Capital Markets Summer 2022: Revealing Recession Patterns
Capital Markets Summer 2022: Revealing Recession Patterns
Summer 2022
Capital Markets: Observations and Insights
Revealing Recession Patterns
Revealing Recession Patterns
Recessions may be the most feared events in economics and investing, but the most effective way to deal with them is to have a game plan. In this presentation, we deconstruct and analyze past recessions to reveal repeating economic and capital market patterns. We also identify areas of investment that may be less impacted by recessions and may be able to grow through them. Our strategy for dealing with economic volatility is to invest in these kinds of companies that can control their financial destiny. Companies with solid balance sheets that gain market share can expand even as their end markets shrink. If we believe company fundamentals such as earnings and cash flow will grow through a recession, we can potentially mitigate the risk of valuation compression. While this is a risk to be sure, it is likely limited and quantifiable, unlike say an economically sensitive company that may see earnings decline to levels that make debt service or repayment difficult. Such a scenario may result in permanent loss of capital in a recession. Quality growth companies, on the other hand, are more likely to emerge from a recession stronger, with better competitive positions. While we can't be sure when the next recession will occur, we have experience in managing through economic volatility. We have invested through eight recessions since our founding in 1964. Our firm has flourished despite these trying times, and we are confident that we will continue to do so, through both recession and expansion.
Daniel C. Chung, CFA Chief Executive Officer Chief Investment Officer
Brad Neuman, CFA Senior Vice President Director of Market Strategy
1
Key Observations and Themes
Revealing Recession Patterns We analyze past recessions to reveal repeating economic and capital market patterns as well as identify areas of investment that may be less impacted by recessions. 3
I
What’s Priced In? With investors focused on risk and asset prices down, we examine valuations to identify areas of the capital markets that may look attractive. 11
II
Economic Crosscurrents Strong labor market and balance sheets are being offset by headwinds from higher interest rates and less accommodative fiscal policy.
16
III
Enduring Themes Secular investment trends may transcend economic volatility, politics and central bank actions, producing compelling investment opportunities over the long term. 22
IV
Style Wars Powerful structural forces may keep the long-term trend of growth outperformance intact, in our view. 29
V
2
I
It Starts With The Fed Revealing Recession Patterns
• Essentially every recession has been preceded by a rising Federal Funds rate
I
‒ Only three instances of “soft landings” in the mid-60s, mid-80s, and mid-90s
U.S. Federal Funds Rate Target
II
Recessions
Soft Landings
20%
18%
III
16%
14%
12%
IV
10%
8%
6%
V
4%
2%
0%
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Source: Federal Reserve, National Bureau of Economic Research (NBER). FactSet as of June 30, 2022.
3
I
The Leading Edge Revealing Recession Patterns
• The Leading Economic Index has typically declined preceding recessions ‒ Its year-over-year change typically bottoms two months before the recession ends
I
Leading Economic Index Year-Over-Year Change
II
Recessions
20%
15%
III
10%
5%
IV
0%
-5%
-10%
V
-15%
-20%
1972
1973
1975
1977
1978
1980
1982
1983
1985
1987
1988
1990
1992
1993
1995
1997
1998
2000
2002
2003
2005
2007
2008
2010
2012
2013
2015
2017
2018
2020
2022
Source: The Conference Board as of May 31, 2022, NBER. The Leading Economic Index (LEI) is a monthly index of 10 economic components used to predict the direction of global economic movements in future months.
4
I
How May Equities Perform? Revealing Recession Patterns
• Equities have historically peaked several months before recessions start and often bottom prior to the end of recessions
I
II
S&P 500 Performance Around Recessions
70%
2020 (2 months)
III
50%
1981/1982 (16 months)
30%
1990/1991 (8 months)
IV
10%
Average
-10%
2008/2009 (18 months) 1974/1975 (16 months)
Cumulative Change
-30%
V
2001 (8 months)
-50%
-12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24
Months Before and After Start of Recession
Source: FactSet and Alger analysis. Data calculated monthly. Duration in parentheses signifies length of recession. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.
5
I
Economic Bottom Signals Revealing Recession Patterns
• Stock market troughs have typically occurred within weeks of jobless claims peaking
I
Weeks Between S&P 500 Bottom and Jobless Claim Peak
II
Stocks bottom first
23
15
7
7
III
3
2
(5)
Average
IV
Jobless claims peak first
(46)
V
Apr-1970 Jan-1975 May-1980 Oct-1982 Mar-1991 Nov-2001 Mar-2009 Apr-2020
Peak in Weekly Jobless Claims
Source: Goldman Sachs.
6
I
Sentiment Bottom Signals Recession Handbook
• Various sentiment indicators such as fund flows, put-to-call ratios, insider buying and implied volatility (VIX) can help identify equity troughs
I
‒ History shows that high levels of fear have led to strong equity returns
II
S&P 500 1-Year Total Return from Various VIX Index Levels
36%
III
Being contrarian during extreme market sentiment may be wise
25%
20%
IV
9%
6%
>40
35-40
30-35
25-30
20-25
V
Less Fear
VIX
More Fear
Source: FactSet and Alger. January 1990-June 2022. Ensuing returns have been measured from the day the VIX hit each level. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.
7
I
Fundamentals in Recessions Revealing Recession Patterns
• In the last three recessions, the median S&P 500 EPS drawdown has been 20%
• Economically sensitive value stock fundamentals have done worse than those of growth stocks
I
II
S&P 500 EPS Drawdowns Around Recessions
But Growth EPS Has Held Up Better
S&P 500 Growth
S&P 500 Value
2001
2008/2009
2020
III
10%
5%
0%
-16%
IV
-5%
-20%
-10%
-15%
V
EPS Peak to Trough
-20% Cumulative Change
-39%
-25%
-12-10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18
Months Before and After Start of Recession
Source: FactSet and Alger analysis. S&P EPS Drawdowns are next 12-months, peak to trough. Growth and Value EPS based on average of last three recessions.
8
I
Powering Through Economic Volatility Revealing Recession Patterns
I • Innovation flourishes while the economy languishes ‒ Automobile ownership advanced in the Great Depression, and there was significant growth in PCs and smartphones during challenging economic periods
II
Personal Computer Penetration Grew Through Early ‘90s Recession
Global Smartphone Subscribers Grew Through Global Financial Crisis
U.S. Real GDP Index U.S. PC Index Recession
Global Real GDP Index Global Smartphone Subscriber Index Recession
III
160
500
+335%
+43%
IV
400
140
300
120
200
+4%
100
+9%
V
100
0
80
2006
2007
2008
2009
2010
1988 1989 1990 1991 1992
Source: NBER; Diego Comin and Bart Hobijn “Historical Cross County Technology Adoption Dataset”; U.S. Department of Transportation; GSM Association; FactSet.
9
I
Some Trends Are Larger Than Recession Revealing Recession Patterns
• Digital transformation is an enterprise imperative, in our view
I
‒ To keep up, companies must spend on areas like software which may make related end-markets recession resistant
II
Worldwide Digital Transformation Spending
Growth Through The Pandemic
GDP Software Recession
3.0
30%
16% Annual Growth
III
2.5
25%
20%
2.0
15%
1.5
10%
IV
5%
1.0
0%
Trillions ($)
0.5
-5%
V
Cumulative Growth
0.0
-10%
-15%
2017
2018
2019
2020
2021E
2022E
2023E
2024E
2025E
Source: IDC, November 2021, U.S. Bureau of Economic Analysis, NBER.
10
II
Long Duration Appears Cheap What’s Priced In?
• The duration trade has driven investors to seek more current cash flows at the expense of growth…
• …while pushing down valuations of longer duration, growth assets to attractive valuations, in our view
I
II
The Duration Trade
Small Growth Attractive Valuations?
Shareholder Yield
Long-Term Growth
Absolute Relative to S&P 500
S&P 600 Small Growth / S&P 500 P/E
35x
160%
30%
III
30x
140%
20%
25x
10%
120%
20x
IV
15x
0%
100%
10x
-10%
80%
Cumulative Return
5x
V
-20%
0x
60%
S&P 600 Small Cap Growth P/E
1998 2002 2006 2010 2014 2018 2022
Jul-21
Jan-21
Jan-22
Mar-21
Mar-22
Nov-21
Sep-21
May-21
May-22
Source: Cornerstone Macro and FactSet as of June 30, 2022. Factor performance relative to the S&P 1500, which is sector neutral and is calculated by taking the relative performance of the top quintile of stocks against the bottom quintile of stocks for each factor. The constituents in the quintiles are rebalanced monthly. Shareholder Yield is [LTM Common and Preferred Stock Purchased - LTM Common and Preferred Stock Sold + LTM Total Common Dividends] / Market Capitalization. Long-term Growth is mean estimated 5-year EPS growth.
11
II
Fastest Growth at a Discount What’s Priced In?
• Valuations of the fastest-growing large stocks have fallen dramatically
I
‒ First driven by expectations of the pandemic slowing and the economy reopening and then by rising discount rates
II
The Fastest Growers Relative Price/Sales Ratio
Recessions
8x
III
7x
The fastest growing large cap stocks are now historically cheap relative to the market
6x
Average 2003-2019
IV
5x
4x
3x
V
2x
1x
2022
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020
Source: NBER, Empirical Research Partners. Equally weighted data. Fastest growers are the top 10% or 75 of stocks of the largest 750 U.S. public equities based on a scoring methodology including forecasted revenue growth, trailing revenue growth, stability of revenue growth, and return on equity. Data through June 2022.
12
II
Dissecting Drawdowns What’s Priced In?
• Some areas of the stock market are discounting a recession more than others, based on historical drawdowns ‒ Small caps and growth stocks seem to be pricing in a recession more than other areas of the equity market
I
II
Average Stock Drawdowns
Recession Average Current
III
IV
-32%
-37%
-43%
-46%
V
-49%
-49%
-50%
-51%
-57%
-59%
S&P 500
Russell 1000
Russell 2000
Russell 1000 Growth
Nasdaq Composite
Source: J.P. Morgan. As of June 2022. Based on 12-month drawdowns. Recession average uses past four recessions.
13
II
Many Happy Returns? What’s Priced In?
• There is a strong relationship between starting equity valuations and ensuing 10-year returns ‒ Current valuations suggest stocks should produce solid returns, in excess of Treasury bond yields
I
II
S&P 500 P/E vs. 10-Year Returns
25%
= month = current
III
20%
History may imply high single-digit annual equity returns
15%
10%
R² = 0.85
IV
5%
S&P 500 10-Year
0% Annualized Return
V
-5%
5x
10x
15x
20x
25x
30x
S&P 500 Price/Earnings
Source: FactSet. Each dot represents the P/E during that month and the returns generated over the subsequent 10 years. The starting P/E ratio is the price divided by the next 12- month earnings per share estimate at the start of each 10-year period measured. Monthly data through June 2022 and beginning in January 1986. R-squared is a statistical measure used to analyze how differences in one variable can be explained by the difference in a second variable. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.
14
II
Stocks vs. Bonds What’s Priced In?
• Even with the rise in interest rates, stocks “yield” significantly more than bonds
I
‒ Over 10-year periods in the past half century, S&P 500 EPS has always grown, averaging nearly 7% annually, while bond coupons do not grow
II
Equity “Yield” Is Attractive Relative to Treasuries…
…And Equity EPS Can Grow!
S&P 500 Earnings Yield 10-Yr Treasury Yield
S&P 500 EPS Growth
III
16%
12%
10%
12%
8%
IV
6%
8%
4%
2%
4%
0%
V
0%
-2%
Rolling 10-Yr Annual Growth
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
Source: FactSet, Robert Shiller, Alger. Notes: periods used were annual. Treasury “P/E” is inverse of yield to maturity. Earnings per share (EPS) is the portion of a company's earnings or profit allocated to each share of common stock.
15
III
Mounting Headwinds Economic Crosscurrents
I
Tailwinds
• Strong labor market
II
• Healthy corporate and consumer balance sheets
• Recovery in depressed economic areas
• Supply chain pressures easing
III
IV
Headwinds
• Tightening monetary policy
• High Inflation
V
• Geopolitical conflict
• Less accommodative fiscal policy
16
III
Slowing Money Supply Economic Crosscurrents
• The increase in the Federal Funds rate, decrease in the Federal Reserve’s assets, and slowdown in government spending is constricting money supply growth and moderating economic activity
I
II
Money Supply Growth
Actual
Forecasted
R 2 =77%
25%
III
20%
15%
IV
10%
Money supply may shrink for the first time since the 1930s
5%
0%
V
-5%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Piper Sandler and Alger. Last actual data point is May 2022. Forecast based on year-over-year change in Federal Funds rate, Federal Reserve’s assets, and U.S. Federal Expenditures.
17
III
High Inflation Hurting Confidence Economic Crosscurrents
• High prices and interest rates have driven down confidence levels amongst consumers and business executives which is likely to weigh on future spending, in our view
I
II
Businesses Are Worried
Consumer Confidence Hit Record Low
60
130
III
120
40
110
20
100
0
IV
90
-20
80 Index
-40 Conditions
70
-60
V
60
Current Economic Conditions
-80 Outlook for General Business
50
Source: University of Michigan (Current Economic Conditions show how U.S. consumers assess current economic conditions in the country; the index is calculated monthly), and National Federation of Independent Business (component of the NFIB Small Business Optimism Index, which is a monthly survey of small and independent business owners). As of 6/30/22.
18
III
Supply Chain Pressures Easing Economic Crosscurrents
• Consensus assumes that inflation needs to moderate via demand weakness but what if supply constraints ease?
I
‒ That could help lower inflation and potentially cause the Fed to be less aggressive
II
Global Supply Chain Pressures Easing
5
III
4
Tighter
3
IV
2
1
0 Global Supply Chain Pressure Index
V
Looser
-1
2015 2016 2017 2018 2019 2020 2021 2022
Source: Federal Reserve Bank of New York Liberty Street Economics. The Global Supply Chain Pressure Index (GSCPI) is global measure that encompasses several indicators used to capture supply chain disruptions. Consensus is earnings estimates as determined by a consensus of analysts at financial services firms and provided by FactSet. As of 6/30/22.
19
III
Still Tight Labor Market Economic Crosscurrents
• The labor market is one of the key drivers for Fed tightening and it remains strong
I
• Wage growth has accelerated – supporting spending but also inflation
II
Still Elevated Job Openings…
…Driving Strong Wage Growth
12
6%
III
Many more job openings than unemployed people
Highest in over 25 years
10
5%
IV
8
4%
6
3%
V
4
2%
U.S. Median Wage Growth
U.S. Job Openings (Millions)
2
1%
2011 2013 2015 2017 2019 2021
2011 2013 2015 2017 2019 2021
Source: U.S. Bureau of Labor Statistics, Federal Reserve Bank of Atlanta. Note that wage growth is reported as a 3-month moving average. As of 5/31/22.
20
III
Solid Balance Sheets Economic Crosscurrents
• Huge fiscal stimulus and easy financial conditions drove a surge in U.S. debt
• However, the cost to service the private and federal debt is not high relative to history
I
II
U.S. Debt Levels Are High…
…But The U.S. Debt Service Burden Is Not
300%
70
20%
3%
60
III
Federal Interest % of GDP
16%
Total U.S. Debt ($ Trillions)
50
250%
2%
12%
40
IV
30
8%
200%
1%
20
4%
U.S. Debt Service Ratio (Households & Corporations)
V
10
U.S. Debt % of GDP (Government, Households & Corporations)
150%
0
0%
0%
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
Source: Bank for International Settlements, Congressional Budget Office, and Alger estimates. The debt service ratio reflects the share of income used to service debt (interest and principal).
21
IV
Age of Connected Intelligence Enduring Themes
• We believe we are in a new technological revolution where intelligent computing will be ubiquitous and pervasive. ‒ Data is the new oil and advances in cloud computing and AI will turn this now abundant raw material into better decision making for companies and individuals
I
II
Organizational Adoption of Technologies
Big Data Adoption in Global Organizations
Plan to use in 1-2 years Plan to use within 12 months Currently use
2021 2022
III
57%
49%
80%
47%
41%
60%
27%
IV
40%
24%
20%
0%
V
Driving innovation with data
Competing on data and analytics
Created a data- driven organization
Source: NewVantage Partners survey of 94 Fortune 1000 or industry leading firms, December 2021; Spiceworks, The 2022 State of IT, October 2021, survey of more than 1000 technology buyers in companies across North America and Europe.
22
IV
Internet of Things Enduring Themes
• The explosion in connected devices is creating the “Internet of Things” or IoT, transmitting valuable and actionable information ‒ Drivers of IoT spending include security, data analytics, efficiencies, reliability, customer service, improved ROI and compliance
I
II
Global Industrial IoT Market Size
Global IoT Connected Devices
1,200
30
III
19% Annual Growth
1,000
25
23% Annual Growth
800
20
IV
600
15
Billions ($)
400 Billions ($)
10
V
200
5
-
-
2020
2020
2021(E)
2022(E)
2023(E)
2024(E)
2025(E)
2026(E)
2027(E)
2028(E)
2021(E)
2022(E)
2023(E)
2024(E)
2025(E)
Source: IOT Analytics, September 2021, and Grand View Research, March 2022.
23
IV
Artificial Intelligence Enduring Themes
• Companies providing AI-based software services and hardware have a large opportunity
• Exhibiting exponential progress, AI capabilities are now close to, or superior to, humans in various tests
I
II
Global AI Market
AI vs. Humans – Accuracy (%)
Human AI
19% Annual Growth
III
Reading Comprehension
90
$500
93
$433
85
Visual Reasoning
$342
72
$297
IV
81
Visual Assessment
80
Billions ($)
Natural Language Inference
93
92
V
Image Classification
95
2020
2021
2022(E)
2023(E)
98
Source: AI market size estimate from IDC, February 2022. Artificial Intelligence Index Report 2022.
24
IV
Metaverse Enduring Themes
• The metaverse may usher in a huge addressable market with a new digital world including an economy where people can earn, trade and shop for digital assets, as well as have social lives and partake in education and entertainment
I
II
Growing Metaverse Conversation
Large Software and Hardware Opportunity
35
$679
30
III
25
37% Annual Growth
20
15
IV
10
5 S&P 500 Mentions In Press Releases
$39
Metaverse Market Revenue Worldwide Billions ($)
0
V
2021
2030
Source: FactSet, June 2022 and Grand View Research, March 2022. Metaverse mentions are based on 3-month moving average.
25
IV
Genomics Innovation Enduring Themes
• Genetic analysis and manipulation will increasingly impact the practice of health care
I
‒ Turning sick care into preventive health care by giving insight into predisposed diseases
‒ Delivering more efficacious treatments via targeted therapies (e.g., immuno-oncology)
II
Global Genomics Market
III
$95
19% Annual Growth
IV
$23
V
Market Size Billions ($)
2020
2028*
Source: Fortune Business Insights, January 2022. *Estimated.
26
IV
Digital Payments Enduring Themes
• Digital payments continue to outgrow the broad economy as they gain penetration, driven by increasing e-commerce and mobile payments
I
‒ China has the largest volume of digital payments and Europe is growing fastest
• Payment networks, processors and software companies can capitalize on the trend
II
Global Digital Transactions
E-Commerce Mobile Payments
III
10.5
14% CAGR
9.6
8.7
4.7
7.8
IV
4.1
6.7
3.5
3.0
5.5
2.5
Trillions ($)
2.0
V
5.9
5.6
5.2
4.8
4.2
3.5
2020
2021E
2022E
2023E
2024E
2025E
Source: Statista Digital Market Outlook 2021. CAGR is compound annual growth rate, the rate of return required for a quantity to grow from its beginning balance to its ending balance. Mobile payments occur when smartphones are used to process transactions using wireless communication or scan QR barcodes.
27
IV
Emission Reductions Enduring Themes
• The rate of CO 2 emissions is not sustainable in our view and current emission targets need to be reduced further • Reducing emissions may provide opportunities in alternative energy sources and in electric vehicles and related products and services
I
II
CO 2 Emissions
Current Pathway
Needed To Limit Warming
60
III
50
40
IV
30
Incremental Reduction Needed
20
V
10
Billions of Annual Tonnes of CO2 Equivalent Emissions
0
1990
2000
2010
2020
2030
2040
2050
Source: Climate Action Project, May 2021. Current pathway represents average of high and low “pledges and targets” scenario while needed to limit warming is based on median to achieve 1.5 degrees Celsius warming.
28
V
Accelerating Change Style Wars
I • Innovation is accelerating across many areas of the economy, causing new products and services to diffuse through society faster and disrupt businesses at a greater pace • This may be a tailwind to growth companies, which we believe are the drivers of innovation, and a headwind to value stocks, which may be victims of change
II
Years from Market Entry to 50% Penetration
Years to Reach 1 Billion Users
III
IV
V
Source: Asymco, Visual Capitalist, company disclosures, Alger estimates.
29
V
Structural Issues Driving Growth vs. Value Style Wars
• Although many value stocks have outperformed over the past year, growth stocks have significantly outpaced value stocks over the past decade • The driver has been the very weak performance of the price-to-book valuation metric, which is used heavily in index classifications of growth vs. value stocks ‒ As accounting fails to keep up with the changing economy, book value may no longer be as relevant (e.g., R&D is not capitalized in book value)
I
II
Value/Growth vs. P/B Cumulative Return
III
30%
40%
Correlation = 0.96
10%
20%
Style classification too dependent upon outdated book value
Russell 3000 Value / Growth
IV
-10%
0%
-30%
-20%
V
-50%
-40%
Low P/B
-70%
-60%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: FactSet, Kenneth R. French, and Alger through May 2022. Low price-to-book returns are based on the B/P Frama/French factor for the CRSP universe which includes US firms listed on the NYSE, AMEX, or NASDAQ. Correlation measures a relationship estimate between two variables. The performance data quoted represents past performance, which is not an indication or a guarantee of future results.
30
V
The Growth Advantage Style Wars
I • Three variables drive P/E multiples: growth, return on capital and risk
• The Russell 1000 Growth Index has higher expected EPS growth, higher return on equity and lower risk in the form of better balance sheets as compared to the Russell 1000 Value Index
II
Lower Risk
Higher Returns
Stronger Growth
Return on Equity
Net Debt / EBITDA
Long-Term EPS Growth
III
35.9%
2.2x
16.4%
IV
9.3%
15.9%
0.9x
V
Russell 1000 Growth
Russell 1000 Value
Russell 1000 Growth
Russell 1000 Value
Russell 1000 Growth
Russell 1000 Value
Source: FactSet as of June 2022. Growth represents consensus long-term analyst estimates and actual future EPS growth rates might be materially different than the forecasts shown.
31
V
A Powerful New Investing Factor? Style Wars
• Studies have shown and our research demonstrates that the most innovative companies have grown their sales, earnings and stock prices faster*
I
Innovative Companies Have Outperformed Over the Past Decade
II
60%
Most Innovative +4% per year
III
40%
20%
IV
0%
-20%
Cumulative Excess Return
V
Least Innovative -3% per year
-40%
Source: FactSet. Excess performance of the quintiles of R&D as a percentage of revenue with the most innovative being top quintile and the least innovative being bottom quintile of the stocks in the S&P 1500 index. Stocks were divided into quintiles based on R&D spending-to-revenue and calculated monthly for the 10-year period ended May 2022. * Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders.” The performance data quoted represents past performance, which is not an indication or a guarantee of future results. Innovative companies may be defined as those companies with a high ratio of annual R&D investment to revenue. Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue.
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Disclosure
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of July 2022. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. Risk Disclosures : Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases and similar public health threats, recessions, or other events could have a significant impact on investments. Past performance is not indicative of future performance . Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue. Companies exploring new technologies may face regulatory, political or legal challenges that may adversely impact their competitive positioning and financial prospects. Also, developing technologies to displace older technologies or create new markets may not in fact do so, and there may be sector-specific risks as well. As is the case with any industry, there will be winners and losers that emerge and investors therefore need to conduct a significant amount of due diligence on individual companies to assess these risks and opportunities.
Important Information for US Investors : This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund and ETF shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds.
Important Information for UK and EU Investors : This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation.
Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries.
Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd. Alger Group Holdings, LLC (parent company of FAM and Alger Management, Ltd.), FAM, and Fred Alger & Company, LLC are not authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA. Important information for Investors in Israel : This material is provided in Israel only to investors of the type listed in the first schedule of the Securities Law, 1968 (the "Securities Law") and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law.
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Disclosure
The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market. The S&P Composite 1500 is an unmanaged index that covers approximately 90% of the U.S. market capitalization. The Russell 1000® Growth Index is an unmanaged index designed to measure the performance of the largest 1000 companies in the Russell 3000 Index with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Russell 3000 Growth index is an unmanaged index considered representative of U.S. growth stocks. Russell 3000 Value index is an unmanaged index considered representative of U.S. value stocks. The Russell 1000 Index is an unmanaged index considered representative of large cap stocks. The Russell 2000 Index is an unmanaged index considered representative of small cap stocks. S&P SmallCap 600 Growth Index is an unmanaged index considered representative of small-cap growth stocks. The Nasdaq Composite Index is a broad-based, capitalization-weighted index of all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market. The S&P 500 Growth Index is an unmanaged index considered representative of large-cap growth stocks. The S&P 500 Value Index is an unmanaged index considered representative of large-cap value stocks. The indices presented are provided for illustrative purposes, reflect the reinvestment of dividends and do not assess fees and expenses that would have the effect of reducing returns. Investors cannot invest directly in any index. The index performance does not represent the returns of any portfolio advised by Fred Alger Management, LLC and actual client results might differ materially than the indices shown. Note that past performance is no guarantee of future results. Comparison to a different index might have materially different results than those shown. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell ® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. The VIX Index is a calculation designed to produce a measure of constant, 30-day expected volatility of the U.S. stock market, derived from real-time, mid-quote prices of S&P 500® Index (SPXSM) call and put options. EBITDA (earnings before interest, taxes, depreciation, and amortization) is a commonly used accounting measure of a company's overall financial performance. FactSet is an independent source, which Alger believes to be a reliable source. FAM, however, makes no representation that it is complete or accurate.
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Fred Alger Management, LLC • 100 Pearl Street, New York, NY 10004 • 800.992.3863 • www.alger.com
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