A new white paper by the Goldman Sachs Asset Management’s Fundamental Equity team on investing in innovation finds that the pull-back in valuations within ‘innovation equities’ has created an attractive entry point for long-term investors into thematic stocks – those focused on areas that are more likely to experience long-term growth.
The firm writes that companies most focused on innovation have witnessed a greater pull-back than the overall market largely due to their relatively greater sensitivity to interest rates and a starting point of elevated valuations.
Investors now have an opportunity to invest in innovation at a much more reasonable price, given that valuations of innovation equities have fallen to below their long-term average, the firm says.
Fundamentals remain strong and innovation equities are well-positioned to outperform, particularly in an inflationary, geopolitically volatile environment and active management is even more important, as increased volatility and uncertainty are likely to drive greater dispersion in performance between stocks.
Goldman Sachs Asset Management writes that it retains conviction in specific multi-decade secular growth themes – technological innovation, environmental sustainability, future health care, and the new-age consumer – on which its portfolios are focused and continues to believe that fundamentally sound companies on the right side of these themes may be well-positioned to outperform.
