Small-cap stocks: Why patience matters

It can be difficult to endure short-term bumps, but we believe that’s critical for long-term success

Time to read: 2 min

The payment sector has been the darling of Wall Street the last few years and has continued to be an active space with several mega-mergers. Only four months into 2019, the payment sector already reached $85 billion of merger and acquisition announcements — almost doubling the full-year record of $49 billion in 2018.1 I expect the trend to continue.

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Fighting the “algorithm wars”

Seeking a differentiated view in a data-rich world

Time to read: 4 min

Artificial intelligence (AI), quant funds, high-frequency trading, big data — these terms get thrown around a lot these days and can create confusion and uncertainty. Case in point: Tesla CEO Elon Musk has said that AI is more dangerous than nuclear weapons, with Facebook CEO Mark Zuckerberg calling such statements “pretty irresponsible.”1 Beyond such dramatic statements, it’s clear to see that quants and high-frequency traders (HFTs) account for more than half of all US equity trading. How does all of this fit into the investing world as we see it?

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After the expansion: Are you ready for what might come next?

Diversification has been in hibernation during this bull market, but it may be coming out of its slumber

Time to read: 3 min

Assuming we don’t fall into recession during the next four months, July 2019 will mark a new record for the longest US economic expansion since the National Bureau of Economic Research started tracking economic cycles way back in the 1850s.  Throughout this expansion, holding assets other than stocks has come at a steeper cost in terms of underperformance. But while investors may be feeling frustrated by the results of their diversification strategies, I believe it’s important to examine what can happen in the years following an expansion. History tells us that this is when the benefits of diversification have been most apparent.

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Digital gaming = serious business

Global revenue has soared, and these five-long-term growth drivers could take it to the next level

Time to read: 4 min

In a world where new video games can have bigger opening weekends than Hollywood blockbusters, it’s clear that digital gaming is serious business. The digital gaming industry’s global revenues have almost doubled over the past seven years (from $71 billion in 2012 to $135 billion in 2018) — and over the next three years, revenue is forecasted to grow at a compound annual growth rate of approximately 9%.1

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Are emerging markets turning a corner?

A tough fourth quarter led to a solid January, and valuations remain compelling

Time to read: 2 min

The fourth quarter of 2018 was negative for both emerging and developed markets. However, we saw emerging market headwinds start to ease toward the end of the year, thanks to stabilizing currencies, lower oil prices, lower inflation pressures and progress in the US-China trade conflict. In fact, EM stocks rebounded strongly in January, yet valuations have remained at a discount to developed markets. All told, we believe there are compelling opportunities to be found in emerging markets.

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The deteriorating state of earnings in Asia

When will prices in China and Japan become attractive?

Time to read: 4 min

Slowing global trade has weighed down export-oriented markets in Asia, and the regional earnings outlook has been deteriorating rapidly. Over the past six months, earnings expectations have been revised down 4% for the MSCI All Country Asia Pacific Ex-Japan Index.1 For December, the earnings revision ratio (which compares positive versus negative revisions) fell to 0.39, the worst reading ever recorded outside of a recession.2 The downgrades were broad-based and included all Asian economies, with 13 of 16 sectors (as defined by Merrill Lynch) experiencing at least twice as many downgrades as upgrades.1 Despite this gloom and doom, some Asian companies are beginning to look attractive using our team’s Earnings, Quality and Valuation (EQV) criteria.

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