Stunning divergence in equities is a short-term opportunity Stunning divergence in equities is a short-term opportunity Stunning divergence in equities is a short-term opportunity

Stunning divergence in equities is a short-term opportunity

Equities 4 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  Travel stocks are soaring on good Omicron news and a quicker path to normalisation and the broader commodity sector is still favoured as investors are adding protection against inflation to their portfolios. The flipside is a bloodbath in speculative bubble stocks and themes such as NextGen Medicine and E-commerce. The divergence in just two trading session is stunningly 9.1%-point between the travel and bubble stocks baskets. While there are many arguments for why bubble stocks could fall more, we think the selloff will soon turn into a "buying-the-dip" situation with the market betting on bubble stocks going into the earnings season on the notion that this part of the market will deliver growth surprises.

Speculative growth stocks are continuing their 2021 descent

We are only two full trading sessions into the new year and we are already observing a 9.1%-point difference in performance between the travel basket, helped by the good news on the Omicron variant, and bubble stocks which suffering from the latest move higher in the US 10-year yield and investors continuing their rotating out of speculative growth and adding inflation hedges such as mega caps, financials, energy and mining.

While we think that a better balance between the physical and the online is warranted in the portfolio as inflation will run higher for longer due to physical constraints across energy and metals during the green transformation. But short-term we think a tactical trading opportunity is emerging as many bubble stocks will continue to show high revenue growth, whether they can deliver on operating margin is a different story, and that they will be bought back again by investors. The next couple of weeks could be tough for speculative bubble stocks, but our thinking is that investors will pick them up ahead of the earnings season betting on revenue surprises lifting share price against deteriorating expectations.

Bubble stocks basket

NameMkt Cap (USD mn.)12M Fwd EPS12M Fwd EV/SalesDiff to PT (%)5yr return (%)YTD return (%)
Kuaishou Technology213,499-0.8516.295.5NA-6.2
Sea Ltd140,384-1.2617.3101.5NA-11.6
Airbnb Inc130,635-1.3128.114.0NA2.6
NIO Inc94,795-1.5918.089.8NA-0.3
Snowflake Inc84,570-0.8771.525.7NA-6.9
DoorDash Inc67,743-0.1917.671.9NA-8.7
Roku Inc59,111-0.2623.160.9NA-2.4
Bilibili Inc51,601-4.7618.2159.8NA-12.9
Teladoc Health Inc41,124-0.3020.372.3452.7-0.4
XPeng Inc37,228-2.4115.032.2NA-5.4
Affirm Holdings Inc34,499-0.8939.782.5NA-15.1
BeiGene Ltd34,490-9.7835.871.1699.2-9.1
Unity Software Inc34,299-0.3532.734.5NA-9.3
Plug Power Inc32,156-0.1868.175.52,152.0-0.3
Seagen Inc31,016-0.1115.923.3165.3-1.2
Cloudflare Inc28,050-0.0846.187.0NA-12.6
Splunk Inc27,486-0.2110.844.5106.20.1
MongoDB Inc25,201-0.9834.120.5NA-12.1
Exact Sciences Corp24,752-1.1413.360.7429.92.8
Gaotu Techedu Inc24,455-3.3411.8NANANA
Farfetch Ltd23,465-0.6610.349.1NA-1.1
DraftKings Inc23,186-1.1626.5118.3NA-3.1
GDS Holdings Ltd20,998-0.1518.695.9389.5-13.0
10X Genomics Inc20,458-0.3238.941.5NA-5.1
Argenx SE19,397-10.72105.27.71,718.1-3.9
Alnylam Pharmaceuticals Inc19,214-4.7721.025.3291.3-2.6
Ping An Healthcare and Technology Co Ltd18,942-0.9111.6115.1NA-10.2
Innovent Biologics Inc18,305-0.6124.0140.5NA-17.2
Guardant Health Inc16,826-1.5040.563.9NA-2.0
Zai Lab Ltd15,781-2.5287.5163.3NA-12.1
Kingsoft Cloud Holdings Ltd15,710-2.569.6145.9NA-12.4
Yatsen Holding Ltd15,665-1.1710.766.0NA-7.9
Oak Street Health Inc15,461-0.4611.167.9NA-3.2 Inc15,370-0.7969.668.4NA-1.4 Holdings Inc15,319-0.1957.465.3NA-12.3
Canopy Growth Corp15,279-0.9024.
Appian Corp15,229-0.4043.357.5NA1.1
Avalara Inc14,770-0.1621.370.7NA-5.9
Elastic NV14,429-0.4420.650.1NA-5.5
Wolfspeed Inc14,240-0.5921.3NANANA
Aggregate / median1,565,14121.367.0409.7-5.5
Source: Bloomberg and Saxo Group

The market is betting on a totally different car industry

As a follow up to yesterday’s equity note, we extended our commentary on the EV battle in today’s podcast. We failed to cover all our thoughts because we have to be conscious of time, so we expanded further on our thinking in this Twitter thread. At any case, the EV battle this year is one of the most interesting to watch and a defining moment for the car industry. A lot of market value is at risk this year. We forgot in our Twitter thread to elaborate a bit on the car as a platform. The idea for the bulls on Tesla is that 1) the company takes 25% global market share, and 2) cars will become a major digital platform in which you can sell software services on. In that scenario, Tesla could be extremely profitable, but the path to the endpoint is not without risk and while we have seen Volkswagen having difficulties ramping up production to beat Tesla, we do not yet know the dynamics of the remaining large players (Ford, GM, Toyota etc.) entering the EV race at full force.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992