The Bespoke 50 Growth Stocks — 7/18/24
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 10 changes to the list this week.
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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 – 7/18/24 – More Divergences
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“The brave may not live forever – But the cautious do not live at all” – Richard Branson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Yesterday was another one of those days when price moved in one direction while breadth went the other way. While the S&P 500 fell 1.3%, a net number of 15 stocks in the S&P 500 finished the day higher. The scatter chart below shows the daily moves of the S&P 500 (y-axis) this year versus the net daily breadth readings (x-axis). Whenever a dot falls in any of the shaded areas, prices and breadth moved in the opposite direction, and occurrences in the darkest shaded areas indicate days when the S&P 500 finished the day up or down 0.5% and breadth moved in the opposite direction. Yesterday (red dot) was one of five days this year when the S&P 500 was down 0.5% and breadth was positive. Not only that, but it was the first time since April 2000 that the S&P 500 was down 1%+ and breadth was positive.
Yesterday was the 34th day this year that the price and direction of the S&P 500 moved in opposite directions. If it ended today, this year’s total would already rank as the seventh-highest number of days where the two moved in the opposite direction. But the year isn’t over yet, and if the current pace keeps up over the next five and a half months, the total number of divergent days for the S&P 500 would total 62, easily setting a record dating back to at least 1990.
In terms of extreme divergence days, yesterday was the 9th time that the S&P 500 rallied (or declined) at least 0.5% and breadth moved in the opposite direction. That already ranks as the fourth most occurrences for a calendar year since 1990. If this pace continues for the rest of the year, there will be 17 occurrences. That would put this year in the position of the second most of all-time, trailing only 19 occurrences in 2000.
It’s never good to find yourself in a world of comparisons to 2000, but when it comes to daily divergences between price and breadth, 2024 has a lot of similarities.
Fixed Income Weekly — 7/17/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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Better Than Expected Housing Data, But…
After three straight months of weaker-than-expected reports, Wednesday’s release of Building Materials and Housing Starts bucked the recent trend coming in better than expected, joining other reports this week that have managed to exceed expectations. As shown above the table below, May’s reports were also revised higher. While the better-than-expected results were welcome, the overall levels of starts and permits remain relatively weak.
On a m/m basis, housing starts increased by 3% month/month, but all the increase was a function of multi-family units, which increased by 19.6%. Single-family units were down 2.2% and fell below the million annualized run rate. Building Permits showed a similar picture with single-family units falling 2.3% while multi-family units jumped 15.6%.
The chart below shows the 12-month average of Building Permits and Housing Starts since 2010, and both measures have now nearly erased all their post-Covid surge. While not quite at new multi-year lows, barring another big jump next month, both series will very likely be at new lows following next month’s report.
While housing starts are trending lower, housing stocks have reversed a steady downtrend in the last few trading sessions. After peaking in late March, the iShares Home Construction ETF (ITB) corrected 15% heading into the July 4th holiday, but since then the ETF has surged as investors rotated out of the mega-caps and into everything else. By yesterday’s close, ITB had erased nearly all of its Q2 decline. Stocks typically lead fundamentals, so by that logic, do homebuilder stocks know something the rest of us don’t?
BESPOKE STOCK MARKET CAMP NEXT WEEK! SIGN UP NOW!
If you or any of your friends or colleagues have children, grandchildren, nieces, or nephews, please take note!
Here at Bespoke we’ve been following the stock market 24/7 for more than two decades, so based on the “10,000 hour” rule, we can confidently say that we are market “pros”.
At the same time, traditional education across grades K-12 doesn’t focus on the stock market, investing, and how it all works.
For years, we’ve thought about addressing the “stock market literacy gap” for students across the country. Now, we’ve come up with a plan!
Starting this summer, we are now offering “Stock Market Camp” for students in grades 5-8 and 9-12!
Bespoke’s Stock Market Camp will run for five days from Monday-Friday with each live Zoom class lasting roughly 75 minutes. Camp will be fun, engaging, and interactive, and by the end of the week, students will have a basic understanding of how the stock market and investing works! If a live class is missed, a recording will be available.
We don’t have to tell you how valuable knowing this information at a young age can be! Instead of kids playing video games, scrolling through TikTok, or messing around on Snapchat, we think our five-day Stock Market Camp will pay major dividends down the road!
For now we are making our Stock Market Camp available to students that are referenced by Bespoke readers. We are running one week of camp for high school students (grades 9-12) from July 22nd-26th, and one week of camp for middle school students (grades 5-8) from August 12th-16th. Each weekly camp will be capped at 40 students max, so please sign up ASAP to reserve your student’s spot. You can purchase as many spots as you’d like or forward this email to colleagues and have them sign up.
SIGN UP YOUR STUDENT OR STUDENTS TODAY AS THE CAMPS ARE LIMITED TO JUST 40 ATTENDEES!
We will touch base after sign-up to gather the pertinent information. If you sign up and the student cannot attend during the dates listed above, we can either provide access to a full recording of the camp or a credit for a future camp. Refunds will be provided upon request if we are notified at least one week before the camp’s start date.
Please reach out if you have any questions about Bespoke’s Stock Market Camp. The camp is for informational and educational purposes only, and there will be no investment advice or recommendations provided. All discussions will be impersonal and historical in nature. There will be no forward-looking analysis or discussion.
Bespoke Baskets Update — July 2024
Chart of the Day – Amazon Prime Day 2024
Bespoke’s Morning Lineup – 7/17/24 – Better Housing Data
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.
“Mercy to the guilty is cruelty to the innocent.” – Adam Smith
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 fun couldn’t last forever, could it? Futures are sharply lower this morning with tech leading the way to the downside as the Nasdaq is indicated to open 1.5% lower. S&P 500 futures aren’t faring much better with an indicated decline of 1%, but the Russell 2000, while lower is down a more respectable 0.40%.
There are two catalysts for this morning’s weakness. First, Bloomberg reported that the Biden Administration is considering tighter trade restrictions on companies that provide chips with US-based technology to China. On the other side of the aisle, former President Trump told Bloomberg that Taiwan should pay the United States for providing defense of the country against China. If there’s one thing both Biden and Trump can agree on, it appears that China is the issue.
Normally, the impact of these types of headlines isn’t long-lasting, but in this case, we would note that semis have been underperforming the broader market for the last couple of weeks now, so that’s something to watch.
It’s a busy morning for economic data as well. At 8:30 we got the release of June Building Permits and Housing Starts, and then at 9:15, we’ll get Industrial Production and Capacity Utilization. Today’s housing-related data was important from an economic perspective as each of the last three reports on Building Permits and Housing Starts have all come in weaker than expected and in some cases by a wide margin. This morning’s release provided some relief as both headline readings came in moderately better than expected while last month’s readings were revised higher.
After a five-day rally of more than 11%, the Russell 2000 closed 4.42 standard deviations above its 50-day moving average yesterday. Yesterday’s close was the most overbought level for the small-cap benchmark index since…Ever. The prior record was 3.72 standard deviations on 6/27/23 and before that 3.40 standard deviations in January 1991.
Looking at the chart of the Russell 2000’s daily OB/OS reading, you’ll notice that three of the four most overbought daily readings have all occurred since November 2021. One potential explanation for this phenomenon could be that as the overall market has become much more concentrated at the top, the rest of the market has become smaller and more prone to extreme moves. It was only a couple of years ago when we marveled that the largest company in the S&P 500 was larger than the entire Russell 2000 small-cap index. Before yesterday, though, the Russell 2000 still had a market cap of less than $3 trillion which was less than the market caps of Microsoft (MSFT), Apple (AAPL), and Nvidia (NVDA). Therefore, a 3% shift in the market cap of just those three companies would translate into a 10%+ rally for the Russell 2000!
Not only was yesterday’s close for the Russell 2000, the highest in its history, but of the four major US indices (S&P 500, Nasdaq, DJIA, and Russell 2000), it was the most overbought closing level on record.
Starting with the Nasdaq, in its history dating back to 1971, the most overbought reading based on standard deviations above the 50-DMA was 3.59 in November 1991.
The S&P 500 dates back to 1928, and its most overbought reading on record was 4.06 standard deviations above the 50-DMA on 8/3/1984.
The Dow goes back even further than the S&P 500, and while the chart below only extends back to 1928, since 1900, its most overbought reading on record was 4.36 standard deviations above the 50-DMA also on 8/3/1984.
Bespoke’s Morning Lineup – 7/16/24 – Better Than Expected Retail Sales
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.
“It’s funny. All you have to do is say something nobody understands and they’ll do practically anything you want them to.” – J.D. Salinger
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures were in the green ahead of the June Retail Sales report this morning as reactions to some of the more high-profile earnings reports were mixed. Shares of Bank of America (BAC) were modestly higher, but both Charles Schwab (SCHW) and Morgan Stanley (MS) were lower. Treasury yields and oil were both lower as gold rallied to what would be a record high on a closing level. In the crypto space, Ethereum is moving modestly lower even as the greenlight was made for ETFs tracking the world’s second-largest crypto to start trading next week.
Retail Sales hit the tape, and the top-lin numbers were better than expected. Overall, sales were unchanged versus an upwardly revised May reading of 0.3%. Ex Autos, sales jumped 0.4% compared to forecasts for a gain of just 0.1% while Ex Autos and Gas, total sales were up 0.9% which was 0.7 ppt better than the consensus forecast. Building Materials saw a large rebound, rising by 1.4% after May’s decline of 0.7%. Nonstore retail (online) saw the largest increase, though, as sales jumped 1.9% on top of May’s increase of 1.1%. As you would expect, yields moved higher on the news, but not by a lot as the 10-year yield is only 2 bps higher than its pre-release level. Still on the calendar for today, we have Business Inventories and Homebuilder Sentiment at 10 AM.
While yesterday’s breadth in the S&P 500 wasn’t strong (+59), it was the fourth straight day where the S&P 500’s net advance/decline line was positive. That’s only the tenth such streak this year, and when you consider that the S&P 500 is up over 18% this year, you would expect to see more similar streaks of positive breadth. The three days that preceded yesterday did show relatively strong breadth, especially compared to other days this year, and all three of them rank in the top eleven in terms of single-day breadth readings.
While breadth readings for the S&P 500 last Wednesday, Thursday, and Friday were strong none of them were strong enough to register as an ‘all or nothing’ day where the net daily breadth reading for the S&P 500 is either +400 or above or -400 or less. That still leaves March 27th (all) and April 12th (nothing) as the only all-or-nothing days this year.
With only two occurrences so far this year, if the current pace continues, 2024 will only have four all-or-nothing days for the entire year. The last time there were fewer was in the extremely placid year of 2017 when there were only three, and before that, you’d have to go back to 2002. While this type of subdued extremes in breadth was normal in the 1990s, most people trading today aren’t familiar with the lack of extremes in day-to-day breadth. While the consistency of low readings in the VIX despite some major geo-political events has been puzzling, the lack of extremes as we have seen in breadth helps to keep the VIX grounded.
