The Bespoke 50 Growth Stocks — 6/29/23
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. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were two 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 weekly on Thursday. 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 each week. 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.
There’s Something About June 29th
There must be something about June 29th. Besides being a significant day of the year from a seasonal perspective (as discussed in Wednesday’s Chart of the Day), two crucial events related to some of the most significant business stories of the past two decades took place on this day, two years apart. The first involved Bernie Madoff, who infamously orchestrated the largest Ponzi scheme in history, although it is worth noting that Madoff once described the Federal Government as another Ponzi scheme, so by his logic, he would have only overseen the second largest Ponzi scheme ever. On this day in 2009, Madoff, once a highly respected and well-loved figure on Wall Street, stood alone in a Manhattan courtroom, devoid of any familial or friendly support, and received a sentence of 150 years in prison.
On a much brighter note, two years earlier in 2007, Apple fans lined up and, in some cases, camped outside of stores for days to be among the first to get their hands on the first-generation iPhone. The fact that people were willing to pay over $500 for a heretofore unproven smartphone should have been all we needed to see to know that this was going to usher in a revolution in the entire computing industry.
Given the success of the iPhone and the scandal of Madoff, you would think that the launch of the iPhone would have been a positive market event and the Madoff sentencing would be associated with a negative market environment. As the chart below illustrates, though, the exact opposite was the case. The first iPhones didn’t just go on sale within four months of any ordinary market peak; the formal launch preceded a 56%+ peak-to-trough drop in the S&P 500 that was the largest drawdowns since the Great Depression. Conversely, Madoff’s sentencing came less than four months after that same largest drawdown since the Great Depression ended.
We’ve said it before and we’ll say it again, but investing based on the headlines can be one of the worst investment strategies known to man.
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Bespoke’s Morning Lineup – 6/29/23 – Strong Economic Data
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“You speak an infinite deal of nothing.” – William Shakespeare
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While Micron reported a wider-than-expected loss and gave mixed guidance after the close last night, commentary from the company suggesting that the semiconductor market bottomed has provided a boost to futures, especially in the tech space, and that has overshadowed any hawkish commentary from Fed Chair Powell.
There’s a decent amount of economic data this morning. GDP was revised much higher coming in at 2.0% versus 1.4% expected. Personal Consumption was stronger than expected (4.2% vs 3.8%), and the GDP Price Index was lower than expected at 4.1% vs 4.2% expected. All these numbers are backward-looking from Q1, though. Timelier was jobless claims, and on both an initial and continuing basis, they came in lower than expected. Initial Claims were especially strong, dropping to 239K versus forecasts for a level of 265K, and that has pushed the yield on the 10-year from 3.74% up to 3.8%.
In Asia overnight, equities were generally flat with a negative bias, although economic data was mostly better than expected. Ironically, Europe is trading with a more positive tone even as economic data in the region hasn’t been particularly market-friendly.
Within the commodities space, one of the only bright spots in an otherwise dark sector had been precious metals, but even this area has started to weaken.
In early May, gold looked like it was on the verge of a breakout, but more hawkish commentary by the Fed and pricing out of rate cuts this year has reversed that positive momentum, and over the last two weeks we’ve seen a downside break of the uptrend off the October lows.
It’s a similar story for platinum which was also trading at 52-week highs in the spring but has since broken down in an even more dramatic way than gold. Right now, it’s on the verge of making a lower low.
Silver traditionally has a connotation of playing the bridesmaid role, but while the commodity has pulled back from its spring highs and traded at a series of short-term lower highs and lows, it is the only one of the three commodities here where the uptrend off the October lows remains intact.
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Chart of the Day – It’s (One of) the Most Wonderful Time of the Year
Fixed Income Weekly: 6/28/23
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.
In this week’s report, we discuss high yielding investment grade bonds.
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Bespoke’s Morning Lineup – 6/28/23 – Waiting on Powell
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“It is better to be roughly right than precisely wrong.” – John Maynard Keynes
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Futures are mixed with a negative bias as the Nasdaq is leading the losses on reports that the Federal government will expand export curbs on certain semiconductors to China. Apart from China, most global equity markets have been rallying overnight in follow-through from yesterday’s US rally. Chinese stocks were more subdued and that comes after reports that industrial profits well 18.8% on a YTD basis as the government cited ‘insufficient demand’. Even after the PBoC intervened in markets overnight, the yuan was under pressure and fell to a seven-month low versus the dollar.
In the US, mortgage applications increased 3% last week, and just in time for the opening bell, Fed Chair Powell will speak at an ECB panel in Portugal at 9:30 AM.
We’ve discussed the rally in the Nasdaq a lot in recent days, and through the fourth to last trading day of the first half, it is up 29.5% which ranks as the third-best first-half performance through this point in the first half trailing only the 39.6% rally in 1983 and the 44.3% surge in 1975. If there’s one thing we’re confident of, it is that this year won’t overtake those two years between now and the end of the week. As wild as this year’s first half seems, it’s even crazier when you consider the fact that last year’s performance through this point in the year was the second worst in the Nasdaq’s history.
Given the strong gains so far, we were curious to see how the Nasdaq performed in the last three trading days of the first half after rallying 10% YTD. In the 24 prior years when the Nasdaq was up by double-digit percentages YTD heading into the last three trading days of the first half, its median rest of month performance was a gain of 0.89% with positive returns 79.2% of the time. That’s a pretty impressive three-day average, but compared to all years in the Nasdaq’s history, it’s actually right in line with the norm.
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Chart of the Day – The Long Stock Market Nightmare is Over
Bespoke’s Morning Lineup – 6/27/23 – Durable Goods Rally
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“College isn’t the place to go for ideas.” – Helen Keller
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While stocks have traded heavily over the last several trading days, the weakness hasn’t been enough (yet) to move the Nasdaq out of overbought territory (one or more standard deviations above its 50-day moving average). As shown in the chart below, Monday was the 34th consecutive trading day that the Nasdaq closed at overbought levels.
That sounds like a long stretch, but for the Nasdaq it is not especially uncommon to trade at overbought levels for an extended period. Since the start of 2013, for example, there have been six other periods where it traded at overbought levels for at least six weeks, and the longest was over ten weeks back in early 2021. For the Nasdaq’s entire history, there have been even longer streaks. In 1997, for example, there were 69 straight days of overbought readings, and back in September 1980, the Nasdaq traded at overbought levels for 95 straight trading days- that’s almost five months!
Naturally, when you see such an extended streak of overbought readings, it’s natural to expect a pullback. After all, stocks can’t go up forever. But if all it took to anticipate a pullback was an extended streak of overbought readings, we’d all be rich. In the chart below, we show a chart of the Nasdaq since the start of 2013 and have included red dots to show each time it traded at overbought levels for 30 straight trading days. In a number of these periods, the market kept rallying with little in the way of a pullback, and the only period where a significant pullback was almost immediate was after the January 2021 streak. But even then, the streak lasted more than another month before the Nasdaq was no longer overbought again.
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Chart of the Day – Positive Days: The Less Routine the Better
Bespoke’s Morning Lineup – 6/26/23 – All Quiet After a Busy Weekend
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“The debt is like a crazy aunt we keep down in the basement. All the neighbors know she’s there, but nobody wants to talk about her.” – Ross Perot
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3 points. After a wild but ultimately oddly quiet weekend on the geo-political front, US futures are just modestly negative to the tune of three points this morning, and crude oil is only marginally higher. Not necessarily what you would have expected to see on the Monday after a weekend where we saw what looks like an attempted coup in a country that holds one of the world’s largest nuclear stockpiles and happens to be the third-largest producer of crude oil.
Bulls are looking to regroup this morning after a negative week, and as we head into the last week of what can only be considered a strong first half for equities. The only economic report on the calendar this morning is the Dallas Fed Manufacturing report, which is expected to be firmly in negative territory (-22.5) but not quite as weak as last month’s reading of -29.1. We’ll be watching the Prices Paid and Prices Received components for confirmation of the pattern we’ve seen in other regional fed reports where pricing pressures have been easing substantially.
While last week was negative for stocks, remember how strong the period was that preceded it was. As noted in Friday’s Bespoke Report, the market still hasn’t broached the prior highs from last August, so the bulls still deserve the benefit of the doubt.
The picture for international stocks doesn’t look nearly as positive. Less than two weeks ago, the MSCI All Country World Ex US ETF (CWI) broke out above resistance to new 52-week highs. Like US stocks, though, the ETF faced pressure all last week and on Friday broke back below its former resistance as well as its 50-day moving average (DMA). So, from the perspective of a US equity investor, it could have been worse.
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