By Barbara Kollmeyer
For growth managers who saw smooth sailing in the first year of the COVID-19 pandemic, 2021 has brought challenges as recovery-geared value stocks swung into favor, leaving some highfliers in the dust.
Gerald Sparrow’s Sparrow Growth Fund /zigman2/quotes/205589655/realtime SGNFX +4.07% has been navigating that rocky path this year. His fund, which outperformed the category benchmark and average category peer for the past 10-year period, has lost about 0.5% year to date, according to Morningstar .
But value’s moment is fading, Sparrow told MarketWatch in a recent interview. “That period has ended, in our opinion, because the economy is slowing down, recently we had a weaker jobs report and housing data, so growths stocks will probably be back in favor and over value,” he said. (Read a February interview with Gerald Sparrow).
As for stocks set to benefit from that turn, he shares a few ideas from the portfolio, starting with Coupa Software /zigman2/quotes/209884077/composite COUP -2.93% , a cloud platform for business spend management that drives corporate digital business transformations. Their “sweet spot is supply-chain management so companies who want to increase their business, or become more efficient, and go digital and control their supply chain, this is the company they’re using,” said Sparrow. Coupa shares are down 26% year to date.
His next pick is MongoDB /zigman2/quotes/203302825/composite MDB +16.42% , which helps companies organize, store and access their large databases. AstraZeneca /zigman2/quotes/200304487/composite AZN -1.17% , Cisco /zigman2/quotes/209509471/composite CSCO +1.97% and SAP /zigman2/quotes/207905606/composite SAP +1.44% /zigman2/quotes/202053813/delayed XE:SAP -0.28% , are just some of its customers. Wall Street analysts are predicting 33% sales growth for this year and next, he said. Shares of MongoDB have climbed 41% so far this year.
DoorDash /zigman2/quotes/222973991/composite DASH +1.19% , which specializes in completing that “last mile” of deliveries, is his next pick. That refers to “anything that can replace us going to the store,” said Sparrow. The company delivers for retailers like Walmart /zigman2/quotes/207374728/composite WMT -0.32% and PetSmart, and is making life convenient for shoppers, in an Amazon-esque way, he said.
While Wall Street is predicting sales will grow 61% this year and slow 20% next year he remains a fan. “I’m a frequent flier in the DoorDash ecosystem and I know how good it is and I know how convenient it is, mentally,” he said. DoorDash shares are up 54% this year so far.
Another pick is Snap /zigman2/quotes/205087158/composite SNAP +5.18% , the parent of Mobile messaging app Snapchat, which he refers to as a “camera company.” Wall Street is expecting sales growth of 67% this year and 47% next year for the company that lets people live in the moment. Sparrow notes Snap’s forays into augmented reality, and partnerships with Disney /zigman2/quotes/203410047/composite DIS +0.29% for entertainment and dating app Bumble. Snapchat shares are up 65% this year.
His last pick is Singapore-based Sea Ltd. /zigman2/quotes/202797958/composite SE +2.13% , which happens to be one of his biggest holdings. The consumer internet company has stakes in gaming, e-commerce and digital financial services. While he has few foreign stocks, Sea stood out because of its extremely high growth rate — in June, the company reported a total GAAP revenue gain of 158%, said Sparrow. Sea is up 71% this year.
What the above stocks have in common is the digital economy, said Sparrow.
“If they’re not storefront companies like Snapchat, Sea, they are the pipeline and the wiring for the digital economy like Coupa’s software and Mongo’s database,” he said. “And as the economy continues to move online, entertainment, financial services — that’s where the growth is.”
Running on empty, all over
Energy, or rather a lack of, is a hot topic for Monday. Thousands of gas stations ran dry in the U.K. on Sunday, while power outages in China have closed factories and darkened households . Goldman Sachs boosted its Brent crude outlook to $90 by the end -2021, calling Hurricane Ida the most bullish in U.S. history. Oil /zigman2/quotes/209723049/delayed CL00 +0.42% and natural gas prices are climbing this morning.
Pfizer /zigman2/quotes/202877789/composite PFE +0.47% has started a Phase 2/3 trial of a COVID-19 oral antiviral candidate for adults who are living with someone who has tested positive for the virus. The pharmaceutical company believes, if successful, the therapy could stop COVID before it can replicate.
Tesla /zigman2/quotes/203558040/composite TSLA +4.24% is expanding driver access to its beta “Full Self-Driving” feature, despite regulatory concerns, while a proxy group is urging a board shake-up and greater corporate accountability.
Durable goods orders surged in August , thanks in large part to more orders for Boeing jetliners, but supply shortages were a drag on automakers. The rest of the week will see updates on inflation , home prices, manufacturing and consumer confidence. We’ll also hear from a ton of Federal Reserve officials this week, including Chair Jerome Powell.
Along with energy prices, stocks /zigman2/quotes/210598065/realtime DJIA +1.40% /zigman2/quotes/210599714/realtime SPX +2.07% /zigman2/quotes/210598365/realtime COMP +3.03% are mixed as the yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.67% hits 1.49%, a level not seen since June, while the 30-year /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -1.64% topped 2%. German stocks /zigman2/quotes/210597999/delayed DX:DAX -0.39% are leading Europe /zigman2/quotes/210599654/delayed XX:SXXP +0.08% higher after the Social Democrats beat the center-right bloc led by departing Chancellor Angela Merkel.
Here’s another look at how much equity buying has been going on in U.S. households:
Singing, dancing and fake COVID tests at the Tony Awards afterparties .
On Reddit: things that probably won’t be around in 25 years .
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.