Category Archives: News

2019 Recap and What Now?

30%+ years in the stock market are rare indeed. They come along about once every 10 years. In 2019, receding trade tensions; diminished risk of a hard Brexit; interest rate cuts and liquidity injections by most major central banks; and improved sentiment about the state of the global economy all helped push stocks significantly higher. But the risk has heightened at this point simply by virtue of prices being 30% higher in one year. Moreover, a few clouds have begun to form on the horizon for investors to be aware. In this quarter’s commentary we explore some of the issues at hand for investors.
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The ‘Gig Economy’ and Investor Irrationality

There are two risks that long-term investors in individual stocks need to concern themselves with: 1) bankruptcy and 2) overvaluation. Earlier in the year, we opined that the Uber IPO would mark the top of the tech bubble. We were wrong. It is likely that WeWork’s attempted IPO last month will mark the top. In our 3rd quarter letter, we examine some of the underlying factors that have contributed to the silliness seen in today’s tech bubble (which will seem obvious in future hindsight), the real economics of some of the more popular unicorn companies, ‘growth' vs. ‘value’ investments, why growth stocks have outperformed, and why that’s likely to be over.
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Growth Stocks are Risky

Today's massive losses in ULTA, a well-known high-flying stock, serves as a cautionary tale as to what happens when stocks with overinflated expectations face economic reality. As the chart above shows, growth stocks in general, such as those that now dominate the S&P 500, are as expensive as they were in the year 2000. Therefore…
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The Backdrop for Stocks is Good, But the Bear Case Is Strong

In Highgate's 2nd quarter letter, we outline the case for a continued cautious approach to investment markets. Leadership in the market is narrowing, domestic stocks (as indicated by the Russell 2000) are down significantly from their highs and economic growth has been entirely underwritten by an increase in government spending. More importantly, signs of excessive speculation are everywhere. I hope you enjoy it and look forward to hearing from you!
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