The big comeback for growth and a major setback for travel

Bubble stocks started their rebound back in mid-May and have since risen 21% likely causing a sigh of relief for Ark Invest and in general growth investors. While growth has staged a comeback and we believe investors should have these growth pockets in their portfolios, we are also still leaning towards inflation will run higher than current market consensus causing interest rates to climb higher over the coming year reducing the tailwind for growth stocks. Below the performance chart on our Bubble Stocks basket we have inserted the companies in the basket and if we look across performance last month the best-performing stock has been Appian.

Appian sells a low-code automation platform and solutions that maximizes resource use for businesses but has been under pressure since the peak back in February. In June, the stock finally rallied without any particular news until 17 June when the stock was added to Hedgeye’s new best idea long based on the views that Appian is doing the right things on pricing, community development and partner integration.

Source: Bloomberg and Saxo Group

Delta variant is a key risk for travel stocks

The emerging Covid-19 variant called ‘Delta’ is coming a key risk for European tourism which is not only a blow to Southern Europe that is in desperate need of a rebound in their tourist income, but also travel stocks that are down 6.2% in June. While investors have reacted to the uncertainty selling off travel stocks, the recent data from the UK and Israel suggest that while new cases are increasing due to the new Delta variant the number of hospitalizations and severe cases of Covid-19 are not dramatically increasing suggesting that vaccinations are working. The recent selloff in travel stocks is healthy as the rebound in travel stocks has been too much relative to what we can expect of profitability and growth from the industry in the coming years.