The Big Shift
Every secular growth cycle has a beginning, a rise, and an eventual decline, as the baton is passed off to the next set of secular growth leaders. Over the past decade, secular market leadership has been dominated by leading internet and software companies, while oil and gas, copper, and iron ore companies have been afterthoughts across the American investment landscape. For the first time in over a decade, there is mounting evidence that market leadership may be reverting away from technology and back toward the commodity landscape.
An accelerating economy combined with a dearth of investment in the commodity space over the past 10 years means that your traditional supply response to rising demand is noticeably absent. As a result, for companies with permits in place and wells that are already producing, the commodity price environment may lead to rising sales, expanding margins, and accelerating free cash flow. In this week’s market update, we discuss the big shifts we are making in the portfolio to reflect this emerging dynamic.
Key Takeaways
- Falling COVID case counts are leading to a rapidly recovering U.S. economy
- Rising demand, stale supply, OPEC discipline, and a lack of investment interest are an attractive backdrop for energy stocks
- The Nasdaq and other growth stocks are exhibiting generational top-patterns while the reverse appears to be the case for energy and materials
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