused term these days, but in the world of investing, we believe it is critical to unlocking opportunity and long-term outperformance potential. So how should investors frame their thinking around innovation – and (more to the point) how can they seek to capitalize on it?
Truly innovative companies tend to control their own destiny by carving out a new industry or meaningfully altering the playing field in an existing industry, potentially allowing them to grow revenues and profits far longer than expected through varied economic environments. Innovation can often be found in novel processes, game-changing technologies, new products/services, or business model changes that allow a company to…
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