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Tag: Growth

Believe It or Not, But Growth May Be the Real Value Destination

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Suddenly, value stocks are generating plenty of buzz, some at the expense of their growth rivals. However, not all value stocks are good values. Investors can avoid the pitfall of value traps with the ERShares Entrepreneurs ETF (ENTR).

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

ERShares founder Joel Shulman “advises listeners to be careful in buying traditional value stocks at this time. Prospective buyers should be wary of the price levels for debt-rich, declining margin, ‘value stocks’ that are at risk for a major price correction,” according to the issuer.

ENTR 3 Year Total Return

The Growth vs. Value Debate

Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.

Some “traditional, value stocks that have also reached high levels while simultaneously flirting with bankruptcy (Avis, etc). Shulman believes that growth stocks will bounce back,” notes ERShares.

Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.

Why Growth Is Offering More Value than Meets the Eye

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For the first time in what feels like an eternity, value stocks are topping their growth rivals, but investors can avoid value clunkers and bet on a growth trajectory with the ERShares Entrepreneurs ETF (ENTR).

The ERShares fund is worth a look over the near-term because its growth stocks are offering surprising levels of value.

“With the market keeping a keen eye on interest rates and its focus on punishing high-flying growth stocks with every basis point increase in the 10-year treasury, it’s sometimes useful to take a step back and examine the big picture,” said ERShares founder Joel Shulman in a recent note. “While it’s true that stocks, of all kinds (growth and value), are fundamentally priced based on discounted future cash flows, it should not necessarily be true that growth stocks should receive a steeper drop in price with rising interest rates. While the basic math of reducing today’s stock price based on discounting future cash flows at a higher rate cannot be denied, neither can the fact that the PRIMARY driver in growth stock valuation is the GROWTH itself.”

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

ENTR All Time Performance

ENTR: A Prime Avenue for the Growth Rebound

“When businesses enter their hyper-growth phase, they enter an extremely uncertain period and seasoned analysts should already discount future cash flows at an appropriate level corresponding to the risk,” adds Shulman.

“The key drivers to the valuation of growth stocks correspond overwhelmingly to the top-line revenue growth (that can exceed 100% rate per year) and should not, from the same mathematical perspective be affected by relatively immaterial or insignificant 5-10 basis point increases in a discount rate.”

The bottom line is thus: recent weakness in growth stocks may be an overreaction to rising Treasury yields.

Why It Pays to Invest in Entrepreneurial Firms

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Growth stocks are suddenly on sale, and with that scenario comes opportunity for investors to embrace entrepreneurial companies at discounts. There’s an ETF for that: the ERShares Entrepreneurs ETF (ENTR).

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

See also: Add ‘Entrepreneurship’ to the Investment Factor Debate

History proves there are compelling reasons to invest in fashion similar to ENTR, or better yet, own the fund itself.

ENTR’s Recipe for Success

Many entrepreneurial firms are concentrated in the consumer discretionary and technology sectors, cementing ENTR’s growth feel.

ENTR 1 Year Total Return

There has been a significant shift in how companies conduct business over the last year, with many corporations transitioning their employees to the home as more stringent regulations become commonplace. With this shift comes a need for innovation, with companies like Ring, Crowdstrike, Tesla, and Fiverr embracing an entrepreneurial mindset. Investors looking to get in on the action can look to ERShares.

Switching Back to Growth? Consider the ERShares ENTR ETF

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For once, value stocks are getting all the love, but that doesn’t mean growth fare should be glossed over. The ERShares Entrepreneurs ETF (ENTR) is an asset that can position investors for a growth rebound while maintaining some value exposure.

The fund is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards.

The economy is currently in the nascent stages of the traditional recovery cycle, and investors should not let short-term noise distract them from growth opportunities. While there are the obvious plays in large tech stocks, investors shouldn’t overlook additional growth opportunities that often fly under the media’s radar. ENTR is an avenue for capitalizing on those opportunities.

Along with expectations of a rebound in profit growth this year and a recovery in economic activity, many market observers are arguing that the foundation for further stock market gains is in place.

ENTR 1 Year Total Return

Breaking Down the ‘ENTR’ Thesis

Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.

Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.

See also: New Name, Same Gains for the High-Flying ENTR ETF

Many entrepreneurial firms are concentrated in the consumer discretionary and technology sectors, cementing ENTR’s growth feel.

Joel Shulman: “It’s a Buyer’s Market,” Especially in High-Growth Tech

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As inflation fears recede and investors shift back toward risk asset classes once more, opportunities are emerging in both growth and value stocks, said Joel Shulman, founder and CEO of ERShares, in a recent interview with Cheddar’s The Open.

In the interview, he offered his viewpoints on the prospect of rising inflation, the strong potential for tech stocks in the latter half of the year, and why investors should avoid Bitcoin.

“Inflation… has been the story all year”

So far, the worst of inflationary fears have not yet materialized in the market, said Shulman. “In terms of inflation, what we’re focusing on are wages which are still below July 2020 levels, (and) we’re seeing the most job vacancies ever,” he said.

He also pointed out that food prices, a significant indicator of real inflation, were only up 2.2% last month.

Shulman did caution that the Federal Reserve could potentially end up overextending itself with bonds.

Currently the Fed is committed to buying $120 billion worth of Treasury bonds and mortgage-backed securities per month, which is keeping interest rates artificially low. If the Fed were to reduce or cease its purchasing program, Shulman says, “we’re going to have some problems.”

“We think tech is well-positioned for the second half of the year”

Tech stock prices have been oscillating a lot lately, many having reached highs in February before dropping at the end of the month; only to follow the same pattern in March through May.

“We are optimistic going forward with tech, especially high growth tech because we think they’re good opportunities now,” Shulman said.

With value stocks falling off of recent highs, Shulman sees an opportunity for high-growth stocks, especially in tech.

He clarifies: “It’s a buyer’s market but it’s very hit-or-miss” when it comes to investing in value versus growth stocks.

Shulman disagrees that interest rate increases could dampen tech stock prices because they’d need to be discounted more. He argues that tech stocks already have a high discount rate built into them by analysts because they are priced over a long period of time, and moving basis points don’t do much to affect the tech stocks.

“It’s the growth of these tech stocks that really drives their valuation, and the growth is still there,” Shulman added.

Speaking specifically about the fintech sector, Shulman believes that Square Inc. (NYSE: SQ) stands out. Square was up around 20% in April, and while it got hit hard in May, it is rebounding strongly.

Square is “a great growth story for a number of years…and I think it’s a good opportunity to buy right now,” added Shulman.

Bitcoin: “Volatile and it has a lot of problems”

Shulman expressed concerns about Bitcoin as an investment, adding that investors should “stay away” across the board.

He believes that “digital gold” is not an accurate moniker for Bitcoin. Gold has been used as a default currency for thousands of years. “It’s not a store of value,” he says of Bitcoin.

Shulman goes on to explain that the lowest volatility for Bitcoin historically “has never been below the highest level for gold.”

What’s more, the environmental impact of cryptocurrency mining is extreme; Bitcoin “is not ESG friendly,” Shulman said.

The offer of miners to change their protocol to become more environmentally friendly is concerning because in changing the protocol, miners could also decide to make the supply of Bitcoin unlimited. It is currently capped at 21 million tokens. Creating an unlimited supply of any cryptocurrency “can basically destroy the value overnight,” said Shulman.

If miners are able to change the protocols in one area, such as ESG, they could also change the protocols in other areas as well.

The propensity for Bitcoin to be involved in illegal activities is yet another reason to stay far away from the digital assets. Because of the extortion surrounding the Colonial Pipeline, which was shut down by hackers, and the subsequent ransom payoff in $5 million in Bitcoin, “the FBI is now looking into bitcoin and how they can better regulate this.”

Shulman goes on to warn: “it’s not a question of if but when they’re going to regulate.”