Growth stocks are rarely inexpensive, and that’s certainly and frequently true of their disruptive, innovative growth counterparts. That’s simply the price of admission into these market segments.
However, the drubbing incurred by growth equities of all stripes in the first half of 2022 is now providing investors with some unusually attractive entry points. With so many of these stocks now on sale, prudent investors may want to eschew stock-picking and instead embrace exchange traded funds, such as the Goldman Sachs Future Tech Leaders Equity ETF (GTEK).
While GTEK member firms, broadly speaking, aren’t setting markets ablaze this year, it’s not all doom and gloom for disruptive growth fare.
“The equity market has pulled back in recent months, driven by fears around inflation, rising rates, and geopolitical uncertainty. In our view, this has created an attractive entry point for long-term investors in innovation equities. Moreover, the current environment may actually provide additional tailwinds to companies that have strong pricing power, offer innovative solutions and are on the right side of long-term secular growth trends, such as technological innovation, environmental sustainability, future health care, and the new-age consumer,” noted Goldman Sachs Asset Management (GSAM).
As a broad-based play on innovative growth stocks, GTEK provides exposure to those themes, and as an actively managed fund, it can swiftly respond to provide access to emerging themes or boost exposure to current allocations with compelling growth trajectories.
As for why GTEK could make for an interesting near-term addition to risk-tolerant investors’ portfolios, the simple fact is that the Goldman Sachs ETF has momentum. There are inklings of rebounds among consumer discretionary and technology names — those sectors combine for 82.6% of the ETF’s roster — and GTEK gained almost 8% in July.
Although rising interest rates are punitive for growth stocks, persistently high inflation could provide ballast for GTEK’s rebound into year-end.
“When inflation is high, businesses will seek to increase revenues and reduce expenses in order to offset rising input costs. As a result, companies that 1) have pricing power, enabling them to pass on higher input costs to consumers via higher prices, and 2) offer innovative solutions that help other businesses improve productivity and reduce costs, will be prized assets. With higher inflation, we expect to see rising demand for many of the innovative solutions in which we invest, including automation software solutions resulting in increased labor productivity and lower overall costs; and tech enabled healthcare that lowers costs and improves outcomes for patients,” concluded GSAM.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.