Multi-asset investment specialist Saxo Bank is performing a dramatic cleanup of the bubble stocks basket as former bubble stocks are no longer meeting the criteria. This has led to 26 out of 40 stocks leaving the basket.

The bubble stocks basket was a high-flying basket in the beginning of last year, but the gradually higher interest rates and inflation pressures driven by higher energy prices forced investors to rethink equity portfolios. As a result a rotation process was set in motion which led to bubble stocks (speculative growth stocks) to be shredded in masse while commodity and value related stocks were increased in portfolios.

Saxo introduced its bubble basket on 8 January 2021 and updated its methodology during early February publishing a renewed basket on 12 February 2021 in which it warned of bubble stocks. Since that day almost a year ago, the bubble stocks basket is down 55.2%.

The methodology behind the bubble stocks basket is not changing and thus Saxo is still selecting the 40 largest stocks on market capitalization with the following characteristics:

• Market capitalization above $2bn
• Listed on exchanges in North America, Western Europe, Singapore, Japan, Australia, and Hong Kong
• 12-month forward EV/Sales above 8x
• 12-month forward EPS less than 0

Based on a current screening there are 26 stocks out of 40 stocks leaving the bubble stocks basket:

1. Kuaishou Technology
2. Sea Ltd
3. Airbnb Inc
4. NIO Inc
5. Snowflake Inc
6. DoorDash Inc
7. Roku Inc
8. Bilibili Inc
9. Teladoc Health Inc
10. XPeng Inc
11. Cloudflare Inc
12. Splunk Inc
13. Exact Sciences Corp
14. Gaotu Techedu Inc
15. Farfetch Ltd
16. DraftKings Inc
17. GDS Holdings Ltd
18. Ping An Healthcare and Technology Co Ltd
19. Innovent Biologics Inc
20. Zai Lab Ltd
21. Kingsoft Cloud Holdings Ltd
22. Yatsen Holding Ltd
23. Oak Street Health Inc
24. C3.ai Inc
25. Canopy Growth Corp
26. Appian Corp

Many of these companies still have market capitalization above $2bn and negative earnings expectations, but they have fallen a lot over the past year combined with revenue growing such that their 12-month forward EV/Sales ratio has gone below 8x.

The 26 new stocks entering the basket are:

1. Rivian Automotive Inc
2. Lucid Group Inc
3. NU Holdings Ltd/Cayman Islands
4. Cellnex Telecom SA
5. Okta Inc
6. SenseTime Group Inc
7. Grab Holdings Ltd
8. Confluent Inc
9. Qualtrics International Inc
10. Brookfield Renewable Corp
11. SentinelOne Inc
12. Robinhood Markets Inc
13. Samsara Inc
14. Gitlab Inc
15. Asana Inc
16. Monday.com Ltd
17. Biohaven Pharmaceutical Holding Co Ltd
18. Procore Technologies Inc
19. Kingdee International Software Group Co Ltd
20. Guidewire Software Inc
21. Ginkgo Bioworks Holdings Inc
22. Smartsheet Inc
23. Novocure Ltd
24. Shanghai Junshi Biosciences Co Ltd
25. Ascendis Pharma A/S
26. Intellia Therapeutics Inc

The table below shows the new updated bubble stocks basket and some key statistics.