Bespoke Stock Scores — 12/10/24
Q4 2024 Earnings Conference Call Recaps: Oracle (ORCL)
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 Oracle’s (ORCL) Q2 2025 earnings call.
Renowned for its flagship Oracle Database and Oracle Cloud Infrastructure (OCI), Oracle (ORCL) powers critical operations for clients ranging from multinational corporations to government agencies. ORCL’s strengths lie in its cloud capabilities, cutting-edge AI integrations, and multi-cloud partnerships with major players like Microsoft, Google, and AWS. This quarter was reportedly driven by cloud services, which now make up 77% of total revenue. Cloud revenue grew 24% to $5.9 billion, with infrastructure-as-a-service (IaaS) up 52%, supported by record AI demand. GPU consumption surged 336%, aided by partnerships with AI leaders like OpenAI and Meta. ORCL’s multi-cloud strategy gained traction, with database-at-cloud services live in 17 regions and 35 more planned. The company emphasized its modular data center strategy, doubling FY25 capex to meet demand efficiently. Remaining Performance Obligations (RPO) grew 50%, highlighting longer customer contracts. OCI’s scalability and AI supercomputers solidify ORCL’s leadership in generative AI and enterprise cloud solutions, positioning it for continued growth in FY25. Although it was an upbeat an optimistic call, ORCL’s results came in below what Wall Street analysts had anticipated, and the stock dropped 9% at the open on 12/10…
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Efficient Market?
Shares of Alphabet ($GOOGL) are trading up over 4% this morning, and outside of an earnings report, it would be the largest upside gap for the stock since March. This morning’s gap higher is also poised to take out short-term resistance from the post-election highs, putting the stock at its highest level since mid-July. So what’s the news driving the stock higher this morning?
There are only two notable stories out regarding the stock. The first is an analyst report from Piper Sandler naming GOOGL the top mega-cap stock to own in 2025. The analyst cited a product-driven resurgence and survey data showing that the company leads among its peers in AI. A bullish analyst report can always boost a stock, but a 4%+ rally in a company with a market cap of over $2 trillion? That seems a little excessive.
The only other catalyst being cited is a breakthrough the company announced in quantum computing where its Willow chip was able to solve a problem in five minutes that “would take one of today’s fastest supercomputers 10 septillion (that is, 1025) years — a number that vastly exceeds the age of the Universe.” The math problem the chip solved has no commercial applications as of yet, but it still marked a major breakthrough in quantum computing and seems to be a promising start. Besides the fact that GOOGL stock is trading higher this morning, other stocks involved in the quantum computing space are trading lower, indicating that this news is the more likely driver of the rally in GOOGL shares versus the Piper report.
What makes the rally in GOOGL shares this morning somewhat puzzling has to do with the timing of the news release. Below is a post from the company on X, discussing the breakthrough with its Willow chip with a link to the company’s blog post about it. Looking at the bottom left, you can see that it was posted Monday morning at 11:46 AM Eastern time. In other words, when the news of this chip was released, the market still had more than four hours of trading in which to react to it yesterday. During that time, the stock actually traded down marginally from the time of the release through yesterday’s close. Nothing clears the mind like a good night’s sleep, and after sleeping on the news last night, the market likes what it read!
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Bespoke’s Morning Lineup – 12/10/24 – Reversal
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.
“Having faith is believing in something you just know ain’t true.”– Mark Twain
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures are mixed this morning with the Dow trading slightly lower while the S&P 500 and Nasdaq futures along with Treasury yields, crude oil, gold, and bitcoin are all modestly higher. In terms of economic news, NFIB’s index of small business optimism saw a monster surge and rose to a 3+ year high in the wake of November’s election. Unit Labor costs for Q3 came in much lower than expected (0.8% vs 1.9% forecast) and Q3 Productivity was inline with forecasts at 2.2%.
Yesterday was a rough day for US stocks relative to the post-election period. With a decline of 0.61%, the only day worse since the election was on 11/15 when the S&P 500 fell 1.32%. In a post yesterday, we noted that the biggest losers of the day were the stocks that had the biggest YTD gains, and that can be seen in the performance of the Momentum ETF (MTUM) which fell 2.13% for its worst one-day decline since the election. Even after the relatively large drop yesterday, the MTUM ETF still managed to hang onto to its uptrend from the summer lows and also remains comfortably above its 50-DMA.
At the sector level yesterday, performance was essentially the opposite of sectors’ direction in the month after the election. As shown in the table and chart below, four of the five best-performing sectors from the election through Friday – Communication Services, Financials, Technology, and Industrials – were also four of the five worst-performing sectors yesterday. Similarly, the only three sectors down in the post-election period through last Friday – Health Care, Materials, and Real Estate – were the only three sectors to trade higher yesterday. The only major exception to yesterday’s reversal theme was Consumer Discretionary (XLY). While it was the best-performing sector ETF after the election through Friday, it only saw a modest decline yesterday.
Turning to individual stocks, the table and chart show the 20 best-performing stocks in the S&P 500 from 11/5 through 12/6 along with their performance yesterday. In the post-election period, these 20 stocks were up an average of 30.3%, and all but one was up at least 20%. Yesterday, though, was not nearly as positive. As shown, 13 of the 20 stocks were down on the day, and the average performance of all 20 stocks for the day was a decline of 1.8% or three times the decline of the S&P 500.
Opposite Day to Start the Week
If you’ve had a good year so far in the stock market, chances are you had a pretty bad day in the market today. On the surface, today’s action wasn’t awful. The S&P 500 (SPY) was down 0.5% while the Russell 1,000 was down 0.7%. Within the Russell 1,000, the average stock was down even less at -0.33%.
So what’s the big deal? Well, what made today noteworthy was the near-perfect performance distribution based on how stocks had performed so far this year heading into today. In the chart below, we’ve broken up the Russell 1,000 into deciles (10 groups of 100 stocks each) based on YTD stock performance through last Friday. Decile 1 contains the 100 best-performing stocks YTD, decile 2 contains the next best 100, and so on until you get to decile 10, which contains the year’s bottom 10% of performers. In the chart, we show the average performance today of the stocks in each decile. As shown, the decile of the best-performing stocks YTD through last Friday was down 2.9% today, while the decile of the worst-performing stocks YTD was up 2%! As you work your way down from the best decile to the worst, today’s performance gets better and better.
At the very top end of the YTD performance spectrum are the 26 stocks in the Russell 1,000 that entered today up more than 100% on the year. As shown below, these stocks fell more than 5% on average today, and every single one was down!
On the flip side are the 25 worst-performing stocks YTD coming into today. These 25 stocks were down an average of more than 50% on the year through last Friday, but they averaged a gain of more than 3% today!
Rarely do we see such uniform performance in one direction based on prior performance in the opposite direction, but that’s exactly what we saw today. Investors were selling winners and buying losers to quite an extreme degree.
Given this type of action, we wouldn’t make any rash long-term investment decisions based on one day’s moves. Sometimes it’s just opposite day in the market where we see downside mean reversion from winners and upside mean reversion from losers.
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The Closer – Freight Rates, Expectations, Refis – 12/9/24
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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 freight rates (page 1) in addition to commodity prices (pages 2 and 3). We then review the latest New York Fed Survey of Consumer Expectations (page 4 and 5). We also review mortgage delinquencies (page 6), upcoming Treasury auctions (page 7), and positioning data (pages 8 – 11).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Argentina ETF (ARGT) on Top in 2024
Below is a look at year-to-date total returns for 46 country ETFs available to investors on US exchanges. While the US (SPY) is sitting on a huge gain of 28.6% this year, the average year-to-date change for these country ETFs is just 8.7%, while the median is even lower at 5.8%. Keep in mind that returns also take into account any movements in the dollar.
Before we get to the biggest winners, nine country ETFs are in the red for the year. France (EWQ) is the most notable and the only G7 country that’s down in 2024. South Korea (EWY), Mexico (EWW), and Brazil (EWZ) have been the biggest losers with declines of 17%+. Brazil (EWZ) has gotten smoked with a decline of 24.3%. It’s bad enough to see a drop of 20%+, but it’s especially bad when the average country is up 8.7% and the US is up nearly 30%.
On to the positives…other than France, the other six G7 country ETFs are all up more than 10% on the year. Behind the US, Canada (EWC) has been the second-best of this group with a gain of 18%.
Interestingly, China (MCHI) and the US (SPY) are up nearly the exact same amount this year at just over 28%. Peru (EPU) ranks as the third best just ahead of SPY with a gain of 31.6%. Israel (EIS) has been the second best with a YTD gain of 34.5%. And finally, the best country ETF this year by a significant margin has been Argentina (ARGT) with a gain of 66%. US investors have so far given Argentine President Javier Milei two thumbs up…way up!
Below we highlight the price change (not total return) of country ETFs going all the way back to the COVID-Crash low on 3/23/20. While China (MCHI) is up about as much as the US (SPY) in 2024, it’s the only country ETF that’s in the red since the COVID lows.
On the flip side, Argentina (ARGT) once again crushes every other country ETF with a massive 491% gain. Behind Argentina is Greece (GREK) with a gain of 173.5%, followed closely by the US (SPY) and India (INDA), which have essentially seen the same price change of 171% since 3/23/20.
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Daily Sector Snapshot — 12/9/24
Chart of the Day: Juan Soto Contract — Billionaire or Bust
Bespoke’s Morning Lineup — 12/9/24
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.
“I’ve got an old saying: at the poker table, you’ve got to pay to learn. You can talk all you want, but you’ve got to get in the game.” – Steve Cohen
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Even though the S&P traded higher on four of five trading days last week and finished the week up nearly 1%, the index saw more decliners than advancers (negative breadth) on all five trading days. Fortunately, the index had a streak of seven straight days of positive breadth heading into last week, so maybe it was just downside mean reversion, but we’ll be watching breadth closely over the next few days.
As shown below, eight sectors fell more than 1% last week, while three sectors gained more than 2%. Last week was a mega-cap AI-led rally, while pretty much everything else traded lower.
