A Constructive View on Growth Stocks
Jennison Associates views growth stocks capitalizing on big secular trends as positioned for prominence amid unsettled broader earnings conditions.
Secular Growth Stands Out as Earnings Climate Cools
Dec 8, 2022
Jennison Associates’ Mark Baribeau, CFA, shares why the changing growth landscape should benefit growth stocks and which secular trends are shaping the future.
A CHANGING GROWTH LANDSCAPE
Market uncertainty has resulted in a broad-based selloff in equities, particularly growth stocks. Contradictory indicators, a lack of visibility and a confluence of macroeconomic pressures have investors on edge. Earnings growth slowed considerably in 2022, and expectations for 2023 forecast growth to recede to below-trend (8%) levels as economic growth slows in response to higher interest rates and elevated inflation. In this environment, growth becomes scarce, boosting potential for durable growth stocks to play a more prominent role in investor portfolios.
As the Fed’s rate increases slow the economy, investors are likely to favor companies with stable, reliable growth which can come from combination of emerging growers (typically young disruptors, in a new or developing industry, and offer significant upside potential) and stable growth compounders (companies demonstrating above-average growth potential with a history of profitability and established drivers of growth).
Given the complicated backdrop, we favor a balanced approach between the fast-growing emerging growth category and stable growth compounders.
SECULAR TRENDS RESHAPING THE FUTURE
Looking through the near-term volatility, growth companies that offer differentiated products and services that create real value for society should continue to prosper over the long-term. Secular growth themes can provide significant tailwinds to well-managed companies. Three of the biggest secular growth areas heading into 2023 include:
Mark Baribeau, CFA
Head of Global Equities
Jennison Associates
ELECTRIC VEHICLES
The transportation industry is next in line for widespread disruption with opportunities in EVs, batteries, battery supply chains, and alternative energy
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LUXURY GOODS
While inflation takes its toll on broader spending, high-end spending trends remain healthy with top brands continuing to flourish
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FINTECH
Financial technology platforms represent compelling opportunities in emerging markets as consumers seek more convenient and affordable access to financial services
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RELATED INSIGHTS
The Global Spectrum of Growth
Companies that deliver above-average, sustainable growth over the long term are among the most valuable investments in the markets.
2023 Investment Themes
PGIM asset managers assess key trends shaping the investment landscape and where to find opportunities for different economic scenarios.
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