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Big Tech went from growth stocks to Wall Street’s Treasury bond substitute during the coronavirus

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FAANG stocks displayed at the Nasdaq.

Adam Jeffery | CNBC

Investors and traders have historically turned to less-risky assets such as U.S. Treasurys to weather market volatility and uncertainty. During the coronavirus pandemic, however, they have turned to unlikely place: tech and software stocks.

Shares of Apple, Netflix, Microsoft, and Amazon are all trading at, or near record highs. All four of these stocks are up at least 29% for 2020 and have contributed to the Nasdaq Composite‘s massive outperformance over the S&P 500 this year. The Nasdaq has surged 17% this year while the S&P 500 remains down over 2% in that time period. 

Wall Street flocked into these names because they believe their business models can not only weather this downturn, but thrive in it. This has led major tech and software stocks to seemingly behave like a safe haven Treasury bond, a dynamic that was apparent throughout this week.

“Clearly, the Covid cases going up around the country has gotten people into those software and internet plays,” said Christian Fromhertz, CEO of Tribeca Trade Group. “These stocks are clearly the haves and it will stay that way until something changes.”

The U.S. reported record numbers this week in daily coronavirus increases. On Thursday, more than 63,000 new coronavirus cases were confirmed in the U.S., according to Johns Hopkins University. The country’s seven-day average of cases also jumped to more than 53,000 this week.

At the state level, Florida’s coronavirus-related hospitalizations hit an all-time high. Nevada rolled back a reopening plan for bars in the state. 

This grim data put stocks that would benefit from the economy reopening under pressure this week. American Airlines fell more than 8% week to date and United slid nearly 10%. Gap shares dropped more than 3% in that time period. 

Big Tech — once considered one of the riskiest groups in the stock market — shined this week. Microsoft climbed about 3% in that time period while Netflix and Amazon popped more than 10% to record levels. Apple also hit an all-time high, jumping about 5% for the week. 

These stocks rose alongside the U.S. 10-year Treasury note. The 10-year yield started the week trading around 0.7%, but later fell to trade around 0.6% (yields move inversely to prices).

Investors argue that what makes these companies so attractive during this pandemic is their steady cash flows and recurring revenues at a time when clarity around the corporate earnings landscape is minimal. 

“What these companies have going for them is that whole idea of a strong balance sheet and recurring revenue,” said Rebecca Felton, senior portfolio manager at Riverfront. “Recurring revenues, in this type of environment where cyclicals might fade out a bit, is really important.”

“It feels right to stick with quality and growth that you think you can count on,” Felton said.

Microsoft, Netflix and Amazon all have subscription-based services driving recurring revenue on a monthly or annual basis. 

When the Fed forces interest rates to zero, they’re gonna push investors on the risk curve to get income and growth … If I’m going to be forced into equities, which is what the Fed’s clearly doing, I’m going to own the equities that I feel the best about and large-cap tech has become a safe-haven play.

David Spika

president of GuideStone Capital Management

Last quarter, Microsoft’s Office 365 users grew to more than 39 million from 37.2 million in the previous three-month period. Amazon, meanwhile, has more than 150 million paying Prime users. There are more than 180 million paying Netflix subscribers around the world. 

Something else making some of these stocks attractive are high dividend yields relative to U.S. Treasurys. 

According to FactSet, Apple and Microsoft currently yield 0.86% per share and 0.96%, respectively. The 10-year Treasury note, meanwhile, has a yield of around 0.6%.

To be sure, stocks are inherently riskier assets than Treasurys as they don’t have the backing of the U.S. government. Treasurys also give investors a consistent interest payment until they reach maturity, whereas stock dividends are subject to cuts or suspensions at any moment. 

Tech stocks also face mounting regulation risk, which could put them under pressure. Chamath Palihapitiya, founder and CEO of investment firm Social Capital, thinks this — along with the possibility of higher taxes and new product experiences — make for a bearish case in Facebook and Google-parent Alphabet. 

“Big Tech’s long term success is no longer about better products,” Palihapitiya said in a Friday tweet. “They are incumbents and their success is now a multi-variate/multi-dimensional problem of competition, anti-trust, tax and regulatory multiplied by EVERY city, state, country and jurisdiction in which the operate.”

Still, David Spika, president of GuideStone Capital Management, thinks using Big Tech as a safe-haven is prudent given how easy U.S. monetary policy is right now.

The Federal Reserve slashed rates to zero in March as part of an effort to support the economy during the pandemic. The U.S. central bank has also embarked on unprecedented monetary stimulus programs, including buying corporate debt.

“When the Fed forces interest rates to zero, they’re gonna push investors on the risk curve to get income and growth,” said Spika. “If I’m going to be forced into equities, which is what the Fed’s clearly doing, I’m going to own the equities that I feel the best about and large-cap tech has become a safe-haven play.” 

Time will tell how long this will last and when Big Tech equities return to acting like stocks with individual risks.

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Source: https://www.cnbc.com/2020/07/10/big-tech-went-from-growth-stocks-to-wall-streets-treasury-bond-substitute-during-the-coronavirus.html

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Security and Sustainability Forum-With Hazel Henderson and Claudine Schneider. 10/22/2020

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Steering Societies Beyond GDP to the SDGs

With Hazel Henderson and Claudine Schneider

October 22, 2020

1:15 pm to 2:15 pm EDT

The next webinar in the SSF series, with ecological economist and futurist Hazel Henderson, will address how the UN SDGs can and should replace GDP as the basis for valuing society leading to an economy based on planet protection and human wellbeing. Claudine Schneider is Hazel’s guest.

GDP accounts for all the public expenditures as “debt” while ignoring the value of the assets they created. If GDP were to be corrected by including the missing asset account, these debt-to-GDP ratios would be cut by up to 50% — with a few keystrokes! Learn why money isn’t what you think it is and why that matters to life on Earth in the next two webinars with Hazel and guests.

Register

Claudine Schneider is a former Republican U.S. representative from Rhode Island. She was the first, and to date only, woman elected to Congress from Rhode Island. She is founder of Republicans for Integrity, which describes itself as a network of “Republican former Members of Congress who feel compelled to remind Republican voters about the fundamentals of our party and to provide the facts about incumbents’ voting records.”

October 22nd webinar with Claudine Schneider and Hazel

Sincerely,

Ed.

Edward Saltzberg, PhD

Executive Director

Security and Sustainability Forum

www.ssfonline.org

[email protected]

Sincerely,

Ed.

Edward Saltzberg, PhD

Executive Director

Security and Sustainability Forum

www.ssfonline.org

Source: https://www.ethicalmarkets.com/63564-2/

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The Briefing: RVShare raises over $100M, Google disputes charges, and more

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Here’s what you need to know today in startup and venture news, updated by the Crunchbase News staff throughout the day to keep you in the know.

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RVShare raises over $100M for RV rentals

RVShare, an online marketplace for RV rentals, reportedly raised over $100 million in a financing led by private equity firms KKR and Tritium Partners.

Akron, Ohio-based RVShare has seen sharp growth in demand amid the pandemic, as more would-be travelers seek socially distanced options for hitting the road. Founded in 2013, the company matches RV owners with prospective renters, filtering by location, price and vehicle types.

Previously, RVShare had raised $50 million in known funding, per Crunchbase data, from Tritium Partners. The company is one of several players in the RV rental space, and competes alongside Outdoorsy, a peer-to-peer RV marketplace that has raised $75 million in venture funding.

Funding news

  • BrightFarms closes on $100M: Indoor farming company BrightFarms said it secured more than $100 million in debt and new equity capital to support expansion plans. The Series E round of funding was led by Cox Enterprises, which now owns a majority stake in the company, and includes a follow-on investment from growth equity firm Catalyst Investors.
  • Anyscale inks $40MAnyscale, the Berkeley-based company behind the Ray open source project for building applications, announced $40 million in an oversubscribed Series B funding round. Existing investor NEA led the round and was joined by Andreessen Horowitz, Intel Capital and Foundation Capital. The new funding brings Anyscale’s total funding to more than $60 million.
  • Klar deposits $15M: Mexican fintech Klar closed on $15 million in Series A funding, led by Prosus Ventures, with participation from new investor International Finance Corporation and existing investors Quona Capital, Mouro Capital and Acrew. The round brings total funding raised to approximately $72 million since the company was founded in 2019. The funds are intended to grow Klar’s engineering capabilities in both its Berlin and Mexico hubs.
  • O(1) Labs rakes in $10.9M: O(1) Labs, the team behind the cryptocurrency Mina, announced $10.9 million in a strategic investment round. Co-leading the round are Bixin Ventures and Three Arrows Capital with participation from SNZ, HashKey Capital, Signum Capital, NGC Ventures, Fenbushi Capital and IOSG Ventures.
  • Blustream bags $3M: After-sale customer engagement company Blustream said it raised $3 million in seed funding for product usage data and digital transformation efforts for physical goods companies via the Blustream Product Experience Platform. York IE led the round of funding for the Worcester, Massachusetts-based company with additional support from existing investors.Pillar secures another $1.5M: Pillar, a startup that helps families protect and care for their loved ones, raised $1.5 million in a seed extension to close at $7 million, The round was led by Kleiner Perkins.

Other news

  • Google rejects DOJ antitrust arguments: In the wake of a widely anticipated U.S. Justice Department antitrust suit against Google, the search giant disputed the charges in a statement, maintaining that: “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.”
  • Facebook said to test Nextdoor rival: Facebook is reportedly testing a service similar to popular neighborhood-focused social Nextdoor. Called Neighborhoods, the feature reportedly suggests local neighborhood groups to join on Facebook.

Illustration: Dom Guzman

Venture investors and leaders in the fintech space can visualize a future where such startups will move toward again rebundling services.

Root Inc., the parent company of Root Insurance, launched its initial public offering and is looking at a valuation of as much as $6.34 billion.

Clover Health posted rising revenues and a narrower loss in its most recent financial results, published in advance of a planned public market debut.

Crunchbase News’ top picks of the news to stay current in the VC and startup world.

Source: https://news.crunchbase.com/news/briefing-10-21-20/

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Syte Sees $30M Series C For Product Discovery

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Online shopping has become the norm for most people in 2020, even coaxing traditional retail brands to up their presence to stay competitive. However, now that shoppers can’t see and touch products like they used to, e-commerce discovery has become a crucial element for customer acquisition and retention.

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Enter Syte, an Israel-based company that touts creating the world’s first product discovery platform that utilizes the senses, such as visual, text and voice, and then leverages visual artificial intelligence and next-generation personalization to create individualized and memorable customer experiences, Syte co-founder and CEO Ofer Fryman told Crunchbase News.

To execute on this, the company raised $30 million in Series C funding and an additional $10 million in debt. Viola Ventures led the round and was joined by LG Technology Ventures, La Maison, MizMaa Ventures and Kreos Capital, as well as existing investors Magma, Naver Corporation, Commerce Ventures, Storm Ventures, Axess Ventures, Remagine Media Ventures and KDS Media Fund.

This brings the company’s total fundraising to $71 million since its inception in 2015. That includes a $21.5 million Series B, also led by Viola, in 2019, according to Crunchbase data.

Fryman intends for the new funding to be put to work on product enhancements and geographic expansion. Syte already has an established customer base in Europe, the Middle East and Africa, and will now focus expansion in the U.S. and Asia-Pacific.

Meanwhile, Syte has grown 22 percent quarter over quarter, as well as experienced a 38 percent expansion of its customer base since the beginning of 2020.

“Since we crossed $1 million annual recurring revenue, we have been tripling revenue while also becoming more efficient,” Fryman said. “We can accelerate growth as well as build an amazing technology and solution for a business that needs it right now. We plan to grow further, and even though our SaaS metrics are excellent right now, our goal is to improve them.”

Anshul Agarwal, managing director at LG Technology Ventures, said Syte was an attractive investment due in part to its unique technology.

“They have a deep-learning system and have created a new category, product discovery that will enable online shopping in a way we never had the ability to do before,” Agarwal said. “The product market fit was also unique. We believe in the strong execution by the team and the rapid growth in SaaS. We looked at many different companies, and the SaaS metrics that Syte showed are the strongest we’ve seen in a while.”

Illustration: Li-Anne Dias

Venture investors and leaders in the fintech space can visualize a future where such startups will move toward again rebundling services.

Root Inc., the parent company of Root Insurance, launched its initial public offering and is looking at a valuation of as much as $6.34 billion.

Clover Health posted rising revenues and a narrower loss in its most recent financial results, published in advance of a planned public market debut.

Crunchbase News’ top picks of the news to stay current in the VC and startup world.

Source: https://news.crunchbase.com/news/syte-sees-30m-series-c-for-product-discovery/

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