The Bespoke Report — 11/10/23
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Daily Sector Snapshot — 11/10/23
Bitcoin: 52-Week High Two Years After a Record High
Even for a volatile asset class, it has been quite a week for crypto-related assets. With a gain of nearly 8% for the week, Bitcoin rallied to 52-week highs and crossed above 35K, 36K, and 37K in the process. Year to date, the largest cryptocurrency is up over 125%, but looking at the chart below, all of the year’s gains have been confined to a handful of trading days in January, March, June, and now.
Ethereum had an even bigger week, rallying by over 14.5% and nearly doubling the gain in Bitcoin. Unlike Bitcoin, Ethereum was trading just shy of its YTD high from back in April.
The fact that Bitcoin is at 52-week highs today is ironic given the fact that its all-time high of just below $69K was exactly two years ago today. Given where prices are now, it doesn’t seem likely that those highs will be tested again any time soon, although stranger things have happened.
The chart below shows Bitcoin’s drawdowns from all-time highs over time. Perhaps the most notable aspect of Bitcoin’s rally is the fact that even after rallying more than 100% this year, the current drawdown of 45% is deeper than the average drawdown of 40.4% for all days since 2016. Just to get back to that historical ‘average’ drawdown, Bitcoin would need to rally back above $40K.
Bespoke’s Morning Lineup – 11/10/23 – Going Out on a Positive Note
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“We have so much to say, and we shall never say it.” ― Erich Maria Remarque, All Quiet on the Western Front
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Investors are doing their best to reverse yesterday’s weak tone and end the week on a positive note. Last Friday, we were finally able to buck the trend of declines heading into the weekend, and if the market could do it again today, that would be a positive sign. The only economic report on the calendar is Michigan Consumer Sentiment at 10 AM, and the inflation expectations components of that report will be the primary focus of the day- at least when it comes to scheduled data.
Unlike every other day this week where the S&P 500 traded higher on the day and the equal-weighted version traded lower, on Thursday, they both traded lower with declines of about 0.8%. In just the first four days of this week, the equal-weighted index underperformed the cap-weighted index by 1.5 percentage points, and over the last 200 trading days, the performance gap between the two indices now stands at over 15 percentage points. A gap that wide is practically unheard of, and since 1990, it has been wider on 55 trading days, and they all occurred in the periods spanning December 1998 through April 1999 and then briefly between March and April 2000.
The record performance gap between the market cap and equal weight versions of the S&P 500 topped out briefly above 20 percentage points for a day in March 2000, but there were multiple occurrences in the early 2000s and coming out of the Financial Crisis when the performance gap was over 20 percentage points in favor of the equal weight index. When you think about it, it makes sense as it would be easier for the smallest stocks in an index to see big moves (especially after a large market decline) than it would for the largest companies in the world.
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Bespoke’s Weekly Sector Snapshot — 11/9/23
The Triple Play Report — 11/9/23
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 29 new stocks. To sign up, choose either the monthly or annual checkout link below:
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Decker’s Outdoor (DECK) is an example of a company that reported an earnings triple play recently. As shown below, DECK has been in an uptrend for all of 2023, and it broke out hard after its most recent triple play. On 10/27, the company’s shares surged 19%, marking a new all-time high and representing DECK’s best earnings reaction day since 2013 on a percentage basis. After its huge earnings day, DECK continued to trek higher and is now up 60% YTD.
In our database going back to 2004 for Deckers Outdoor (DECK), the fiscal Q2 earnings report marks the footwear company’s strongest beats on both EPS and revenues. It’s not often that DECK reports a triple play either. In fact, DECK raised guidance for the first time since Q4 2010. This quarter’s report highlighted the strength of DECK’s brand portfolio, particularly HOKA and UGG, which saw a 30%+ increase in global consumer acquisition. The brands’ strong performance, especially HOKA achieving a 27% revenue increase, has been a compelling growth story. The chunky sole HOKA running shoes have gone viral it seems, benefiting the hardcore runner and those favoring comfortably casual options. With cold weather on its way, consumer trends have shown that UGG slippers are all the rage too, with the Tasman model all over TikTok and seemingly sold out everywhere. You can read more about DECK and the 28 other triple plays 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.
Historic Sentiment Shift
The S&P 500 and Nasdaq have extended their impressive winning streaks and that has resulted in a surge in bullish sentiment. The latest weekly AAII sentiment survey showed that 42.6% of respondents reported as bullish this week. That is now the highest level of bullish sentiment since the first half of August and perhaps more notably, a major turnaround from last week’s multi-month low of 24.3%.
As shown below, bullish sentiment’s 18.3 percentage point rise week over week is a historically large jump in optimism, especially in more recent years. That week-over-week increase ranks as the 22nd largest in the survey’s history. It also just barely edged out the 17.88 percentage point increase in November 2020 for the largest one-week increase since July 15, 2010, when it had risen 18.43 percentage points.
The surge in bullish sentiment borrowed heavily from those formerly reporting as bearish. Bearish sentiment jumped above 50% last week, the highest reading since last December, but was nearly cut in half this week as it came in at only 27.2%
Whereas the jump in bullish sentiment was historically large, the resulting drop in bearish sentiment is even more significant ranking as the fourth largest on record.
Given there were historic moves across both bullish and bearish readings, the bull-bear spread in turn has experienced a top 1% week-over-week move. Only one week ago, the spread indicated that bears outnumbered bulls by a wide margin of 26 percentage points. Rising an astounding 41.4 points week over week, that spread is back in favor of bulls at 15.4.
Chart of the Day – S&P 500 and Nasdaq Concurrent Eight-Day Winning Streaks
Bespoke’s Morning Lineup – 11/9/23 – Can It Keep Going?
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“If you’re lonely when you’re alone, you’re in bad company.” – Jean-Paul Sartre
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Futures are basically flat this morning as the Nasdaq and S&P 500 each look to extend their winning streaks to ten and nine, respectively. The only data on the calendar today is jobless claims at 8:30, but there is a decent amount of Fedpseak to navigate including Chair Powell at 2 PM. With the market going up every day now for nearly two weeks, you can imagine that investor sentiment has improved. In this morning’s latest update to the AAII sentiment survey, bullish sentiment surged from 24.3% up to 42.6% which is the highest level since August. Bearish sentiment, conversely, has been nearly cut in half falling from just over 50% (50.3%) down to 27.2%.
As treasury yields have collapsed over the two weeks, short-term returns on long-term US Treasuries have surged. Take the iShares 20+ Year US Treasury ETF (TLT). Over the last two weeks, it has surged over 7% putting its two-week change in the 99th percentile relative to all other ten-day moves in the ETF’s history. It’s still down over 7% since the end of August, but that’s a story for another day.
Given the magnitude of the recent move and the big losses we have seen in TLT in recent months, it shouldn’t come as a surprise that the ETF’s day-to-day volatility has also become elevated. Over the last 50 trading days, TLT’s average daily move has been 1.10% (up or down) which ranks in the 94th percentile relative to all other periods. The only times where this measure was higher were during the Financial Crisis, when S&P downgraded the sovereign debt rating of the US from AAA, briefly during COVID, and most recently, late last year and into early this year.
While volatility in the Treasury market is historically high, volatility in the equity market remains low. Over the last 50 trading days, the S&P 500 tracking ETF (SPY) has been just 0.65% which ranks right in the middle of its historical range.
With TLT averaging a daily move of over 1.1% it has been about 45 bps more volatile than SPY over the last 50 trading days. Since the inception of TLT in late 2002, there were just 17 trading days spanning late 2010 and into early 2011 and just another 5 trading days in July 2015 where the spread was wider. In other words, you don’t see this very often.
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