Bespoke’s Morning Lineup – 9/3/24 – Right on Cue
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“Practice isn’t the thing you do once you’re good. It’s the thing you do that makes you good.” – Malcolm Gladwell
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Right on cue, the first trading day of September has been accompanied by weakness in the futures. One caveat worth pointing out is that much of the weakness is only erasing the late-day surge in the final minutes of trading last Friday. Overnight in Asia, most major benchmarks were also lower, but the magnitude of the losses was mostly modest. Similarly in Europe, the STOXX 600 is down less than 0.5%.
Looking ahead to the rest of the trading day, we’ll get a first look at manufacturing activity and sentiment for August with Manufacturing PMIs from S&P at 9:45 and ISM at 10. Also at 10, we’ll get the latest update on Construction Manufacturing, but that’s a July number.
The negative level of equity futures to kick off September should surprise no one as stocks have gotten a lot of practice being weak in September. Just over the last 20 years, the S&P 500’s median performance the day after Labor Day has been a decline of 0.14% with gains just 40% of the time. More recently, the first real workday of September has been even weaker with declines in seven straight years for a median loss of 0.42%.
With a weak start, Labor Day week has also tended to be weak. Over the last 20 years, the median decline has been 0.20% with gains just half of the time. Over the last four years, Labor Day week has seen declines of at least 1.3% three times. The one exception was in 2022 when the S&P 500 rallied 3.65%.
During the rest of September after Labor Day, performance has been extremely bifurcated. While the S&P 500 has been positive slightly more often than it has been negative, and the median return has been slightly positive (0.26%), the last four years have been weak. As shown in the chart below, performance from the Friday before Labor Day through month end has been negative by at least 1.87% in of the last four years.
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A Left-for-Dead Blue Chip Bounces Back: 3M (MMM)
When you have some time, be sure to listen to the latest episode of The Compound where Bespoke’s Paul Hickey joined Josh Brown, Michael Batnick, and Gunjan Banerji for an in-depth conversation about markets. You can find it at this link or wherever you typically listen to podcasts.
With four months left in 2024, below is a look at the year-to-date performance of the 30 stocks in the Dow Jones Industrial Average. Would you believe that previously left-for-dead blue chip 3M (MMM) is currently the Dow’s best performing stock on the year? With a gain of more than 50% YTD, MMM is just ahead of Walmart’s (WMT) 48.4% gain.
Three stocks in the Financials sector round out the top five: American Express (AXP), Goldman Sachs (GS), and JP Morgan (JPM).
On the flip side, current left-for-dead blue chips have been the year’s worst performers in the Dow: NIKE (NKE), Boeing (BA), and Intel (INTC). All three of these stocks are down more than 20% on the year.
Below is a look at the growth of a hypothetical $10k investment in 3M (MMM) shares at the start of 1990 with dividends re-invested. MMM shares peaked more than six years ago in early 2018, where that $10k had turned into nearly $300k at the highs. From its high point in early 2018 through late 2023, MMM experienced a drawdown of more than 60%, leaving the $10k in 1990 down to just $115k at its recent lows.
With a year-to-date gain of more than 50% in shares, though, the current value of $10k in 1990 is back up to $226k.
If it weren’t for 3M’s dividend, long-term returns would be much more muted. An easy way to show this is to look at MMM’s share price change versus its total return since 1990. Whereas MMM shares are up just 741% in price since 1990, its total return has been 2,165%. This means that well over 50% of MMM’s returns over this period have been from re-investing the dividends paid out by the company.
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Brunch Reads – 9/1/24
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
Bespoke’s Paul Hickey appeared on The Compound podcast with our friends Josh Brown and Michael Batnick of Ritholtz Wealth earlier this week, and the episode is now available. You can find it at this link, by clicking on the image below, or wherever you typically listen to podcasts. Give it a listen and let us know what you think.
The Germans Invade Poland: On September 1st, 1939, Germany invaded Poland, marking the beginning of World War II. The invasion followed months of escalating tensions in Europe, driven by Hitler’s expansionist ambitions. Germany’s Blitzkrieg involved rapid, coordinated attacks using aircraft, tanks, and infantry, overwhelming Polish forces. Hitler justified the attack by a fabricated attack on a German radio station, known as the Gleiwitz incident, staged by the Nazis to claim that Poland had attacked first. The invasion was brutal and swift, and the Polish army was ill-prepared and outmatched in numbers and modern military equipment.
An anecdote often recounted from the early days of the invasion is the desperate but courageous charge of the Polish cavalry at Krojanty on September 1st. The cavalry, armed with sabers and lances, bravely charged the German infantry, unaware that they were supported by armored vehicles. Though ultimately a tragic loss, this event symbolized Poland’s fierce but doomed defense.
Creating the NFL Schedule (NFL Football Operations)
No matter what colors you bleed on NFL Sundays, creating the NFL schedule is no easy task. It involves balancing the needs of the fans and broadcast partners, and considering the logistical challenges. The NFL has a team of experts to navigate around pre-existing events at stadiums, adhering to a strict rotational formula for matchups, and managing the demands of the league’s six major broadcast partners. The process involves generating thousands of potential schedules using cloud-based computing, ultimately narrowing it down to the one that best fits all these factors. The 2024 schedule also includes international games in Brazil, the UK, and Germany. As the top teams and storylines emerge, the league will also utilize flex scheduling to ensure that prime-time games feature top-tier matchups. [Link]
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The Bespoke Report – 8/30/24 – Holding Pattern
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On Thursday, Paul Hickey and the Wall Street Journal’s Gunjan Banerji sat down with Josh Brown and Micheal Batnick for an episode of The Compound. It was a great conversation about markets. politics, and many other things. Gunjan, Josh, Micheal, and the rest of the Compound crew are an awesome group, so take some time over the long weekend to give it a listen, and let us know what you think.
Daily Sector Snapshot — 8/30/24
Bespoke’s Morning Lineup – 8/30/24 – Eight Down, Four to Go
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“What we learn from history is that people don’t learn from history.” – Warren Buffett
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The unofficial end of earnings season was over two weeks ago, but earnings-related news has dominated recent headlines. Yesterday, Nvidia’s (NVDA) report sparked a 6% decline in the stock even as the rest of the market rallied. This morning, futures are trading higher in response to some positively received reports from Dell (DELL), Autodesk (ADSK), and Lululemon (LULU).
While the tone is positive now, today is the last trading day of August, and next week starts what has been the worst month of the year for equities. If you take a look at the bottom of page one of today’s Morning Lineup you can see just how bad the next one-month period has been relative to all other one-month periods throughout the calendar.
From an economic perspective, the month will end on a busy note with Personal Income, Personal Spending, and PCE at 8:30. These reports will be followed by Chicago PMI at 9:45 and Michigan Sentiment at 10 AM. After that, expect things to quickly quiet down as traders head out for the long weekend. As far as the 8:30 data is concerned, it was mostly in line with expectations except for the reading on Personal Income which was better than expected.
They say you can’t teach an old dog new tricks, and in the case of Warren Buffett who turns 94 years young today, all he still does is win. One long-held selling point of Berkshire Hathaway (BRK/a) has been that while the stock can tend to underperform the market during strong bull markets, it’s when things start to hit the fan that the stock proves its worth. That’s what makes its performance over the last 12 months so impressive. Even as the S&P 500 has rallied 26.2% on a total return basis over the last twelve months, BRK/a has done even better outperforming the index by three percentage points.
Over the last five years, Berkshire has separated itself from the S&P 500 by even more. As shown below, BRK/a’s gain of 130.2% has exceeded the gain of the S&P 500 by more than 20 percentage points.
Over the last ten years, the margin of outperformance hasn’t been quite as strong with BRK/a outperforming the S&P 500 by less than six percentage points.
Lastly, over a 20-year time frame, BRK/a’s performance of nearly 713% outperforms the S&P 500 by 65 percentage points. When a stock outperforms the broader market with such consistency over so many different timeframes you can chalk it up to more than just luck. It may have taken until just before Buffett’s 94th birthday for his company to reach the trillion-dollar club but he proved long ago that he is the greatest investor in at least a generation.
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The Closer – Dollar Stores, Bulls Above 50%, Energy – 8/29/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we kick off with a rundown on dollar store stocks (page 1) followed by an update of investor sentiment (page 2). We then review the latest revisions to GDP (page 3) in addition to monthly estimates for US energy production (page 4). We then recap today’s 7-year note auction (page 5) and close out with an update on the latest demographic data for jobless claims (pages 6 and 7).
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Bespoke’s Weekly Sector Snapshot — 8/29/24
The Bespoke 50 Growth Stocks — 8/29/24
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 9 changes to the list this week.
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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.