Hi, my name is Stephen Denichilo, Portfolio Manager at Federated Investors.
Where do you see opportunities in growth investing as we head into 2020?
As we look into 2020 we see a tremendous amount of exciting opportunities in growth investing. Look, we are in a slightly slower growth environment. In that slower growth environment we see investors gravitating toward secular growing companies. Companies that do not need economic tailwinds for them to achieve their results. Specifically, we see opportunities in biotech, healthcare device, technology and specific internet commerce companies.
As we head into an election year, do you expect the next 12 months to be strong for IPOs?
We're never specifically focused on whether we're in an election year or not. That being said, the first half of 2019 has been very strong in the IPO market and it has provided a lot of opportunities for investors. As we look forward over the next year, we see a tremendous amount of new issues coming to the market with innovative new technologies, filling in white space, able to have growth without any cyclical tailwinds behind it, strong balance sheets, a clear pathway to free cash flow growth. Historically this has provided a very strong IPO market which we hope to take advantage of.
What are the key risks to your overall view?
We're coming off of nine quarters in a row of accelerating GDP growth rate on a year over year basis. That has never happened before. So as we look into 2020 it is natural to expect slightly slowing growth. In an environment of slowing growth we typically have higher volatility. We think in this higher volatility market, investors would be well served to focus on companies that can grow regardless of the economic environment, that continue to provide white space and momentum, have strong balance sheets and a clear pathway to free cash flow growth. In that environment it doesn't matter what GDP growth rate is, those companies should be successful over the long term.
Views are as of September 6, 2019, and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Investing in IPOs involves special risks such as limited liquidity and increased volatility. Small company stocks may be less liquid and subject to greater price volatility than large company stocks. Past performance is no guarantee of future results. Federated Investment Management Company 19-40363 (10/19)