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November 19, 2018
THE 2019 INVESTOR’S GUIDE

Good morning, Term Sheet readers.

Fortune's annual investor's guide is out this morning, and it's packed with deep analysis and must-read reporting you want to get your hands on.

 
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Perhaps, the most interesting and relevant topic to the Term Sheet audience is Fortune's 2019 Investor Roundtable. We convened a panel of investors to address the question on everyone's mind: "Which companies will be able to deliver standout returns as the market's mood gets more downbeat?"

This year's panel included Lori Keith, portfolio manager at Parnassus Investments, which specializes in socially responsible investing and has $28 billion under management; John Linehan, chief investment officer for equity at T. Rowe Price, which has $1.1 trillion under management; Catherine Wood, CEO of ARK Invest, a firm whose investments focus on "disruptive innovation"; Kate Warne, investment strategist for $1 trillion financial services firm Edward Jones; and Ed Sim, founder of Boldstart Ventures, an early-stage venture capital firm specializing in tech infrastructure and software development.

The wide-ranging conversation covers everything from valuations to the IPO market to Elon Musk. If you read one thing today, this is it.

Below is an excerpt from the Q&A. Read it in full here.

FORTUNE: You mentioned speculative excess. Open question for the table: Are you seeing valuations you associate with prices going too far?

ED SIM: From a venture capital perspective, I've been in the business since 1996, and I'm seeing some excessive pricing. The amount of capital being invested in the market in the late stages is absolutely incredible. [Financing rounds of] greater than $100 million accounted for at least half of the $28 billion of U.S. domestic venture capital investment for Q3. So when I'm seeing pricing around 15 to 20 times 2019 revenue numbers, I start getting worried a bit. That, in my mind, is a sign of excess in the markets. And I fear what may happen, let's say, in 2020.

FORTUNE: Is the IPO market also overpriced?

CATHERINE WOOD: In the public markets there's been a move toward passive strategies. And at the same time, there's been a search for innovation in the private space, the pre-IPO world. You have this crowding into the private world. So we think the most undervalued part of any equity market is innovation in the public equity market. We do see many IPOs that fall flat because they've just had one or two too many "up" rounds in the private space. But we see incredible bargains in the public space.

Many people will make fun of me when I say this, but you have Tesla, for example, which we think, long run, is primarily a mobility-as-a-service play. Right now, it's selling for two times trailing revenues, so it's valued at $45 billion vs. $20 billion in sales. Had Tesla remained private, it would have a much higher valuation.

FORTUNE: John, which companies are adapting best to the onslaught of technological disruption?

JOHN LINEHAN: In large-cap value land, it's very difficult to find companies that are disrupters, and we have plenty that are disruptees. But oftentimes, the market is unwilling to give these companies the benefit of the doubt or truly understand the business model. UPS is a company that's faced a lot of dislocation around transitioning from a ­business-to-business to a business-to-­consumer strategy. But I think we can all agree that the demand for delivery of packages is only going to increase. With UPS, the issue isn't so much a volume issue, it's a pricing issue. And we think that's correctable.

If we move into electrified vehicles, it is going to transfer demand for hydrocarbons from oil or crude oil to natural gas. And moving those hydrocarbons is going to become a critical element of the energy storage and battery part of this story. TransCanada, a midstream pipeline company that is one of the leaders in transporting natural gas, is trading at 10-year lows on many valuation metrics. The market's worried about the money it has borrowed. But there is a unique opportunity to continue to grow.

Read the full Q&A here.

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THE LATEST FROM FORTUNE...

The 30 best stocks for 2019—for a bull or a bear market (by Jen Wieczner)

The 5 best tech stocks to buy for 2019 (by Jen Wieczner)

The best bond funds to buy for 2019 as interest rates rise (by Lucinda Shen)

The best retail stocks for 2019? Amazon, and these 5 companies with Amazon-proof businesses (by Jen Wieczner)

...AND ELSEWHERE:

Beyond Meat files for IPO. General Catalyst is considering launching a credit fund. Facebook is "at war." Apple CEO Tim Cook calls new regulations "inevitable." James Brett is leaving J. Crew after 16 months as CEO.

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VENTURE DEALS

Acorns, an Irvine, Calif.-based developer of a mobile app that automatically rounds up spare change from debit or credit card transactions to make micro investments, is in talks to raise more than $100 million at a valuation north of $700 million, according to Bloomberg. Investors were not named. Read more.

Hippo, a Mountain View insurance startup, raised $70 million in Series C funding. Felicis Ventures led the round, and was joined by investors including Lennar Corporation.

VOI Technology, a Sweden-based smart mobility startup, raised $50 million in Series A funding. Balderton Capital led the round, and was joined by investors including Vostok New Ventures, LocalGlobe and Raine Ventures.

MapAnything, a Charlotte, N.C.-based provider of location-of-things solutions, raised $42.5 million in Series C funding. Investors include GM Ventures, Andrew Leto, Salesforce Ventures, Greycroft, Harbert Growth Partners and David Stern.

AEye, a lidar technology developer, raised $40 million in Series B funding. Taiwania Capital led the round, and was joined by investors including Kleiner Perkins, Intel Capital, Airbus Ventures, and Tychee Partners.

Wonolo, a San Francisco-based on-demand staffing platform enabling businesses to fill their immediate labor needs, raised $32 million in Series C funding. Bain Capital Ventures led the round, and was joined by investors including DAG Ventures, Sequoia Capital, Base10, AMN Healthcare, and Cendana.

Plastiq, a San Francisco-based online payment service, raised $27 million in Series C funding. Kleiner Perkins led the round, and was joined by investors including DST Global.

Twiga Foods, a Kenya-based start-up connecting smallholder farmers in rural areas to informal retail vendors in cities, raised $10 million in funding. IFC and TLcom led the round, and was joined by investors including Wamda Capital, DOB Equity, 1776 and Adolph H.Lundin.

Visor, a San Francisco-based provider of an online tech-enabled tax advisory service, raised $9 million in Series A funding. Defy led the round, and was joined by investors including Unusual Ventures and SVB Capital.

BOU, a provider of cooking products, raised $4 million in Series B funding. Investors include FounderMade and Nebari Ventures.

Zippity, a Cambridge, Mass.-based workplace amenity for full-service car maintenance, raised $2.6 million in funding. Investors include A3Ventures, BP Ventures and LaunchPad Ventures.

Zdaly, a Texas-based big data and AI startup, raised funding of an undisclosed amount. Investors include S3 Ventures and Moneta Ventures.

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HEALTH AND LIFE SCIENCES DEALS

Alphamab Oncology, a China-based biopharmaceutical company focused on treating cancer, raised more than $100 million in Series A funding. Investors include Advantech Capital, PAG,OrbiMed, Heritage Provider Network and Janchor Partners.

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PRIVATE EQUITY DEALS

ACProducts Inc, a portfolio company of American Industrial Partners, agreed to acquire Elkay Wood Products Company, an Oak Brook, Ill.-based maker of kitchen and bath cabinetry. Financial terms weren't disclosed.

KPS Global, which is backed by D Cubed Group LLC, acquired Custom Cooler, a San Dimas, Calif.-based maker of custom walk-in coolers, walk-in freezers and industrial cold storage applications. Financial terms weren't disclosed.

Gemspring Capital acquired the assets of Bobit Business Media Inc, a Torrance, Calif.-based B2B media company. Financial terms weren't disclosed.

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OTHER DEALS

Cimarex (NYSE: XEC) and Resolute Energy Corporation (NYSE: REN) agreed to acquire Resolute Energy Corporation (NYSE: REN) in a cash and stock transaction valued at $35.00 per share, or a total purchase price of approximately $1.6 billion.

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EXITS

Waybill acquired Small Tube Products, a Duncansville, Penn.-based redrawer of niche, small diameter copper and aluminum tubes. The seller was Quilvest Private Equity. Financial terms weren't disclosed.

Balmoral Funds LLC acquired an ownership stake in VESTA Modular, a provider of modular buildings. The sellers were Soaring Pine Capital LLC and Wells Fargo Central Pacific Holdings. Financial terms weren't disclosed.

Citrix acquired Sapho, a San Bruno, California-based micro app platform, Financial terms weren't disclosed. Sapho had raised approximately $28 million in venture funding from investors including Caffeinated Capital and Alsop Louie Partners.

KKR agreed to acquire GeoStabilization International, a Grand Junction, Colo.-based provider of geotechnical maintenance services for critical infrastructure, from CAI Capital Partners. Financial terms weren't disclosed.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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