The Closer – Fiscal Stress, Central Banks, Commodities – 12/16/24
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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 Canadian political stress and corresponding market moves (page 1). We also check in on our Fedspeak Monitor Index (page 2) in addition to a preview of the busy week of central bank happenings (page 3). After checking in on commodity prices (page 4), we preview this week’s Treasury auctions (page 5) and look at the latest positioning data (pages 6-9).
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Daily Sector Snapshot — 12/16/24
Quantum Stocks Leap
Alphabet (GOOGL) has continued to surge higher since last week when it had a delayed response to news that its Willow quantum computing chip had made a breakthrough in the speed in which it can solve problems. GOOGL shares are up another 4.5% today and are now up more than 13% since last Monday’s close. As shown below, GOOGL experienced a sharp drawdown (-22%) from mid-July to mid-September, but its recent jump higher has taken it back to new all-time highs.
Since the “quantum” news from Google last week, smaller companies focused on quantum computing have skyrocketed. Below is a table of four small-cap quantum computing stocks along with their year-to-date and quarter-to-date percentage changes. Below the table, we provide price charts for each stock.
As you can see, all four of these stocks are up more than 300% this quarter alone, while Rigetti (RGTI) and Quantum Computer (QUBT) are up more than 1,000% quarter to date! A little over a month ago, QUBT was trading for $1.38/share, but today shares are trading at $10.91. Rigetti (RGTI) was at $1.41/share on 11/15, and this afternoon shares are trading at $8.73.
While these quantum stocks are experiencing a quantum leap right now as speculators trade the Google news, this is their second rodeo. As you can see in the charts below, IONQ is the only one of these four quantum stocks that is currently trading at an all-time high. RGTI, QUBT, and QMCO all traded at prices higher than they’re at now during the COVID stimulus-fueled SPAC and meme-stock craze back in 2021, and then they all experienced drawdowns of more than 95%! IONQ managed to only see a drawdown of 88% from its 2021 high to its late 2022 low.
For investors that would rather play an ETF than a specific stock in the quantum computing space, there’s the Defiance Quantum ETF (QTUM), which we show below.
During bull markets, you often see short bursts higher like this in speculative industries due to the “FOMO” trade (fear of missing out). And they often end in tears, as we’ve already seen once in the quantum computing space. This is another way of us reminding you to “be careful out there.” These kinds of moves are not normal and usually prove that there is no easy money on Wall Street.
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Chart of the Day: Big Week For Central Banks
Bespoke’s Morning Lineup – 12/16/24 – Abnormally (or Normally) Bad
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.
“Abnormally good or abnormally bad conditions do not last forever.” – Benjamin Graham
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s been a weak start to the week for global equities in Asia and Europe. In Asia, Retail Sales in China came in weaker than expected while Industrial Production was in line with estimates. In response to the data, Chinese 10-year yields made another new low while policymakers hint at fiscal and monetary moves to help break the rut in the Chinese economy. European stocks are currently modestly lower in response to weaker-than-expected flash manufacturing reports and a Moody’s downgrade of France.
While international markets are lower, US futures remain undeterred with S&P 500 futures trading up by about 0.2% while Nasdaq futures are up by twice that amount. The only economic reports on the calendar this morning are Empire Manufacturing which is expected to pull back from November’s surge and flash PMI readings for the Manufacturing and Services sectors. The big event of the week will be Wednesday’s Fed decision. While a 25 bps cut is all but certain, the market will be intently focused on the statement, revised economic expectations, and Powell’s press conference. With inflation proving to be stickier than most would like, a ‘hawkish cut’ has become increasingly priced in.
Abnormally bad may be a good way to describe the performance of value stocks to start December. The chart below shows the performance of the S&P 500 Value (IVE) and S&P 500 Growth (IVW) ETFs over the last year. While the S&P 500 Value ETF has seen its share of ups and downs within a longer-term uptrend over the last year, December has been consistently weak with ten straight days where it has closed lower than it opened.
As shown above, while value has been consistently weak, growth has rallied to new highs powered by mega-cap tech stocks. As a result of the divergent performances between the two styles, the S&P 500 Value ETF has declined 4.0% over the last ten trading days while the S&P 500 Growth ETF has rallied 3.4%. The chart below shows the 10-day performance spread between the two ETFs since their inception in mid-2000.
Over the last four years, there have been other periods when large-cap value stocks significantly underperformed growth while large-cap growth significantly underperformed at other times. There were other periods of elevated volatility between the two styles around the dotcom peak and during the Financial Crisis, but neither lasted anywhere as close to long as the current period. The term has been thrown around often in the last decade or longer, but is this era of elevated volatility between the performance of the two investment styles a new normal?
Even with the wide swings in performance spread of Value and Growth, the current spread is extreme relative to recent history as there have been only a few times when the spread was this wide, and they have all occurred in the post-Covid period (mid-2020, March 2022, and June 2024).
Brunch Reads – 12/15/24
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.
The Coveted Ice Cream Cone: Although it may almost be the Winter Solstice, it was on this date, December 15th, 1903, that Italo Marchiony, an Italian immigrant and pushcart vendor in New York City, received a patent for a mold designed to make ice cream cones. Marchiony’s invention made ice cream enjoyable on the go, which was groundbreaking at a time when ice cream typically required a bowl. The cone was a convenient way for the fast-paced New Yorkers to enjoy what was otherwise a messy treat.
Marchiony’s cone was sturdy and edible, making it practical and eco-friendly, long before those were buzzwords. He created the cones to replace fragile glass cups that customers often broke or failed to return. His patented mold produced a cone with a crisp, uniform texture, ensuring that each one held its shape and could handle a generous scoop of ice cream.
Though Marchiony was granted the patent in 1903, the concept of the ice cream cone gained widespread popularity at the 1904 St. Louis World’s Fair. Vendors at the fair served ice cream in rolled wafers, a style inspired by Marchiony’s invention but adapted by others. This cemented the ice cream cone as a timeless dessert vessel.
So, the next time you enjoy an ice cream cone, remember the winter day over a century ago when Marchiony’s clever mold turned a simple idea into an iconic ice cream fan favorite. It seems so simple now, but there was a time when no one had ever thought of it.
Housing & Real Estate
More Americans are living in malls, as developers get creative to help ease the housing crisis (CNBC)
Malls are turning into spots where you can shop, eat, and live all in one place. Developers are transforming old department stores into apartments to tackle the housing shortage and breathe life into struggling retail spaces. Living at the mall comes with cool perks like food courts and gyms right downstairs, but things like high construction costs and zoning headaches are still making it tricky to pull off everywhere. [Link]
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Daily Sector Snapshot — 12/13/24
Q4 2024 Earnings Conference Call Recaps: Costco (COST)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Costco’s (COST) Q1 2025 earnings call.
Costco (COST) operates a global network of membership-only warehouse clubs, offering a diverse range of high-quality goods at competitive prices. Known for its Kirkland Signature private label and bulk purchasing model, Costco serves over 77 million households worldwide. This quarter, COST reported a 7.5% YoY increase in net sales to $60.99 billion, with US comparable sales up 5.2% (7.2% adjusted for gas deflation). Membership income rose 7.8%, bolstered by 77.4 million paid memberships and a 92.8% US renewal rate. On the call, management highlighted record-breaking warehouse openings and strong e-commerce growth, with 13% higher comps driven by Costco Logistics’ near 1 million big-and-bulky deliveries. Inflation was flat overall, but fresh foods saw high single-digit growth. COST also launched early retail media campaigns yielding 2-3x typical ad returns. Consumer trends revealed a bifurcation in spending: premium products like high-quality meat cuts performed well, while budget-conscious members gravitated toward lower-cost proteins. On the mixed results, COST shares traded modestly positive on 12/13…
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The Triple Play Report — 12/13/24
An earnings triple play is a stock that reports earnings and manages to 1) beat analyst EPS estimates, 2) beat analyst sales estimates, and 3) raise forward guidance. You can read more about “triple plays” at Investopedia.com where they’ve given Bespoke credit for popularizing the term. We like triple plays as an indication that a company’s business is firing on all cylinders, with better-than-expected results and an improving outlook. A triple play is indicative of positive “fundamental momentum” instead of pure fundamentals, and there are always plenty of names with both high and low valuations on our quarterly list.
Bespoke’s Triple Play Report highlights companies that have recently reported earnings triple plays, and it features commentary from management on triple-play conference calls, company descriptions and analysis, and price charts. Bespoke’s Triple Play Report is available at the Bespoke Institutional level only. You can sign up for Bespoke Institutional now and receive a 14-day trial to read this week’s Triple Play Report, which features 24 new stocks. To sign up, choose either the monthly or annual checkout link below:
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Sportradar (SRAD) is an example of a company that recently reported an earnings triple play, its first since its IPO in 2021. The stock rallied 13% in reaction to the triple play on 11/7, which has subsequently triggered further gains putting the stock up about 40% since the beginning of November. That’s an impressive six weeks! Despite the gains, shares remain roughly 35% below their IPO price, so they still have ground to make up.
SRAD works as the behind-the-scenes engine driving everything from live game updates to sports betting platforms. The company partners with big leagues like the NBA, NHL, and more, collecting and distributing real-time statistics to media outlets, sportsbooks, and leagues worldwide. They also use advanced technology to spot suspicious betting patterns. What makes SRAD particularly interesting is its position at the intersection of two booming trends: the global rise of legal sports betting, and the increasing demand for real-time, data-driven fan experiences. As the betting markets expand, especially in the US, SRAD’s services are becoming indispensable for sportsbooks looking to provide accurate odds and more engaging features to bring more business to their platforms. There have also been several companies that we’ve recently covered noting the growing popularity of sports, whether it be the recent and upcoming Olympics, World Cup, College Football, and NFL playoffs, or the broader rise of women’s sports as seen with women’s college basketball and the WNBA. Sports is undoubtedly a hot place to be. Additionally, SRAD’s embrace of AI and predictive analytics also sets them apart and brings them into the AI slipstream, allowing them to offer next-gen insights that could redefine how fans and businesses interact with sports. You can read more about SRAD and the 23 other triple plays we covered in our newest report by starting a Bespoke Institutional trial today.
Bespoke Investment Group, LLC believes all information contained in these reports to be accurate, but we do not guarantee its accuracy. None of the information in these reports or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, past performance of any investment is not a guarantee of future results. Bespoke representatives or clients may have positions in securities discussed or mentioned in its published content.
Q4 2024 Earnings Conference Call Recaps: Broadcom (AVGO)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Broadcom’s (AVGO) Q4 2024 earnings call.
Broadcom (AVGO) develops advanced chips for networking, broadband, wireless, and storage applications, while its software portfolio supports data center virtualization, cybersecurity, and enterprise solutions. AVGO serves hyperscalers, enterprises, and OEMs, providing critical components for AI workloads, cloud computing, and telecommunications. In Q4, AVGO reported revenue up 51% YoY to $14.1 billion. AI was a standout, contributing $12.2 billion in fiscal 2024, up 220%, driven by custom AI accelerators and networking growth of 158%. VMware’s integration boosted infrastructure software revenue to $5.8 billion. Semiconductor revenue hit $8.2 billion, with AI networking comprising 76% of networking revenue. AVGO also highlighted a $60–90 billion serviceable AI market opportunity by 2027. Forward guidance projects Q1 revenue of $14.6 billion, driven by AI’s 65% growth and software expansion, underscoring its strategic pivot to AI dominance. On the AI optimism, AVGO shares were up 20% on Friday morning despite a narrow miss on the top line…
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