As the US equity market has rallied over the last decade, share prices have risen dramatically.  When the S&P 500 hit is Financial Crisis low on March 9th, 2009, there were just six stocks in the S&P 500 trading above $100/share.  At the same time, there were 119 stocks in the index (24%) trading with a single-digit share price of less than $10.  Fast forward to today and there are now 235 stocks (47%) in the S&P 500 trading above $100/share, while there is just one — ONE — stock in the index trading below $10/share.  The one stock trading with a single-digit share price is also a single-letter ticker — Ford (F).

We are constantly running our decile analysis on the S&P 500 to see which stock characteristics are driving performance within the index.  To do this, we break the index into deciles (10 groups of 50 stocks each) based on things like P/E ratio, market cap, dividend yield, analyst ratings, etc., and then we calculate the average performance of the stocks in each decile over a given time period.

Share price is a very basic stock characteristic that most people don’t (nor should they) use as an investment factor.  But when we ran our decile analysis recently, we still found it notable that the highest priced stocks in the S&P are outperforming the lowest priced stocks by quite a bit.  As shown below, the 50 stocks in the S&P with the highest share prices at the start of the year are up an average of 3.67% year-to-date.  The next 50 stocks with the highest share prices are up an average of 4.03% YTD.  On the other end of the spectrum, the 50 stocks with the lowest share prices at the start of the year are up just 1.4% YTD, while the next 50 lowest-priced stocks are up just 0.77%.

In case you’re interested, below is a snapshot of our full decile matrix so you can see the other stock characteristics we like to analyze.  This analysis is very helpful for finding underlying trends that are driving market performance.  To unlock the full matrix, start a two-week free trial to Bespoke Premium then view our recent B.I.G. Tips report at this link.

While equities have continued to rally in the new year, conditions have gotten a bit extended as every one of the major US index ETFs was more than two standard deviations above their 50-DMAs at the end of last week. Taking another look at just how overbought conditions have gotten, of the S&P 500 stocks, over 25% currently have a 14-day RSI reading above 70. That is the highest reading by this measure since late February of last year.

Although stocks are generally overbought, there are still some to be found that are not running as hot. One such group is the Telecommunication Services group. Of the S&P 500 stocks in this group—Verizon (VZ), CenturyLink (CTL), and AT&T (T)—each one has pulled back within its respective trading range recently and have begun to bounce from the bottom of their uptrends as shown in the charts below.  Today, each one of these stocks has also crossed back above their 50-DMAs. Given this, these three stocks have also earned a good timing score in our Trend Analyzer tool.

In addition to being attractive from a technical standpoint, the valuations are also relatively cheap.  Stocks in the Telecom Services group reside in the broader S&P 500 Communication Services sector, which has a price-to-earnings ratio of 23.5. But for VZ, CTL, and T, the P/E ratios are 16.3, 11.6, and 10, respectively.  Not only are those lower than the sector’s P/E ratio , but for CTL and VZ, that is in the 13th and 11th percentile of the past decade’s readings, respectively.  Although the P/E is still fairly low, the valuation for T is not quite as significantly low as its current P/E ratio is in the 75th percentile of the past ten year’s range.

Additionally, this is a group of high yielders paying a dividend at least twice the size of the 1.88% dividend yield of the S&P 500. In fact, currently yielding 7.37%, CenturyLink (CTL) has the third-highest dividend yield of all S&P 500 stocks. The payout ratio for CTL is a bit high at 88.8%, but it could also be worse. AT&T has the 14th highest dividend yield of 5.47% but has an elevated payout ratio of over 100% meaning further ability to pay its dividend as well as grow it would come more into question for this stock holding the earnings picture constant.  On the other hand, while not one of the largest dividends, VZ’s yield is still generous at 4.13% while the payout ratio is the most palatable of the bunch at just 49%. Start a two-week free trial to Bespoke Institutional to access all of our research and interactive tools.

Snapchat parent company Snap Inc. (SNAP) made a new 52-week high last Friday in a beautiful breakout pattern.  As shown below, the stock traded in a very nice uptrend over the first seven months of 2019, but then it began a multi-month consolidation phase.  During this consolidation phase, the stock rounded out a bottom (a cup formation) all while holding above support at its 200-day moving average.  The end result was Friday’s break to new highs.

Below are charts of SNAP and a handful of other related companies in the online/social media space.  You can very easily build custom portfolios like this on our website with a Bespoke Premium or Bespoke Institutional membership.  Being able to easily monitor the stocks and ETFs you’re most interested in with our Custom Portfolios tool is extremely helpful.  Start using our Custom Portfolios tool and everything else on our website with a two-week free trial to Bespoke Institutional.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read 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.

While you’re here, join Bespoke Premium for 3 months for just $95 with our 2020 Annual Outlook special offer.

Wall Street Week

The End of the Bonus Culture Is Coming to Wall Street by Katie Linsell and Lananh Nguyen (Bloomberg)

As Wall Street transitions towards a more recurring revenue-based system that is more automated and reliant on technology, bonuses are becoming a less important part of compensation schemes. [Link; soft paywall, auto-playing video]

U.S. Curbing Early Access to Sensitive Data Threatens Arms Race by Katia Dmitrieva and Vince Golle (Bloomberg)

Procedures related to the media lockup ahead of major data releases is changing and the results could force traders to go data-hunting on their own as they seek a leg up in the digestion of huge data releases that won’t have an out-of-the-box media narrative. [Link; soft paywall]

Less Research? No Problem, Hedge Funds Say. by Julie Steinberg and Paul J. Davies (WSJ)

Reduced analyst coverage of European stocks related to the advent of regulation coverage research has created opportunities for hedge funds that thrive in the darkness of less information. [Link; paywall]

Climate & Society

US power generators set for another big year in coal plant closures in 2020 by Anna Duquiatan, Taylor Kuykendall, Darren Sweeney, and Liz Thomas (S&P Global Intelligence)

2019 will mark the largest retirement of coal power capacity since 2015, further reducing coal demand and driven by the still-improving economics of natural gas and renewables. [Link]

Food & Drink

The Capitalist Way to Make Americans Stop Eating Meat by Derek Thompson (The Atlantic)

With carnivores challenged by the combination of animal welfare and the carbon impact of their eating habits, innovations across the spectrum of technology and culinary arts are fueling “peak meat”. [Link; soft paywall]

Panera Bread to cut meat on its menu by a third by Alistair Gray (FT)

In-line with the trends described in the prior story, Panera has moved to reduce the number of menu options which include meat over the next couple of years. [Link; paywall]

America Drank Less Wine for First Time in 25 Years by Saabira Chaudhuri (WSJ)

Less wine (on a volume basis) was purchased in 2019 than in 2018, the first sequential drop since 1994; industry groups blame less consumption of alcohol overall along with much less demand for low-price wine. [Link]

Zeitgeist

The Twitter Electorate Isn’t the Real Electorate by Helen Lewis (The Atlantic)

An argument that the flattening of newsrooms that social media has brought does not actually succeed at exposing them to opinions traditionally excluded from the media. [Link; soft paywall]

The 10 Most Checked-Out Books in N.Y. Public Library History by Concepción de León (NYT)

Dystopian science fiction, children’s books, and Harper Lee’s classic “To Kill a Mockingbird” are the most-read books in the long history of the New York Public Library. [Link; soft paywall]

Panic, Or Don’t

Few Bank Failures Could Be a Warning Sign for U.S. Financial  System by Andrew Ackerman (WSJ)

We can remember a time when the high number of bank failures was a sign things were very bad, but apparently the opposite is the case. If there was ever an effort to spin good news poorly, this is it. [Link; paywall]

Money-Losing Companies Mushroom Even as Stocks Hit New Highs by James Mackintosh (WSJ)

With the rise of hyper-growth companies and firms dependent on network effects, more and more public companies don’t actually make any money. [Link; paywall]

Time For Tech

Silicon Valley reinvents Victorianism by Jamie Powell (FTAV)

The latest tech start-up to get attention is San Francisco company that re-creates servants with an app, and without using much in the way of technology to do so. [Link; registration required]

EU considers temporary ban on facial recognition in public spaces by Janosch Delcker and Bjarke Smith-Meyer (Politico)

With privacy concerns around facial recognition picking up, the EU is considering a ban on the use of the technology in public spaces. [Link]

Iran

How the US Knew Iranian Missiles Were Coming Before They Hit by Daniel Oberhaus (Wired)

Ground-based radar and satellite detection systems are key to giving US installations and troops an early warning when hostile missiles start flying. [Link]

Shocking Revelations

‘Rich kid of Instagram’ accused of swindling investors out of millions by Amanda Woods (NY Post)

A British teen claimed to make turn 200 pounds into six figures, then used the notoriety to take advantage of investors. [Link]

Health

The medications that change who we are by Zaria Gorvett (BBC)

Side effects from unremarkable, widely-prescribed drugs are turning up some strange behaviors from patients. [Link]

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Have a great weekend!

Below is a chart of the Bloomberg World Equity Market index, which is a cap-weighted index made up of nearly 5,000 publicly listed companies around the world (including the US).  While the S&P 500 is up more than 15% from its January 2018 high, it’s notable that we still haven’t seen equities break out on a global scale.  As shown, the Bloomberg World Index is now just a hair below its prior all-time highs (22 basis points to be exact).  Start a two-week free trial to Bespoke Institutional to access our full library of research and interactive tools.