Name: Biggest Investing Opportunities and Risks for 2020
Uploaded: 2019-11-20
Duration: 10 min 14 s
Description: According to Fortune’s annual Investor Roundtable panelists.

[ MUSIC ] Savita Subramanian tell us about your greatest opportunities and greatest risks you see for 2020? Well, I'll start with the risks and what worries me a little bit is that we've seen these Flash crashes popping up everywhere. So we saw this spike in. In the repo rate just a month ago we've seen big moves in different styles like growth outperformed value and then value outperformed growth and it was like a five standard deviation event It feels like the market is getting more fragile. And what worries me about the S & P 500 and US large cap stocks which are normally the most liquid stocks in the world. A Larger and larger percentage of these companies are owned by passive investors or by quant funds, not your traditional fundamental investor. So I worry that if there is some sort of mass Exodus out of Equities, the liquidity profile of the s & p 500 could look very different from what it has looked like in prior bear markets. So that I think is a risk that that's kind of under the radar And is worth thinking about from an opportunity perspective. My favorite sector for 2020 is US Financials. And again, it's not for the reasons that we normally think of buying financials. We don't anticipate a huge recovery in the economic cycle, we don't anticipate a credit expansion cycle, but Financials, to me, looks like the new high quality Dividend yield sector. And the reason I say this is little known fact the shareholder buyback plus dividend yield of financials is the highest of all 11 sectors. These companies are putting cash back in the hands of their investors. And this is different from what we saw ten years ago and this is very different from what we're seeing other companies do. Other companies are dialing down their cash return story. Meanwhile financials are dialing it up. Financials also happens to be the most hated sector in the equity market by both institutional long only and hedge fund investors. So I think it's really a beaten down sector that's pricing in a lot of risks around political changes. Where we don't necessarily see the likelihood of more regulation. It's a sector that just looks more high- quality than it has in a very long time. Leverage ratio are a shadow of their former selves back in 2007. So it's a sector that I think has transformed into a better hedge against the downturn than what it was ten years ago. Josh Brown greatest risks and greatest opportunities for 2020. Okay, let's start with greatest opportunity. I genuinely believe that most of the market is expecting some extreme move out of rates. They either think this whole thing is a fake out and there's going to be this bout of inflation or bond vigilantes overseas That triggers something where all of a sudden, everyone will be caught off sides and fixed income and rates have to scream higher. You hear a lot of that, you also hear a lot of rates are headed to zero it's a matter of time. Look around the world we won't be immune to those dis inflationary pressures. What if it's just more of this as far as the eye can see? That is a possibility. I have a book this thick. I haven't really read it, I pretend to read it. But it's Richard seller history of interest rates. There have been hundred year spans where there wasn't much volatility and interest rate. So I know that makes for boring television perhaps but it's entirely possible that just like this year, people with extreme opinions will lose and people that are doing asset allocation will win. And so that's my opportunity, the opportunity to be seen and not be one of these lunatics that thinks we're going to have one Cataclysm or another The biggest risk is you. You are your own biggest risk. None of the macro themes we're talking talking about. It's not security selection or you're gonna pick the wrong ETF, you are the risk, you are the risk. Last year we had a 16 % draw down, in the winter we followed up with a 20 % draw down How did you act? What did you do? Did you log in to betterment and tone the dial down? Did you call your broker to get me out? If you did, then you recognize that you are the one doing the things that Will have the bigger impact on your portfolio. It's not the Fed, it's not Trump, it's you. So the minute you get that through your head, I think you start thinking about the portfolio process differently and hopefully become a better investor over time. Thanks, Josh. Kareena Funk, what are your greatest opportunities and greatest risks for 2020? Let's see, risks is a short discussion because there are a lot of risks. Whether it's interest rates, geopolitical, trade wars, and there's a whole lot out there that we can't predict, and we can't control. Frankly, I worry about what I can control. Which is going out there, doing the research and finding great companies that can deliver compelling customer value propositions day in and day out. These companies that can outperform during a bull market that have outperformed in very choppy markets. I'll just mention some themes that we're excited about in our portfolio. Healthcare has been what, the second- worst performing sector generally in the past 12 months, but yet some companies within there, very very strong double- digits, so tools, diagnostics, companies that are helping the drug discovery and move into this trend from small molecule chemistry based drugs To large molecule and also medical devices, just devices that help people live longer save lives and improve lives. Then in tech there's the, I mean, clearly a lot of valuation and fangs has played out but there's a lot more legs in digital transformation, whether it's transforming Business as usual processes moving that to the cloud and just modernization and then also industries that have under invested in technology that are ripe for disruption disruption, whether its construction infrastructure Manufacturing, there's a lot of opportunity there. And then there's also the massive trend of data everywhere on many devices in every location. So companies that are leveraged to that build out 5G, and some of the silicon that that are really precise for those kinds of workloads, those are growth opportunities. And then finally, I'll mention this trend of resource constraints. That's not going away. You know, the fact that we have to learn to as you know, some companies that we invest in, do more with less either internally, resource optimization. It's all about decreasing your inputs, but increasing your yield, whether you do that for yourself, or you do that for your customers that's compelling day in and day out. And all of these secular trends that I just mentioned, are going to happen whether we're at a peak or a trough. Or wherever we are in terms of valuations, these are growth opportunities. Thanks, Katrina. Rob Sharps, what are your greatest opportunities and greatest risks for 2018? That all start on the opportunity side just by making the observation that it's interesting that this roundtable seems to be as positive as it is with regard to the near term outlook, right? There was a sentiment poll cited last week. That actually had the fewest number of bulls in the history of the sediment poll. So I think the opportunity for me is, PMI's are bottoming. There still is a fair bit of scepticism around the durability of the economic cycle and the ability of earnings to resume growth next year. So I think to lean away from safety and lean into cyclicality. I like industrials. In the US I think there are a number of high quality industrials name like Union Pacific or UPS. Or you can get double digit returns. If you want to take on a little more rescue, you could take on a name like United Airlines or even GE where there it's messy right now. They're stabilizing the balance sheet She. But you have a new CEO in there with a proven track record that, you know, kind of ultimately I think can build on a number of strong underlying franchises with NGE. In terms of risks mine is around the election. And I do think that there is in outcome from the election where political leadership implements some anti business policy. That raises cost that increases the regulatory burden and ultimately will lead to a negative productivity shock. I think it could be particularly acute in sectors like financial services or energy. And I think those two sectors are sectors that are really influential and really important to the economy as a whole. So that would be something that I'm gonna watch for and something that I'm concerned about Thanks Rob, Angelou Strange, tell me the biggest risk and biggest opportunities you're seeing for next year. Yeah, I think the biggest opportunity is to create companies that will serve 50 % of the US and the more than 2 billion people worldwide that are underbanked, or unbanked entirely. And here's why. It used to be, and right now it's very difficult to start a financial services company, it used to be difficult to start an internet company. And along came Amazon Web Services and they offered storage, compute all of these things as a service and so went from being millions of dollars and long time to anybody can start a company with their laptop and a credit card. Now in financial services, I often state that the Amazon Web Services era is coming to financial services. And what that means is it's not just one company, but there are several different infrastructure companies that will do things like partner with banks and package up the licensing process and some regulatory and all the different payment type networks that you need such that instead of spending two years and millions of dollars and forming tons of partnerships, you can get all of that as a service and get going. So, what does that do? It makes it faster and cheaper to start a company and what it'll do is similar to the Internet. It will unleash all of these experiments. Some of which will become large large companies of the future. We're also seeing that's enabling people from entirely different social economic demographics, probably who understand these problems from a much deeper product perspective to start companies. There's already great founders in that space and there's gonna be many many more. [ BLANK_AUDIO ]

Biggest Investing Opportunities and Risks for 2020

Finance

According to Fortune’s annual Investor Roundtable panelists.