Why This Former Money Manager Thinks Hyper-Growth Stocks Are Positioned To Rally

High-growth stocks have been facing selling pressure over the last few months amid rising Treasury yields and increasing inflation concerns. 

Many think there is more downside ahead for some of the hyper-growth names, but former money manager Puru Saxena sees it playing out differently.

"When the sugar high from QE and fiscal stimulus wears off, the truly promising (fundamentally sound) companies with massive growth runways and excellent management teams will shine again," Saxena said Thursday on Twitter Inc TWTR.

Saxena thinks the downside from current levels is "fairly limited" for growth stocks. 

"When [the] economy wobbles in Q1 and bond yields come off, high growth stocks might bottom and start rallying before the indices," he said.

Saxena noted that both the Nasdaq and the S&P 500 indices declined more than Cathie Wood's flagship fund, ARK Innovation ETF ARKK, did on Thursday. The Innovation ETF is often used as a gauge for high-growth names. 

Related Link: ARK Innovation ETF Hits New 52-Week Low: Here Are The Top 5 Holdings In Cathie Wood's Flagship Fund

The former money manager thinks the recent strength in FAANG names, as well as Microsoft Corporation MSFT, will cease and some of the beaten-down, high-growth stocks will lead the next leg up. 

"After this bear-market, a new crop of hyper-growth companies [are] likely to emerge as the liquid, institutional-grade leaders of the next bull market," according to Saxena. 

ARKK Price Action: Ark Innovation ETF was down 5.73% at $71.52 Friday at publication.

Photo: ArtTower from Pixabay.