The programmatic ad sector, 3D additive printing and micro/small cap biotech continue to get whupped in 2021. It’s pretty unreal, but note that these areas are the future (which is what investing is all about: future revenue and earnings). It’s nice to see Apple (APPL) nearing $3T and Microsoft (MSFT) at $2.5T but these high flyers (and other S&P 500 darlings) will one day return closer to earth. Then value investors will rotate out of broad mutual funds and into more selective early growth companies. Of course everyone is throwing money into passively managed index funds these days:
“Some $11 trillion is now invested in index funds, up from $2 trillion a decade ago. And as of 2019, more money is invested in passive funds than in active funds in the United States.” –Could Index Funds be ‘Worse Than Marxism’?, Annie Lowrey, Atlantic Monthly, April 5, 2021
https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/
Greater market-caps beget greater market-caps when index funds continue to buy holdings that go up in value, creating a virtuous cycle. The S&P 500 is up 22% YTD and averaging over 20% annually over the last five years. These are eye popping numbers of good stock price growth, and certainly welcome news for index fund holders. The question is… are we in a similar situation to the housing market bubble before 2008 where people just assumed that “home values will continue to go up no matter what?” Will the mantra of buying index funds hold up over time or will there be a steep correction like we had during the dot-com bubble of 2000? Who knows, but in the meantime there are crazy value plays for those active investors who see some ignored gems out there:
Puma Biotech (PBYI) $118M (-71.88% YTD)
Viant Tech (DSP) $513M (-82% YTD)
Proto Labs (PRLB) $1.4B (-67% YTD)
PubMatic (PUBM) $1.8B (+24% YTD)
Magnite (MGNI) $2.3B (-43% YTD)
fuboTV (FUBO) $2.4B (-41% YTD)
Digital Turbine (APPS) $4.8B (-12% YTD)
DoubleVerify (DV) $4.8B (-15% YTD)
“Business, more than any other occupation, is a continual dealing with the future; it is a continual calculation, an instinctive exercise in foresight.” –Henry Luce