Bespoke’s Morning Lineup – 1/2/25 – A Tale of Two Timeframes
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“Self-education is, I firmly believe, the only kind of education there is.” – Isaac Asimov
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Happy New Year! After the terrible end of the year for equities, US stocks are on pace to start the year on the right foot. Both the S&P 500 and Nasdaq were indicating gaps up of over 1%, which would have put the S&P 500 on pace for its best opening day since 2013, but they have since pulled back a bit and are both up just under 1%. While US stocks are on pace to start positively, the same can’t be said for international markets. Chinese stocks traded down over 2% after the Manufacturing PMI reading for the world’s second-largest economy came in weaker than expected and just barely in expansionary territory. That decline was the worst opening day for Chinese stocks since 2016.
In Europe, the tone isn’t nearly as weak, but equities in the region are mixed as the STOXX 600 trades modestly lower. The Eurozone Manufacturing PMI decelerated slightly from 45.2 to 45.1. Meanwhile, concerning inflation, ECB President Lagarde commented “We have made significant progress in 2024 in bringing down inflation and hopefully 2025 is the year when we are on target.”
In the US, the only economic reports on the calendar are jobless claims at 8:30 (better than expected on both an initial and continuing basis), the final Manufacturing PMI from S&P for December at 9:45, and then Construction Spending at 10 AM. The ISM Manufacturing Index will be released tomorrow.
December wasn’t a good month for bulls, and the last several days were bad to a historic degree. The chart below shows the performance of the S&P 500 from the close before Christmas to year-end with the S&P 500 down 2.6%. As shown in the chart below, that ranks as the worst performance for the closing days of the year since at least 1952 and the 12th year during that span that it fell over 1%.
Best Performing Stocks of 2024
Below is a look at the 20 best performing stocks in 2024 of current Russell 3,000 members. As shown, each of these stocks gained at least 349% last year, with eleven gaining 500%+ and four gaining 1,000%+.
Below is a one-sentence description of what each of the 20 best performing stocks in the Russell 3,000 in 2024 does to generate revenues:
- GeneDX (WGS): Provides advanced genetic testing and analysis to support precision medicine and healthcare solutions.
- Rigetti Computing (RGTI): Develops cutting-edge quantum computing systems and software for various industries.
- Sezzle (SEZL): Offers “buy now, pay later” financing solutions for e-commerce platforms and retailers.
- Dave (DAVE): A personal finance app designed to help users manage expenses, avoid overdraft fees, and build credit.
- SoundHound AI (SOUN): Develops AI-powered voice recognition and conversational intelligence solutions for businesses.
- D-Wave Quantum (QBTS): Specializes in quantum computing hardware and software to solve complex optimization problems.
- AppLovin (APP): Provides tools and services for mobile app marketing and monetization.
- Intuitive Machines (LUNR): Focuses on lunar exploration technologies and space systems for commercial and government missions.
- Root (ROOT): Offers personalized auto insurance powered by advanced data analytics and telematics.
- Summit Therapeutics (SMMT): Develops innovative therapies for infectious diseases and other critical health challenges.
- Redwire (RDW): Provides advanced space solutions, including manufacturing, infrastructure, and engineering for space exploration.
- RealReal (REAL): Operates a luxury consignment platform for buying and selling pre-owned high-end goods.
- NuScale Power (SMR): Develops modular nuclear reactor technology for clean and efficient energy production.
- Candel Therapeutics (CADL): Focuses on the development of oncolytic viral therapies for cancer treatment.
- Innodata (INOD): Provides data annotation, AI model training, and digital content services for enterprises.
- Janux Therapeutics (JANX): Develops innovative immunotherapies designed to treat various types of cancer.
- MicroStrategy (MSTR): Offers enterprise analytics, business intelligence software, and cryptocurrency-focused solutions.
- Rocket Lab (RKLB): Designs and manufactures launch vehicles and space systems for small satellite deployments.
- Byrna Technologies (BYRN): Produces non-lethal self-defense products and devices for personal and law enforcement use.
- Palantir Technologies (PLTR): Provides data analytics platforms and solutions for government and enterprise use.
The Most Popular Brunch Reads Articles of 2024
There’s been a ton of news this year and Bespoke has covered the biggest headlines. Throughout the year, our weekly Brunch Reads — a linkfest of some of our favorite articles each week — has also shared what we found to be some of the most interesting stories that received less coverage. The links are not only market-related but also cover other interesting subjects. With the year winding down, we wanted to tie a bow on the links that got the most love from Bespoke Sunday Brunch readers, so below, we have provided links to each month’s most popular article. Enjoy!
January
Warren Buffett’s Investment Protégé Grew His Retirement Fund From $70,000 To $264 Million — An Account He Opened When He Earned Just $22,000 Per Year: ‘In A Perfect World, Nobody Would Know About This Account’ (Yahoo Finance)
When he was 22 years old in 1984, Ted Weschler was making $22,000 a year. He opened an IRA and grew it to $70,000 five years later. Weschler left his job as a junior financial analyst started a private equity firm, and then launched a hedge fund in 2000 that delivered a compounded annual return of 22% until 2011. He joined Berkshire in 2012, Throughout his career, and by 2021, that $70,000 exploded to $264 million. Aside from his stock picks, Weschler called on the value of investing in index funds over the long term, especially for average investors over the long term. [Link]
Continue reading this post on the most clicked-on links by Bespoke readers in 2024 by logging in if you’re already a member or signing up for a trial to one of our two membership levels shown below! You can cancel at any time.
The Closer – 60/40, Best and Worst, AI Update – 12/31/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look into the performance of 60/40 portfolios (page 1) in addition to other assets (page 2). We then review the best and worst performing equities on the year (page 3) followed by an update of the latest read on home prices (page 4). We round out tonight’s report with some commentary on the quarterly rebalancing and newest changes to our AI baskets (page 5).
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Bespoke’s Morning Lineup – 12/31/24 – That’s a Wrap
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“the cause of the disease is not clear.” – China People’s Daily, 12/31/2019
To view yesterday’s CNBC segment, you can just click on the image below.
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Of the international markets that are open for trading on this last day of the year, it’s been a mixed session. In Asia, China’s Manufacturing PMI came in weaker than expected, barely hanging onto growth at 50.1, and in Korea, CPI for December rose 0.4% m/m, double consensus expectations. In Europe, the STOXX 600 is up about 0.25%, but Germany and Italy are closed while other major exchanges will have early closes. Here in the US, futures are looking to close out a lousy December on a positive note, and the only economic report on the calendar is an October update of Case Shiller Home Price indices. While the tone is positive, barring a major rally, the S&P 500 will close out the month with a decline of over 1%.
It started five years ago today with a short statement from China about a flu outbreak in a market that most people had never heard of. Whatever. What’s everyone’s plan for New Year’s? More stories started to show up on Drudge Report in the following days. Coronavirus? Who’s got limes? As January continued, the story picked up steam. Hey, you hear about that flu-thing in China? On January 20th, the first case in the US showed up in Washington State. Wow! But they probably got it in China. Three days later, China put the entire city of Wuhan, a population of 11 million under complete lockdown, and pictures started circulating of trucks driving down the streets spraying disinfectant into the air. What? They would never do something like that here! Then, people started getting sick on cruise ships. People always get sick on cruise ships. What else is new? Then, more cases started to show up in Arizona, California, and other parts of the country, and there was also a breakout in Italy. Maybe I should have bought some of those masks after all. From there, the case counts started to explode, and markets sold off. Where can I find a roll of toilet paper? In early March, an outbreak in New Rochelle, NY resulted in the first US “containment zone” and then the shutdowns/lockdowns started. Within weeks schools and businesses across the country were closed. The skies were silent, highways were deserted, and the country was ‘masked up’ and closed for business. Wow. They really did do that here.
The first half of 2020 will likely go down as the strangest period of most people’s lives, and it will take decades for the full story and impact of Covid to be realized. In the markets, though, the reaction was swift. Equities initially rallied to start 2020 but peaked in mid-February. At its closing low in March 2020, the S&P 500 was down over 30% YTD, and at their respective lows in the first half of 2020, every sector was down at least 20% with three sectors – Energy, Financials, and Industrials – down over 40%. It was enough to make any investor with a retirement account sick, and some no doubt attempted to cut their losses and raise cast into the declines.
The pain in markets from Covid was short-lived, though, and showed once again that panicking in the markets rarely works out. While many sectors adapted and managed to thrive despite onerous restrictions, the flood of stimulus unleashed on the global economy drove the rebound. Through yesterday’s close, not only is every sector higher now than it was when Covid made its public debut, but the S&P 500 is up over 80%, and all but two sectors are up over 30%.
As shown in the chart below, the biggest winner has been Technology, and deservedly so. Without the technology that different parts of the economy utilized during and after Covid, the economy would have been in a much different place now. While no sector is down since the start of 2020, Real Estate has been the worst-performing sector with a cumulative gain of just 5.7%. The sharp increase in interest rates during this span has been the major culprit, but the fact that companies are still having trouble getting their employees into the office hasn’t helped either.
The Closer – Globalizing Gas, Positioning – 12/30/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a look into the explosion of US natural gas exports (pages 1 and 2). We then review the latest positioning data (pages 3 – 6).
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Concentration
On Friday, we published our annual recap report for 2024. The report provides a complete rundown of everything that went on across financial markets this year, including the trend of incredible concentration in stocks up at the top. Replicated below is a chart from that report showing the combined market cap of the S&P 500’s eight largest stocks as a percentage of total S&P 500 market cap for each year going back to 1994.
Currently, the eight largest members of the S&P—at the moment those are the Magnificent Seven names plus the newest trillion-dollar stock: Broadcom (AVGO)—account for 35.6% of S&P 500’s total market cap. That’s a record high. We would also note that the growing share of the S&P 500’s market cap that this small handful of stocks accounts for isn’t exactly a new phenomenon. Over the past decade, the largest stocks’ share of market cap has steadily been growing, and actually, this isn’t the only record high to highlight with prior records being set at 29% at the end of 2021 and 30% last year. With that said, the 5.6 percentage point jump versus last year is one of the largest one-year increases in concentration at the top that we’ve seen.
Drilling down a step deeper, below we again show the collective share of S&P 500 market cap possessed by the eight largest members for each year since 1994, but this time with a breakdown by sector. Of the current group of largest stocks, half belong to the Tech sector: NVIDIA (NVDA), Apple (AAPL), Microsoft (MSFT), and Broadcom (AVGO). Of course, zooming out for context, the Tech sector, as a whole, holds a historically massive S&P 500 weighting at 32%, but these four stocks alone account for a huge share (21.5 percentage points) of that. In other words, the S&P 500 is heavily concentrated in Tech, and Tech is heavily concentrated in these four stocks.
As for the other largest members, Communication Services names—Meta Platforms (META) and Alphabet (GOOGL)—account for a combined 7.21% of the S&P 500’s total market cap and the remaining two names from the Consumer Discretionary sector—Tesla (TSLA) and Amazon (AMZN)—are to thank for 6.95%.
As for the rest of the sectors, 2024 is going to end with Financials not having a single stock in the eight largest S&P members for the first time since 2009. This is thanks to Broadcom (AVGO) unseating Berkshire Hathaway (BRK.B) as the index’s eighth largest stock. Meanwhile, Industrials hasn’t had a stock land in the top eight since 2015, and Consumer Staples has now gone a decade without a top eight stock. In the past five years, Health Care has only found its way into this group once in 2022, but otherwise, it has been absent. Materials, Real Estate, and Utilities haven’t had a member land in the top eight largest stocks in any year since at least 1993.
Again, the present situation is historic. Aside from there never having been such a large share of the S&P 500’s market cap coming from the top, there also hasn’t been a year since at least 1993 when these top eight stocks have had such narrow sector representation. As shown below, only three sectors are represented among the S&P 500’s top eight stocks. Historically, it has been most common to see six different sectors represented among these eight names.
Bespoke Matrix of Economic Indicators – 12/30/24
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
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The Bespoke 50 Growth Stocks — 12/30/24
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. There were 12 changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. With Bespoke Premium, you’ll receive a number of daily market updates from us along with our weekly newsletter and a portion of our investor tools. With Bespoke Institutional, you’ll receive everything that’s included with Premium plus additional daily macro analysis and more stock-specific research.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated monthly on Thursdays unless otherwise noted. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning after publication. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 12/30/24 – Rolling Over into Year End
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“When people are intimidated about having their own opinions, oppression is at hand.” – Jimmy Carter
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Former President Jimmy Carter didn’t leave office as the most popular President, but his years after serving in the Oval Office helped to improve his legacy as one of the most admired men in modern American history. Since 1946, Gallup has run an annual survey asking Americans “What man that you have heard or read about, living today in any part of the world, do you admire most? And who is your second choice?” In the survey’s history, Billy Graham tops the list with 61 of the top 10 finishes. Ronald Reagan ranks a distant second with 31 top-ten finishes, but right behind him, Jimmy Carter ranks third with 29, slightly ahead of Pope John Paul II (27) and Bill Clinton (26). Living to just over 100, the 39th President lived a full life.
US futures were trading just modestly lower until shortly before 8 AM Eastern but have weakened considerably since then on little news. Overnight in Asia, Japan and Korea both ended their trading years on a negative note with Japan’s Nikkei down 1% and the Kospi down a more modest 0.2%. In terms of economic data, Japan’s Manufacturing PMI came in below 50 for the sixth straight month. Trading in Europe had been much more subdued than in Asia, but these indices have also seen a pickup in the selling as US futures rolled over. Here in the US, both today and tomorrow will be full trading sessions, and markets will be closed on Wednesday for New Year’s Day.
Getting back to the US, this morning’s weakness will put the S&P 500’s 50-day moving average back into play after it held that level on Friday. As shown in the chart below, the technical picture isn’t looking particularly positive as we close out the year. The index has been gradually trending lower since its peak on 12/6. What a difference a few weeks make.
