The period of investing in growth stocks in the US during this period is considered a stock with a good growth rate. because it has a strong statement of financial position and performance Sales and profits can continue to grow. There is also support from the government. This makes investors interested in this type of stock still have a high chance.
Mr. Kesri Ayuttaka, CFP® – Assistant Managing Director, Chief Investment Office, SCB Securities Company Limited, and Mr. Chaturapat Tanabutr – Manager, Chief Investment Office, SCB Securities Company Limited, have analyzed this stock quite interestingly.
In the second half of this year, SCBS CIO remains optimistic about investing in US growth stocks, which are growing stocks. has a strong statement of financial position and performance Sales and earnings can continue to grow, including stocks in the Information Technology and Consumer Discretionary categories. In particular, large technology and platform stocks such as the FAAMG Group (Facebook, Amazon, Apple, Microsoft, Google (Alphabet)) whose performance confirms their strong position. Including products and services still occupy a high market share.
It also includes group stocks. US semiconductors benefiting from digital transformation accelerating from the Covid-19 crisis This creates massive chip demand and leads to continued chip shortages through 2022, and is also benefiting from the CHIPS for America act that provides funding to both manufacturers and related researchers. Including tax credit back to the company as well.
SCBS CIO is of the view that the performance of US listed companies The overall outlook is still good. Consensus expects 2Q2021 sales to grow 22%YoY and EPS to grow 61%YoY. The segments where Consensus expects EPS to stand out are Cyclical industrials, Consumer Discretionary, Materials in FAAMG. There is a tendency for the budget in 2Q2021 to turn out well as Consensus expects average EPS growth of 52%YoY.
Factors that will support the rise of US growth stocks
firstly Peak Growth Composite PMI (Combined Manufacturing and Services) US has hit a high in 2Q2021 and will likely start to stabilize to a decline going forward. which is considered one of the signs indicating that US economy has passed its peak expansion period. And it is likely to grow at a slower rate during 2H2021. Historical statistics indicate that growth stocks will increase well. When the economy began to expand at a slower rate. Especially during the time that the US manufacturing index is still above 50, but gradually declines like the present. The US Growth stocks, which have high profitability. and have a strong balance sheet Often generate more outstanding returns than other groups
secondly Peak Inflation tends to accelerate temporarily Due to the reopening of the economy in the past including the problem of labor shortage supply chain issues However, US inflation in 2H2021 tends to slow down. As a result of the previous year’s low base began to disappear. And commodity prices have already peaked, in line with the statement from the Fed chairman that the recent acceleration in inflation is due to temporary factors and will begin to soften in the coming periods. the future US inflation will return to move between 1-3% from the current level above 3%, which will result in the group US Value/Cyclical, which includes Financials, Energy, Industrials, Materials, is becoming less attractive compared to Growth stocks.
Third Flattening Yield Curve The Fed is likely to signal a gradual shift in monetary policy. And as a result, the yield on the US 10-year bond is likely to increase less than the 2-year bond yield, and consequently, the yield curve of the US bond decreases (Bear). Flattening) in this period, until before the meeting at Jackson hole Aug. 26-28 very quickly. Or at least before the Sept. 22 Fed meeting, where long-term bond yields remained at this low level. This contributes to the attractiveness of US Growth stocks because Growth stocks have long duration stocks.
The risk of tax hikes (Tax Hike) and scrutiny of large technology companies and antitrust platforms are also issues to watch for. The heights that President Biden had suggested began to decline. Because the money of the spending plan stimulates investment in infrastructure. (Infrastructure Bill) is likely to come out lower than what President Biden proposed.
There is a possibility that the maximum tax rate charged will be lower. by raising the corporate tax rate on domestic income from 21% to a maximum of 25% (previously targeted at 28%) and an increase in the GILTI tax on foreign income (GILTI tax) from 10.5% to the maximum. Not more than 15% (previously targeted at 21%), which will reduce the risk that earnings (Earnings) US stock markets will be revised down
especially pressure on technology groups And will help support the cash flow of US companies. And as a result, the company has the ability to announce dividend payments. and buy back more shares For the issue of market monopoly examination of the Big Tech group, the US will see that in terms of Valuation or EV/Sales of the Big Tech group (Facebook, Amazon, Apple, Google)
At present, it is still trading at a rather high average of 5.4 times, reflecting that market investors have not given much weight to the antitrust risk that will affect the valuation as well as the sales growth trend of the group that also did not respond to the risks As can be seen from the beginning of the year, consensus’ sales growth forecast for 2022 has been revised up by 17%.
While the average sales growth is expected from 2019 to 2023, the group will expand by 19% per year. US Government Antitrust Litigation Issues to technology companies with monopoly behavior For example, in the case of AT&T and Microsoft at US courts, it took eight and a few years, respectively, so investors did not weigh the matter on the matter. This year, the overall risk is quite limited.
In summary, SCBS CIO still has a positive view on US growth stocks as it receives support from both economic growth and US inflation. has passed its peak growth period in 2Q2021 (Peak Growth & Peak Inflation) and the US Yield Curve with flattening trend, as well as the performance of growth stocks that still have strong growth prospects while the risk that earnings will be revised down from the US tax hike plan tends to decrease Although the risk of Antitrust may increase. It can create volatility for US growth stocks, especially Big Tech, in the short term.
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