Mitch Rubin, co-chief investment officer at RiverPark Capital and head of both its long / short opportunities and large growth funds, lamented the obsession with thinking about how isolated economic variables will affect markets. “Economists, experts and market strategists always note that they merely highlight situations where – all other things being equal – one action, such as higher prices, can have a significant negative impact on specific investments, such as higher multiple stocks and / or longer duration assets,” he said in the investment letter for the third quarter. “Maybe so, but we would observe that everything else is literally NEVER equal.”
To prove his point, he looked back at the list of 21 largest companies by market value in the S&P 500, Russell 1000 growth and Russell 1000 value indices at the end of 2007. From there, he points out, these companies experienced a lot. “Over the next nearly 14 years through today, we had the great financial crisis, both democratic and republican control over the White House and Congress, several geopolitical ‘crises’ and then the COVID pandemic,” he said.
But what really mattered by predicting returns is at what rate and in what direction the company’s earnings strengthened.
Two of the three best-performing stocks were also the most expensive stocks back in 2007, he noted. “High PE + strong earnings can still result in the best stock performance in the class – even if the many contracts significantly,” he said. Another interesting point was that JPMorgan Chase JPM,
did well despite the fact that the industry it operated was crushed. “Management and specific business characteristics still matter as much, if not more, to stock performance – but they are not easily quantifiable in any visible statistic that you can screen for,” he said.
Occasionally, the market offers several years at deeply discounted values - he quoted Apple AAPL,
and Blackstone Group BX,
as examples. But he said the company has had just as much success buying stocks that are considered expensive as long as they grew their earnings at high prices for a long period of time. In a footnote, he also noted companies, including Costco COST,
Home Depot HD,
and Chipotle CMG,
which the company owned but sold prematurely as it felt they were becoming expensive.
Economists expect a strong wage report for October, with The Wall Street Journal-compiled consensus expecting a 450,000 increase in wage lists outside agriculture, and the unemployment rate falling to 4.7%.
Shares rose after the pharmaceutical giant said a study found that its oral antiviral drug reduced coronavirus hospitalizations and deaths by 89%. Merck & Co. MRK,
which has just had its oral antiviral drug approved in the UK, fell by 8% as a study of its product reduces hospitalizations and deaths by 50%. Emergent Biosciences EBS,
overturned after the federal government canceled a contract, after the production of millions of polluted Johnson & Johnson JNJ,
The White House is asking Democratic senators to meet with Fed Chairman Jerome Powell, leading some to believe that President Joe Biden will nominate him, according to Axios. Late. Sherrod Brown said the White House could issue four nominations to the Fed, including for the vice president of the banking supervisor role.
Peloton Interactive PTON,
slipped 30% after the exercise bike maker predicted far weaker holiday sales than analysts had expected. Inventories rose 35% sequentially to $ 1.27 billion. RiverParks Rubin said the Peloton was the top short in its long / short fund. He said the fund “can cover some”, but there is a downside below $ 50 per share. shares.
and Expedia EXPE,
each benefited from an increase in travel, showed their recent results.
A RiverPark investment that has had a rocky week is Zillow Z,
“We are excited that they are leaving the home buying industry, and given the correction, they are buying more,” Rubin said in an email.
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After a particularly strong day for technology stocks and the 15th gain in 17 attempts for the S&P 500 SPX,
US stock futures ES00,
The return on the 10-year treasury TMUBMUSD10Y,
was 1.52 pct. GBPUSUSD,
traded lower for another day following the Bank of England’s surprise decision to keep interest rates unchanged.
New York City’s elected mayor says he will take his first three payslips in bitcoin BTCUSD,
– in what will be a challenge for the city’s wage system.
The Swedish pop supergroup ABBA has released its first album after 40 years.
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