‘Dream themes’ for stocks in 2017
Our 21st Investment Roundtable weighs in
Being in the right place at the right time is a way to win the stock market. But with rapid changes facing the markets for 2017 from politics to technology, investors might not be sure where to pick their spots. mBut that’s where the brainpower and extensive research of the four panelists on USA TODAY’s 21st annual Investment Roundtable can assist. These investment professionals with decades of collective experience have ferreted through all the themes and trends that will matter next year. Several themes that could very well bring solid returns no matter what happens to the broader markets are where these investors are focused, including:
SECULAR GROWTH
The term might sound like jargon, granted, but it was the most recurring theme among the four panelists. Secular growth stocks are those that can grow no matter what curve balls the general stock market or economy throws at the market. Playing secular growth, though, is up to interpretation. Jeff Rottinghaus, portfolio manager of the T. Rowe Price U.S. Large-Cap Core fund sees secular growth companies as those that sell things so critical that demand doesn’t fall even if the market or economy falters. And for him, health care stocks are the classic example. Finding secular growth opportunities around the world, where companies can do well despite the broader economy, will be a critical aspect of portfolio management next year, says Rupal Bhansali, chief investment officer of international and global equities at Ariel Investments. “There are many developments in the world out there ... which actually will stand the test of time,” she says. “You’ll decouple your portfolio performance and make it dependent upon these idiosyncratic things that you know you can bank upon.”
RISE OF THE TECHNOLOGY CLOUD
Corporate investments in Internet-based shared computing resources — commonly called the cloud — will be an important shift. Companies and people are increasingly looking to house data on remote servers to help reduce costs and allow them to access information from anywhere. And the cloud ties into other key developments for investors such as wireless bandwidth and mobile data. Mobile devices are often used to access data on the cloud, allowing data to be available whenever and wherever it’s needed. “It’s hard to have a meeting in Silicon Valley right now where there’s not some sort of discussion of what’s going on with the cloud,” Rottinghaus says. Currently, cloud computing powers 10% of computer workloads. That is going to 95%, says Gavin Baker, portfolio manager of the Fidelity OTC Fund. “It’s better. It’s faster. It’s cheaper,” he says.
ARTIFICIAL INTELLIGENCE
Making computers smarter and able to do more personalized tasks will be a massive theme that will generate returns as it plays out, Baker says. Investing in companies building artificial intelligence, or A.I., systems is the biggest theme in Baker’s portfolio, he says. The trend is being powered by the fact companies have large collections of data that can enable digital decision making. But the proliferation of smart devices is another key development making now the time for A.I. A.I. “is a very pro-
You just pretty much needed to own stocks in 2016 to make money. Don’t expect such an easy time in 2017 as the market braces for changes that could shake things up.
Practically anything with a ticker symbol rose in 2016. It was just a matter of by how much. With a little more than two weeks before the New Year, owning the Standard & Poor’s 500 index has delivered investors an 11.1% gain. Holding small companies has been even better, with the Russell 2000 index up 21%.
But the days of easy stock gains are over as the market prepares for big changes, according to experts tapped in the 2017 USA TODAY Investment Roundtable. Higher interest rates, massive investments being moving to corporate cloud computing and important bets on new forms of transportation and advanced manufacturing are just a few of the important shifts investors need to be prepared for. That’s why our gurus think investors will find the best success with the following playbook and they name names.