Hey Readers!

Firstly, I’d like to apologize for not writing in a while - I’ve been in the process of getting my newsletter officially blessed for distribution by my company, RBC Wealth Management.

You can imagine that:

1. Having a faceless newsletter about investing and personal finance is great, but having it actually associated with my job as an investment advisor is better. You know, in case anyone actually wants to talk about managing their wealth, estate planning, tax strategies, business owner planning, etc. etc.

2. That big, bank-owned wealth managers don’t exactly move quickly to approve things. (ok, sure, maybe I dragged my feet a little bit)

Anyway, this will be my last post on Substack but I’ll be following it up from my official RBC email. The newsletter will be pretty much the same as before, with a bit more personal finance tips and tricks.

I’m excited about getting back into writing StreetSmarts, and I hope you will continue to get something out of it!

Stay curious,

Ryan

ryan.metcalf@rbc.com

p.s. If you don’t see the latest edition of StreetSmarts in your inbox (and presumably still want to receive it), maybe check to see if it ended up in your Junk folder.

Hey Readers!

I’ve been meaning to do a write-up on Costco forever so I’m glad to have finally got around to it.

I’m hoping to do more single stock write-ups since I’ve mostly been whining about volatility doing more equity strategy stuff lately. If you have any ideas for other interesting companies to look into next, please let me know in the comments (please no meme stocks).

Have a good weekend,

- Ryan

Street Stories

The Costco Juggernaut

Since first hearing Charlie Munger gush about the company, I’ve been a fan of Costco-the-stock for years. As for Costco-the-company, I’ve been a member for a long time now but - to my eternal shame - I’ve only ever used the delivery app and never set foot in a warehouse. That is, until yesterday.

And it was glorious.

And as much as I love a good deal, or a 40lb bag of trail mix, as an investor I love great companies even more. And any way you slice it, Costco is truly one of the great corporate success stories.

What follows below is my concise summary of the financial wizardry that has made Costco one of the best investments this millennium. If you want to learn more about the company’s history and what makes it tick, I found the above podcast by Acquired to be of particular interest.

Hope you like it!

To start, Costco has been a rocket ship of a stock. Outperforming the market by 3.4x over the last 10 years. A period where the S&P 500 has enjoyed one of its greatest bull runs ever.

The true test for a quality growth company is also that it can hold up when market sentiment sours and, as you can see above, Costco is consistently an outperformer.

Part of Costco’s investor appeal is its consistent, steady growth.

Plenty of overzealous retailers experience massive boom and bust phases of expansion and contraction to their location count. Costco stands out for its disciplined approach which results in near clockwork expansion and a nearly 0% closure rate for warehouse locations.

A modest point of concern for long-term investors is that the rate of annual warehouse expansion has tapered down a bit.

Costco’s discipline in expansion has kept them from overreach that could ding its Return on Investment, but it can’t magically create new, scalable markets with the cultural receptivity to embrace their warehouse membership model.

To continue to find profitable locations for expansion, Costco is increasingly reliant on international markets to grow their business.

Since 2011, 43% of new Costco locations have come from international expansion.

However, as you can see above, the company does have plenty of large markets that don’t appear to have yet been tapped. For example, currently there are no South American locations.

Whereas most traditional supermarkets offer between 30,000 to 100,000 different items, Costco rigidly adheres to a policy of only allowing approximately 3,800 to 4,000 items per warehouse. The result is:

• Increased negotiating power with suppliers (better price on bulk ordering)

• Streamlined operations (faster inventory turnover; reduced labor required for stocking)

• Simplified shopping experience (reduced decision fatigue; faster shopping)

Another sign of Costco’s discipline can be seen in its steady merchandise margin. For their house brand, Kirkland Signature, the company caps their mark-up at 14% over cost. For all other items this is capped at 15%.

It takes significant discipline for company management not to maximize short term profits but this non-exploitative pricing has built significant customer loyalty.

Costco’s steady, persistent growth is best seen in their annual revenue. Since going public in 1985, Costco has had only a few instances of revenue contraction; the most notable was in 2009 - while the whole world was melting down - when they saw revenue decline by a mere 1.5%.

It was then up 9.1% in 2010 and 14.1% in 2011.

Increased operational efficiency and sourcing has also meant that EPS growth has consistently outpaced revenue growth. Since 2012, only two years (2014 and 2016) have seen EPS grow by less than revenue.

Stock buybacks have also chipped in here as well, as the company has averaged ~0.4% annual buyback yield over the last five fiscal years.

While a consistent grower, Costco isn’t immune to the impact of inflation. During the darkest times of sticky inflation in 2022/2023, Wall Street progressively trimmed revenue estimates for the company’s out years.

Interestingly, Wall Street’s numbers have remained solid during the 2025 tariff commotion - even ticking up modestly. Concerns of increased supplier costs are apparently outweighed by belief that looming economic concerns may drive more cost conscious consumers into Costco’s clutches.

The company reports their Q3 2025 on May 29th, which will likely get more scrutiny than usual due to the readthroughs to the US consumer and commentary relating to global retail supply chains.

Historically, however, Costco reporting is usually a non-event. As you can see above, while the company has its fair share of misses (red) on Revenue and EPS, the gap between reported figures and Wall Street estimates are usually very tight.

Q3 2023 stands out as a rare exception, as economic concerns saw a marked decline in higher margin non-essentials (home furnishings, jewelry, electronics). That said, revenue only came up 1.6% shy of estimates so not exactly disaster.

As a big, high quality retailer, Costco would be expected to be a dividend investor’s best friend but sadly this isn’t the case as their dividend yield is a paltry 0.5%.

Their dividend track record is still pretty impressive though: Regular dividends have grown by an average of 13.2% annually since 2011 and every few years they announce a surprise special dividend to investors, with the most recent being a $15 one in 2024.

Taking into account the special dividends, the average dividend yield (calculated at year end share prices) is actually ~1.8%. Not great, but not as tragic.

A big reason their dividend yield isn’t anything to write home about has to do with their valuation: Costco trades at a forward P/E multiple of 52.4x - which is f****** massive.

For example, if Costco traded at the S&P 500’s P/E of 21.1x then that 1.8% all-in dividend yield would be 4.5%. Much more respectable.

To illustrate just how crazy that premium is, consider that Costco trades at a P/E 2.0x and 1.9x that of Apple and Nvidia respectively.

Apparently $1.50 hotdogs and 200 box packs of Kraft Dinner > iPhones and AI compute.

In all seriousness, beyond the steady, consistent growth offered by Costco, the investor base rightfully appreciates the straight-forward, transparent way management runs the company - which is something of a rarity these days.

Costco reporting is tight to GAAP accounting and extremely transparent:

• No adjusted earnings games (a big issue with tech companies):

• No aggressive capitalization, inventory tomfoolery or revenue pull-forwards;

• No hiding share-based compensation;

• Low leverage with expansion capital primarily coming from free cash flow

It’s easy to see why investor’s love Costco but buying the stock is like shopping there without a membership: expensive and no free samples.

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Joke Of The Day

On a Miami­ to Chicago flight, there was a lively youngster who nearly drove everyone crazy. He was running up and down the aisle when the flight attendant started serving coffee. He ran smack into her, knocking a cup of coffee out of her hand and onto the floor.

As he stood by watching her clean up the mess, she glanced up at the boy and said, ‘”Look, why don’t you go and play outside?”

Trivia

Today’s trivia is on Costco (duh).

1. Which company did Costco merge with in 1993?
   A) Price Club
   B) Price Club
   C) Sam's Club
   D) BJ's Wholesale

2. When was Costco founded?
   A) 1976
   B) 1983
   C) 1987
   D) 1991

3. Where does the name 'Kirkland' come from?
   A) CEO's hometown
   B) Original supplier
   C) Original Costco HQ location
   D) Founder's middle name

4. What is true about Costco’s famous cafeteria hot dogs?
   A) It’s seasonal
   B) Price fluctuates yearly
   C) It’s been $1.50 since 1985
   D) It includes fries

5. When did Costco first reach $1 billion in sales?
   A) 1992
   B) 1985
   C) 1989
   D) 1991

6. Which of these is NOT sold at most Costco warehouses?
   A) Caskets
   B) Gold bars
   C) Firearms
   D) Hearing aids

(answers at bottom)

This Week In History

May 20, 1498 – Vasco da Gama reaches India
The Portuguese explorer lands in Calicut, opening direct sea trade between Europe and Asia and initiating centuries of colonial competition.

May 25, 1961 – JFK proposes the moon landing
Kennedy’s “We choose to go to the moon” speech launched the Space Race, a major new front in the Cold War. Baller.

May 20, 1927 – Charles Lindbergh takes off on transatlantic flight
His solo trip from New York to Paris made him a global icon and demonstrated aviation’s new role in geopolitics and transportation.

May 21, 2010 – Bitcoin's first known commercial transaction
A programmer pays 10,000 BTC for two pizzas, a landmark moment in cryptocurrency history. At the current BTC price of $108k, those pizzas cost $1,080,000,000. Gulp.

May 25, 1977 – Star Wars premieres
The movie’s release changed the business of film financing, merchandising, and marketing forever.

Market Update

Please consider giving this post a Like, it really helps get Substack to share my work with others.

Trivia Answers

1. B) In 1993, Costco merged with Price Club.

2. B) Costco was founded in 1983.

3. C) ‘Kirkland’ is the original Costco HQ location.

4. C) Costco’s hot dogs have been $1.50 since 1985.

5. B) Costco hit $1 billion in sales in 1985. Pretty good for a three year old company.

6. C) Costco doesn’t sell firearms. Not even in bulk.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

Share StreetSmarts

Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Hey Readers!

Another short one today as I’ve got a lot going on at the moment. Back to regular programming next week!

Have a good weekend,

- Ryan

Street Stories

Stock Market Parabola

Five weeks ago, the S&P 500 was down 15% in 2025. Yesterday it closed up 1.3% on the year.

And no, markets aren’t efficient.

The wild run over the last few weeks has meant that 7 of 11 sectors are now in the green for the year.

Of the four sectors in the red, only Healthcare is trading near its lows for the year.

Healthcare’s plight can almost singlehandedly be blamed on UnitedHealth - the beleaguered health insurance giant.

Having its market cap cut by 55% since the murder of Brian Thompson, the CEO of the insurance division, the company used to represent ~10% of the healthcare index but now only makes up ~5%.

Considering that healthcare is down 5%, it’s basically all UNH’s fault.

As for the Magnificent 7, all are now miles away from their lows for the year but still net down in 2025.

Nvidia’s bounce has probably been the most surprising considering the question marks around competition and AI bubbles still linger, but the stock is officially back in the green for 2025 - however, this is admittedly a bit less impressive than its +171% performance in 2024.

The rally has also meant that the forward P/E multiple for the S&P 500 is now back above 21x - where the air is quite thin. Ooof.

And while the market may have turned positive, the same can’t be said about Wall Street’s analysts, which have only grown increasingly sour in their outlook for S&P 500 constituents.

But ‘sour’ doesn’t necessarilly mean negative, as the Wall Street consensus is for the S&P 500 to continue to post strong Revenue and EPS growth in 2025 - recession fears be damned!

In fact, the Street is calling for double-digit EPS growth in each of the next three years, which I have to admit seems pretty punchy!

I’m definitely more optimistic about things since President Trump’s de-escalation of tariff diplomacy, but I have to admit that my outlook for the global economy likely falls some degree below the exuberance on display in this market.

Expensive markets and high levels of forecast growth don’t tend to mix well with uncertainty. Lots and lots of uncertainty.

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Joke Of The Day

My hotel tried to charge me ten dollars extra for air conditioning. That wasn’t cool.

Trivia

Today’s trivia is on the history of Wall Street.

1. What year was the Buttonwood Agreement, which laid the foundation for the New York Stock Exchange, signed?
   A) 1689
   B) 1792
   C) 1834
   D) 1901

2. What is the origin of the name "Wall Street"?
   A) It was named after a Dutch-built wall meant to defend against attacks
   B) It was named after a famous banker, John Wall
   C) It was an early nickname for the financial district in London
   D) It was the first street paved in Manhattan

3. What major event occurred on Wall Street on October 28, 1929?
   A) The opening of the NYSE
   B) The worst single-day stock market crash in U.S. history at the time
   C) The signing of the Securities Act
   D) The Dow Jones hit an all-time high

4. In what year was the Dow Jones Industrial Average (DJIA) first introduced?
   A) 1856
   B) 1896
   C) 1914
   D) 1933

5. Which company was the first to reach a $2 trillion market capitalization?
   A) Amazon
   B) Tesla
   C) Microsoft
   D) Apple

(answers at bottom)

Market Update

Please consider giving this post a Like, it really helps get Substack to share my work with others.

Trivia Answers

1. B) The Buttonwood Agreement was signed in 1792.

2. A) Wall Street is named after a defensive wall the Dutch built before New York was acquired by the British.

3. B) October 28, 1929 was worst single-day stock market crash in U.S. history at the time and ushered in the Great Depression.

4. B) The Dow-Jones was created in 1896.

5. D) Apple was the first company to reach a $1 trillion market cap.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

Share StreetSmarts

Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Hey Readers!

Short one this week since I’m been super busy. It’s a fun one though, hope you enjoy!

Have a good weekend,

- Ryan

Street Stories

The 60/40 Portfolio

I’ve spent most of my professional career as a stock picker so I’m naturally biased towards equities. To me, bonds are… kinda yucky.

That’s not to say I don’t think they have a role in people’s portfolios.

The idea is that stocks and bonds have a low-ish correlation. Often times when stocks do poorly, bonds do ok and thus they add some nice diversification. Portfolios structured this way are increasingly more common as individuals age, since preserving wealth is more important than absolute returns and there are also material tax savings if used appropriately¹. I know, lame right?

1. Bond coupon payments are taxed as income and retired individuals - in low tax brackets - can benefit from this relative to dividends and capital gains.

So, ok, bonds are fine. Whatever.

The big issue I have is that a lot of investment advisors and wealth managers get a little too pushy with their portfolio construction and overdo it with the bonds: The classic example being the 60/40 portfolio.

In a 60/40, the advisor puts 60% of the clients assets in stocks and 40% in bonds. As you can see above, with the S&P representing the stocks and the Bloomberg US Aggregate Bond Index subbing in for the bonds, that’s not exactly an ‘optimized strategy’.

In the 30 years since May 2nd 1995, the S&P 500 is up +1,178% while the bond index is only +261%. Slapping 40% of your money into bonds would decrease your return by 31% to +811%. Ie: Not good.

Note: Data relates to ‘total return’ inclusive of dividend and coupon payments reinvested.

And if the 60/40 is so good at adding diversification, with the market going haywire surely this would be the time for it to shine - and it’s definitely done ok.

Since the market peaked on February 19th, the S&P 500 Total Return is down 7.0% compared to only 4.2% for the 60/40. 🫠

But while that +2.8% outperformance that the 60/40 has had over the S&P Total Return since mid-Feb is moderately impressive, you don’t have to zoom out too far to see just how much of a detriment it would have been to have been holding bonds recently.

If we look at the rolling 1 year return of the 60/40 versus the S&P 500 Total Return, 27% of the time since 1993 it’s outperformed.

For the rolling 5 year return since 1998, the results are even more impressive at 34% of time - mostly due to the market taking its time lapping the highs from 2000 (DotCom Bubble) and 2007 (Great Financial Crisis).

But ‘34% of the time’ doesn’t capture the full picture, since the excess return generated by the stocks-only portfolio over the 60/40 has been significant the majority of the time.

As you can see above, on a rolling 5 year basis the stocks-only portfolio has averaged an 11.1% outperformance over the 60/40 - not exactly chump change!

Ryan’s Thoughts: As much as I joke around that we’d be better off without them, bonds play a vital role in portfolio construction. As an individual approaches retirement, an ever increasing allocation isn’t just prudent; it’s a necessity.

The issue I have is that younger investors and savers are over allocated to bonds, either by societal pressures or by investment advisors acting poorly. The latter I blame for two primary reason:

1. They often do not fully understand the service they should be offering their clients - and clearly haven’t taken the time to research the issue.

2. They don’t want to get fired

The last one is particularly terrible in my opinion. Not getting fired - and thus continuing to take a cut of the investors assets every year - is often more of a priority for the advisor than the most prudent long-term strategy for the individual.

As an example, imagine you can pitch your client two strategies: The first will outperform the market by 3% a year when the market goes up and underperform the market by 3% when it goes down. The other strategy does the opposite; underperforming by 3% in up years and outperforming by 3% in bad years. What should the advisor recommend to a 33 year older client?

Well, given that up years happen significantly more often than down years (the S&P closed higher in 35 of the last 46 years - or 76% of the time) and that they likely won’t need to touch their money for another 30 years, the first strategy is generally superior for the client.

But clients don’t usually fire their advisor in good years - even if they’ve left a lot of money on the table! They typically fire them when markets go down and they go down more. To me, that’s a big reason why young investors get saddled with overly conservative, bond-heavy portfolios - even when that’s clearly against their long-term prosperity.

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Joke Of The Day

Market Update

Please consider giving this post a Like, it really helps get Substack to share my work with others.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

Share StreetSmarts

Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Street Stories

FX Hurts

The US market has been a rocket ship for the last decade.

For context, over the last seven years, the S&P 500 has outperformed China’s CSI 300 - the index that tracks the largest 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges - by 106%.

Which is a lot.

In 2025, however, the picture has been a lot more icky, with the S&P 500 really only coming out ahead of the Japanese Nikkei amongst it’s global peers.

Japan makes a lot of cars, and cars really don’t like tariffs.

What makes this even worst for US investors is that the U.S. Dollar has also had a rocky time out there. In the world of ‘safe haven’ assets, the greenback hasn’t proved as resilient as gold (see below) - almost like foreign investors are a wee bit peeved by the global hegemon at the moment.

All the other major global currencies *cough* plus Canada *cough* have seen strengthening versus the USD this year.

The net effect is that since the US election, most major stock indices have picked up the relative boost of being denominated in non-USD currencies. When we take into consideration the foreign exchange impact, the outperformance of these indices only adds insult to the S&P’s injury.

For example, inclusive of the FX impact, Britain’s FTSE 100 picks up another +2.4% versus the S&P.

Europe has arguably been the biggest beneficiary.

The Eurozone’s 50 biggest companies - tallied in the EuroStoxx 50 - have outperformed the S&P by an FX adjusted ~15% since President Trump’s election.

China’s CSI 300 is underperforming the S&P 500 on a constant currency basis but sprinkle in a +2.6% FX gain, and even the country with Trump’s biggest bullseye on it is outperforming the US.

Heck, even whipping boy Canada is hanging in there!

Tesla’s Opposite Day

Small growth stocks often get a pass for bad quarters. Growth can be lumpy and as long as the vision is intact then, sure, take the quarter off.

But for former trillion dollar companies, missing EPS estimates by 34% ($0.27 vs. Wall Street estimate for $0.41) and Revs by 9% ($19.3B vs. est. $21.2B) the result is usually ugly. Really ugly.

Unless you’re Tesla. In which case your stock goes up by 5.4%.

Yes, Trump did a 180 on tariffs shortly after they reported post-market on Tuesday. Yep, the stock was down 40% this year. And sure, maybe expectations were for the quarter to be even worse (if that’s even possible).

But since Tuesday, Tesla’s stock is up 25% after what was unequivocally their worst quarter EVER.

Anyone else find that odd?

Gold at All-Time Highs

The shiny yellow metal has been going interplanetary since this time last year, giving Gold Bugs their first taste of success since the Covid Pandemic.

While I don’t begrudge anyone their successes, a skyrocketing gold price is usually associated with a ‘flight to safety’, meaning most times this happens things aren’t particularly fun elsewhere.

Moreover, if gold does find itself in something of a bubble, how likely is it that the roof falls in once disaster is averted?

To look into this, I compared how volatile were future gold returns were after periods of sharp increase. Basically, if gold was up X% over the last 12-months (Y-Axis), how did it do over the subsequent 12-months (X-Axis).

Turns out Gold doesn’t really ‘implode’ - especially after a big performance. Looking at monthly data since 2000, any time Gold was up >20% over the next 12-months the worst it’s ever drop was <9% (November 2007).

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Joke Of The Day

Stockbroker: What is a million years like to you?
God: Like one second.
Stockbroker: What is a million dollars like to you?
God: Like one penny.
Stockbroker: Can I have a penny?
God: Just a second…

Trivia

This week’s trivia is on Investing 101.

1. In finance, liquidity refers to:
   A) The ease of converting assets to cash
   B) The amount of liquid in a company's water cooler
   C) The duration of investment assets
   D) The change in net operating cash flow of a business

2. The Capital Asset Pricing Model (CAPM) is used to:
   A) Determine yield on a bond or annuity
   B) Calculate expected return on an investment based on its risk
   C) Price capital goods
   D) Model the capital of a city

3. 'Systemic Risk' refers to:
   A) The risk that computer and technology failures pose to financial markets
   B) The risk of collapse of an company, market or financial system
   C) The risk associated with a particular operating system
   D) The undiversifiable investment risk associated with the market

4. 2. The term "Black Monday" refers to:

   A) The Monday after the end of the fiscal year

   B) The launch of the Euro currency

   C) The October 19, 1987 stock market crash

   D) The day oil prices hit $100 per barrel

5. 8. The "Volcker Shock" in the late 1970s/early 1980s refers to:

   A) Deregulation of financial markets

   B) Massive interest rate hikes to combat inflation

   C) Collapse of the gold standard

   D) Beginning of free trade agreements

(answers at bottom)

Market Update

Please consider giving this post a Like, it really helps get Substack to share my work with others.

Trivia Answers

1. A) Liquidity is the ease of converting assets to cash.

2. B) CAPM calculates expected return on an investment based on its risk (using Beta as the risk input).

3. B) Systemic Risk is the risk of collapse of a company, market or financial system. If you picked D, that’s ‘systematic risk’. Muahaha.

   

4. C) Black Monday refers to the October 19, 1987 stock market crash.

5. B) The Volker Shock refers to massive interest rate hikes to combat inflation.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

Share StreetSmarts

Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Hey Readers!

Bit of a shorter one today (no Macro Update or Market Movers) since last week’s was a monster!

If you missed it, I did a big primer on the current state of the financial world - check it out!

Have a good weekend,

- Ryan

Street Stories

How Defensive Are Staples?

The Consumer Staples sector of the S&P 500 hasn’t been a bad place to put your money over the last few years.

It just hasn’t been a particularly good place.

Since the start of 2020, the index has underperformed the more trendy sectors like Tech, Communication Services and Consumer Discretionary - in part because that’s where the Mag7 are located.

However, so far in 2025, Staples is the best performing sector; up 5.8% while the S&P 500 is down 10.2%.

Fan favorites Discretionary, InfoTech and Comm. Services are also getting smoked - down a respective 19.7%, 18.4% and 11.7%.

The Staples sector is clearly showing that once again, it’s a defensive bulwark against a correcting market. The question is whether or not those companies - not their shares - are actually well insulated from the whims of consumer demand.

The results are actually pretty astounding!

As you can see, earnings per share has steadily marched upwards even through the worst parts of the last three recessions. All while Discretionary and the S&P 500 more broadly all took it square on the chin.

While the Consumer Discretionary sector has bounced around all willy-nilly, Staples has only had two down years for EPS growth since 2000: -0.1% in 2001 and -1.7% in 2015.

Something that you might find interesting is that sleepy old Staples has actually grown revenue faster than its more exciting Discretionary peer.

A good chunk of this has to do with M&A activity and consolidation within the industry but it is pretty wild that the sector has grown revenue per share by nearly 500% since 1999 while the overall S&P 500 has only managed around 200%.

Looking at the big fish within the sector only adds to the feeling of persistent, steady growth. As you can see, both Walmart and Costco have each only seen revenue contract once in the last 25 years. Pretty darn impressive.

Compared to Discretionary names, like Ford, Staples looks downright zen.

It may only happen every decade or so but going heavy into Staples at the right time really makes you look like a hero. 😏

UnitedHealth Reports A Dud

A truism for the stock market over the last decade has been that UnitedHealth beats on every quarter. EVERY. QUARTER.

Until now.

On Thursday, the health insurance giant popped out Q1 2025 EPS of $7.20 vs. Wall Street estimates for $7.30, as well as tiny miss on Revs ($110B vs. $112B expected), driven mostly by poorly adapting to rule changes relating to Medicaid billing practices - which UnitedHealth is being investigated by the DOJ for since February. They also chopped their 2025 EPS guidance.

Probably not the end of the world but geez, the market cut them no slack - dragging down the broader health care sector with it.

The Un-inverting of the Yield Curve

Inverted yield curves get a lot of attention from the financial community - and for good reason.

To oversimplify, when faced with growing inflation, central banks raise short-term interest rates to cool the economy.

This often is accompanied by a decrease in the longer-term rates as investors reason that future economic growth will be suppressed, and that the central bank will be forced to lower rates in the future to stimulate growth.

The result is usually a tilting of the yield curve from upward sloping, to downward sloping (ie: inverted).

Market participants also view the inverting of the yield curve as presaging a recession. Which, of course, isn’t typically good for the stock market.

While the process of inverting does generally indicate a cooling of economic growth, the point at which the curve un-inverts is also a useful data point.

Essentially, short-term rates are on their way down due to some combination of the central bank wanting to stimulate the economy (because growth is slowing) or because inflation is now at a reasonable level (typically because growth has slowed).

The spread between the US 3-Month T-Bill and the 10-Year Note has hovered around zero since December, after a record 25 months being inverted.

As you can see above, when the yield curve univerts the stock market doesn’t typically do so hot.

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Joke Of The Day

All I ask is a chance to prove money can’t buy happiness.

Early to bed, early to rise… makes people suspicious.

Trivia

Today’s trivia is on Consumer Staples.

1. Which legendary investor called Procter & Gamble stock “the kind of company you want to marry, not date”?
   A) Carl Icahn
   B) Peter Lynch
   C) Warren Buffett
   D) Ray Dalio

2. Which company introduced the first toothpaste in a collapsible tube in 1896?
   A) Colgate
   B) Unilever
   C) Church & Dwight
   D) Johnson & Johnson

3. What year was Walmart founded?
   A) 1949
   B) 1959
   C) 1969
   D) 1979

4. Which of these companies is headquartered in Switzerland but has a major footprint in U.S. staples?
   A) Kraft Heinz
   B) PepsiCo
   C) Nestlé
   D) Mondelez

5. Which of these companies famously uses a “Dividend King” strategy with over 50 consecutive years of dividend increases?
   A) Coca-Cola
   B) Procter & Gamble
   C) Colgate-Palmolive
   D) PepsiCo

6. What Percent of the S&P 500 does Consumer Staples represent?
   A) 15.2%
   B) 2.4%
   C) 6.1%
   D) 21.3%

(answers at bottom)

This Week In History

April 14, 1865 – Abraham Lincoln Assassinated
President Lincoln was shot by John Wilkes Booth just days after the Civil War effectively ended. His death shocked the U.S. and derailed Reconstruction efforts.

April 15, 1912 – RMS Titanic Sinks
Though not a war event directly, the Titanic’s sinking had massive implications for naval regulations and maritime safety worldwide.

April 14, 2000 – Peak of the Dot-Com Bubble (NASDAQ)
NASDAQ hit its all-time high of 5,048.62, marking the peak before the brutal crash. It took 15 years to fully recover.

Market Update

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Trivia Answers

1. C) Warren Buffett said this about P&G.

2. A) Colgate launched the squishable tooth paste tube.

3. C) Walmart was founded in 1969.

4. C) Nestlé is Swiss.

5. B) Procter & Gamble has raised dividends for 50 straight years.

6. C) Consumer Staples represents 6.1% of the S&P 500.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Street Stories

Usually I try to have a cohesive thought that shapes my weekly write-up. Some sort of theme or concept. But given how unprecedented things are right now, I decided to take more of a ‘kitchen sink’ approach, and basically just lay out the charts and data that I feel add the most information to what’s currently taking place.

Get ready for context overload!

To start, the last seven trading days have seen a near record amount of volatility. Over this period, we’ve seen average price movements for the S&P 500 of 3.9% - which is a lot.

The average since 1978 is 0.7%.

To put that into historical context, that level of volatility was only surpassed by the initial Covid market crash and the heights of the Great Financial Crisis.

Yup, the Tech Bubble popping was more orderly for markets.

2025 is also in some ugly company for the worst starts for the S&P 500. The year to April 11th falls just behind 2008 (ie: inclusive of the Bear Stearns collapse) for the fourth worst start to the year. Truly icky stuff.

The silver lining is that most of these years ended up positive by year end - save for 1980, 2001, 2008 and 2009.

On Wednesday when President Trump called a pause to the flurry of international tariffs, the market saw one of it’s biggest one-day gains in history.

What’s interesting is that of all the biggest one-day pops the market has ever seen, pretty much all have come as relief rallies during the biggest market collapses.

Just looking at the above, one could be forgiven for thinking the Great Financial Crisis was a peachy time to be an investor.

On the sector front, the big winners of 2024 - Consumer Discretionary, Tech and Communication Services - are currently the worst performing on 2025.

And not surprisingly, the three best sectors this year have been the defensives: Health Care (-0.5%), Utilities (+0.8%) and Consumer Staples (+3.7%).

As it stands, 71% of the S&P is negative for the year with the average company down 8.5%.

(Note: That the S&P 500 is down 8.8% as more of the larger *cough* tech companies *cough* are feeling it the largest this year)

Interestingly, even though Canadians are arguably the ones taking it on the chin the hardest, so far in 2025 the TSX is holding it better than the S&P 500: 67% of companies are negative vs. 71% for the S&P and the average company is down 6.4% vs. 8.5%.

It’s a small win but go Canada!

In fact, of the main targets for Trump ire - Mexico, Canada, Europe and China - all of their main indices have outperformed the S&P since President Trump’s election.

Another fun one is Warren Buffett’s Berkshire Hathaway: Uncle Warren was catching some flak at the end of last year for being bearish on the market and - for probably the first time ever - holding more cash than he did in stocks.

While that conservative positioning led to the Oracle of Omaha being once again touted as an outdated luddite, 2025 has proven once again that he still may know what he’s talking about.

2025 has also seen a few shakeups at the top of the pile for who will reign as the world’s largest company. Nvidia retook the title early in the year from Apple, but that was short lived amidst general displeasure with chip stocks.

China tariffs hit Apple hard - since apparently President Trump’s ‘we should make iPhones in America’ didn’t hit too well with investors and Microsoft swooped in to take the lead.

America’s pausing of most tariffs (and hints at green shoots for Apple) on Wednesday saw Apple retake the top spot - adding a bewildering $397 billion in market cap to boot.

Something I’ve harped about for the last six months has been how expensive the market is - hitting levels only seen during the Covid blip and the heights of DotCom insanity.

While things have definitely contracted, the S&P 500’s forward P/E multiple is still not exactly in ‘screaming buy’ territory.

For context, when the rubble settled after the Great Financial Crisis settled, the S&P 500 traded at a P/E of 9.5x - a touch under half of today’s ‘on sale’ 19.1x.

While the S&P may not be back to ‘normal levels’, the Tech sector has definitely seen some moderation - taking the market pull-back square on the jaw.

In July 2024, the gilded Tech sector peaked at a P/E premium to the S&P 500 of 9.8x (31.3x for Tech and 21.6x for the S&P). This has since shrunk to a more modest 4.0x.

While Tech may have been hit hardest, every sector in the S&P 500 has seen their one year forward P/E multiples compress, save for defensive Consumer Staples and… Materials (?) Didn’t see that one coming did ya!

[Note: P/Es go up when earnings estimates get cut]

An interesting nuance of Wall Street is their hesitance to get particularly negative on stocks. Piss off the company with a sell report, and you just lost your bank’s allocation on the next debt deal or management cancels you hosting of their next investor roadshow. Bonus deleted.

Still, the stubbornness of analyst to trim estimates this year is a bit surprising. As you can see above, the aggregate 2025 and 2026 estimates for companies in the S&P 500 hasn’t budged this year.

That’s not saying nothing has happened. In fact, 72% of companies have seen an increase to their 12-month forward EPS estimates increase since the start of the year.

[Note: If a company has positive growth, the 12-month forward EPS will always increase overtime without estimate changes due to the a greater proportion of outyear estimates in the aggregated figure.]

One company that has seen their forecast get taken to the woodshed is Tesla. Estimates for their fiscal 2025 earnings per share now sit at $2.67 - a full 28% down from this time last year at $3.69.

Fun Fact: In April 2022, that figure sat at $6.88. 🫠

The market’s favorite ‘fear gauge’ - the VIX - hasn’t sat idly by either. The pop this week took the CBOE’s Volatility Index into the stratosphere, only topped this millennium by the worst weeks in the GFC and pandemic.

Another adage of mine this past year has been ‘well, at least inflation is down’.

Sure that’s nice and all, as the Consumer Price Index for March came in at 2.4% - it’s lowest level since you were wearing facemasks and busy trying to ‘flatten the curve’ - but significant drops like that can be troubling as well.

At its core, inflation is driven by people buying goods and services. If they aren’t buying, inflation may go down but there’s broader - often less positive - implications for economic health.

Fingers crossed for the US consumer.

Consumer Sentiment - released Friday - didn’t help alleviate fears either, as a massive miss seems to portend a worrying outlook for the average American.

One of the biggest whipsaws we’ve seen this year is the spike in expectations for rate cuts this year.

At the time of President Trump’s election, the interest rate swaps market was pricing in a 41% chance of three or more rate cuts over the course of 2025.

To oversimplify, tariff rhetoric posed inflationary fears so expectations for +3 cuts dropped to around 23% by New Years (the Fed doesn’t usually cut rates in the face of increased inflation.

Since then, however, the concern has moved from ‘inflation from tariffs’ to ‘recession from tariffs’ and the Fed tends to cut rates during period of economic decline.

Right now, the odds of three of more rate cuts in 2025 sits at 81%. ⛷️

The bond market hasn’t ignored this, and as a result we’ve seen yields for most of the curve drop significantly since the start of the year based on the idea that rates will be lower and for longer.

I write StreetSmarts to share a bit of information and maybe the odd insight or terrible meme. It’s fun and I love it. But this is certainly one of the more unique times in my investing journey and, if I’m being honest, I’m not too optimistic at the moment.

Hopefully something above was helpful as you try to figure out how to navigate the situation and I definitely don’t want to tell anyone what they should or shouldn’t be doing (see disclaimer at bottom). I also know that a lot of folks are worried about their savings and financial future right now.

There are a million quotes or adages that take both sides of what people should be doing; from JP Morgan’s ‘I made a fortune selling too early’ to Kenny Fisher’s ‘Time in the market beats timing the market’.

The nice thing about investing is you can choose your own adventure, and - with a little bit of digging - can figure out a spot in the middle where your risk tolerance intersects your ability to sleep at night.

As Arthur Dane said to Ned Stark in season 6 episode 3 of Game of Thrones: “I wish you good fortune in the wars to come”.

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Joke Of The Day

So apparently RSVP'ing back to a wedding invite 'maybe next time' isn't the correct response…

Claustrophobic people are better at thinking out of the box.

Trivia

Obvvvviously today’s trivia is based on the great stock market crashes throughout history.

1. What nickname was given to the day the stock market crashed in 1929?
   A) Black Friday
   B) Black Tuesday
   C) Black Monday
   D) Red Thursday

2. What percentage did the Dow Jones Industrial Average fall on Black Monday in 1987?
   A) 12.7%
   B) 16.0%
   C) 22.6%
   D) 25.3%

3. Which famous investor said "Be fearful when others are greedy, and greedy when others are fearful"?
   A) Benjamin Graham
   B) Peter Lynch
   C) Warren Buffett
   D) Charlie Munger

4. Which Wall Street investment bank famously collapsed in 2008, marking a turning point in the crisis?
   A) Morgan Stanley
   B) Bear Stearns
   C) Lehman Brothers
   D) Merrill Lynch

5. Which economic theory inspired FDR’s New Deal programs during the Great Depression?
   A) Monetarism
   B) Keynesian Economics
   C) Supply-side Economics
   D) Austrian School

6. During the Great Depression, what percentage of Americans were unemployed at the peak?
   A) 14%
   B) 19%
   C) 25%
   D) 30%

7. What infamous hedge fund collapsed in 1998, requiring a $3.6 billion bailout?
   A) Renaissance Technologies
   B) Long-Term Capital Management
   C) Tiger Global
   D) Bridgewater Associates

(answers at bottom)

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Trivia Answers

1. B) The start of the great Depression is generally considered to be Black Tuesday.

2. C) The Dow fell 22.6% on Black Monday.

3. C) Warren Buffett said the whole ‘be fearful’ thing.

4. C) Lehman Brothers collapsed… right when I was doing full-time recruiting for investment banking. Thannnnks.

5. B) Keynesian Economics inspired FDR and other fiscal policy acolytes.

6. C) Unemployment peaked at ~25% during the Great Depression.

7. B) Long-Term Capital Management. Fun-Fact: There’s a conspiracy theory that because Bear Stearns and Lehman Brothers didn’t contribute to the bail-out (Lehman later did), that that’s why Wall Street didn’t come to their aid when they failed. Treasury Secretary Hank Paulson was COO (and later CEO) of Goldman Sachs at the time.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Street Stories

Let’s pretend you’re a legacy brick-and-mortar retailer, and that most of the products you sell are available online for less. What do you do?

Tighten up your online presence? Check. Pivot towards new niches, like collectibles? Tried that too. Become a Bitcoin hedgefund? Whaaaaaa?!

Yep, GameStop is trying to pull a MicroStrategy and get into the crypto game. And reactions thus far have been… well, less than enthusiastic.

Shares of the beleaguered meme stock initially popped when the company released a presser claiming that its board approved the creation of a treasury fund to house the crypto it planned to buy.

However, when they announced a $1.3 billion convertible bond issuance two days later to start buying bitcoin in earnest, the market got cold feet - sending the shares down double digits.

Not exactly tiptoeing into this, eh?

For those a bit hazy on the rationale, they are basically trying to ‘pull a Microstrategy’ - the mediocre tech company led by crypto evangelist Michael Saylor that became a famous for issuing shares (or prefs or converts) to buy Bitcoin.

The secret sauce was that - for reasons that still remain mystifying - the company continues to trade at a massive premium to their Bitcoin holdings. In essence, they can issue shares; buy Bitcoin; and their stock goes up like some sort of perpetual money printer.

So, since GameStop has tried a whole whack of stuff but hasn’t yet been able to turn the business around (they closed 600 stores last year and Q4 revenue was down 28% year-over-year) they thought they’d give this a whirl.

They do have a bit of a problem though: They already trade at a ridiculous premium.

See, EPS for the fiscal year ending in January clocked in at $0.25 making the $22 share price something of a stiff P/E multiple.

However, the company has aggressively leveraged this premium valuation to issue shares and raise cash - dilution be damned!

So what happens if GameStop dumps all of its massive $4.8 billion cash pile into Bitcoin and we slap on a similar ‘Market Cap-to-Bitcoin Holdings Multiple’¹ to MicroStrategy of 1.8x?

Well, that would imply that the share would go down 12.9%

1. I can’t believe I just typed that.

Anyway, this isn’t to say that this won’t work (I mean, assuming they can issue shares/converts at a premium, why wouldn’t it?). But if you want to be a ‘real’ business, there does need to be something beyond financial engineering.

If the only reason you are still in existence is a shareholder base willing to absorb dilution even after a dilution event in the belief that GameStop can regain its former glory, then turning yourself into a glorified Coinbase wallet is gambling (quite literally) with people’s hard earned capital.

And even the folks at r/wallstreetbets have their limits.

What’s Bad & What’s Worse

The market had another week to forget, with the S&P 500 down 1.5%.

Other than Energy - which has hung in there with solid oil prices kept up by Middle-East woes and a punchy OPEC vowing further supply cuts - things are playing out in fairly traditional fashion:

• Defensive sectors, like Utilities, Health Care and Consumer Staples, are all in the green; aided by more reasonable valuations.

• Cyclical sectors, like Industrials, Materials and Consumer Discretionary, have been getting beat up, as tariffs, trade wars and fears of a cooling economy have tempered some of the big winners in 2025.

The biggest pain has come from Tech, with the average company down 8.5% this year after the sector jumped +36% in 2024. Of the 69 Tech companies in the S&P, only 15 of them are up on the year.

Moreover, the bigger names in the S&P 500 have held in better than the smaller ones - which again is standard operating procedure.

Put into buckets (shown above), the biggest 100 companies have averaged positive returns this year (+0.6%), as have the next 100 biggest (+1.4%). The smallest 100 (bottom 20%), however, are down by an average of 6.5% so far this year.

And this trend is directionally consistent as we get into the world of Mid-Cap and Small-Cap stocks, with the S&P 400 (mid-cap) off 4.9% and the 600 (small-cap) even worse at -7.7% for the year.

So, while it may seem like unprecedented times, with defensives being defensive and small underperforming big, this is pretty much out of the textbook right now.

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Joke Of The Day

Nothing is foolproof to a sufficiently talented fool.

Macro Update

Core PCE [Friday]

• February core PCE rose 0.4% m/m (vs. 0.3% expected), bringing the annualized rate to 2.8% (vs. 2.7% consensus).

• Headline PCE increased 0.3% m/m, matching expectations, with the annualized rate steady at 2.5%.

• Personal spending rose 0.4% (vs. 0.3% expected), while income jumped 0.8% (vs. 0.4%), showing strong consumer momentum despite sticky inflation.

Durable Goods Orders [Wednesday]

• Headline durable goods orders rose 0.9% m/m in February (vs. -1.0% expected), with January revised up to 3.3%.

• Core capital goods shipments came in strong at +0.9%, suggesting resilient equipment demand.

Consumer Confidence [Tuesday]

• March Consumer Confidence dropped to 92.9 (vs. 94.5 expected), its lowest since January 2021, with the Expectations Index hitting a 12-year low at 65.2.

• Labor market perceptions held steady, but inflation and trade concerns weighed on sentiment.

New Home Sales [Tuesday]

• February new home sales rose 1.8% to 676K (vs. 677.5K expected), continuing a modest upward trend.

PMIs [Monday]

• March preliminary composite PMI came in at 53.5 (vs. 51.7 expected), with services rising to 54.3 (vs. 50.8) and manufacturing slipping to 49.8 (vs. 51.9).

• Business activity was lifted by services, while manufacturing contracted amid slower new orders. Input costs surged at the fastest pace in nearly two years, especially in manufacturing.

Trivia

Today’s trivia is on Nike.

1. When was Nike, Inc. originally founded?
   A) 1971
   B) 1954
   C) 1964
   D) 1980

2. What was Nike's original name?
   A) Mountain Footwear
   B) Blue Ribbon Sports
   C) Victory Sports
   D) Athlete's Foot

3. What was the initial payment for the creation of the Nike Swoosh logo?
   A) $35,000
   B) $35
   C) $350
   D) $3,500

4. What were Nike’s sales in fiscal 2024?
   A) $7.1 billion
   B) $45.9 billion
   C) $104.8 billion
   D) $87.4 billion

(answers at bottom)

Market Update

Market Movers

Friday

• Applovin (APP) [+4.1%] CEO Foroughi clapped back at the Muddy Waters short report, saying their ad models are improving and their data practices are no different from the big tech players.

• Rocket Lab USA (RKLB) [+1.1%] Got a boost after joining the US Space Force Launch Program, opening the door to future national security contracts.

• Wolfspeed (WOLF) [-51.9%] Cratered after reports it failed to reach a debt swap deal and could lose a key CHIPS Act grant, though it stuck to its Q3 outlook.

• lululemon athletica (LULU) [-14.2%] Despite a solid Q4 beat, weak comps and a soft outlook spooked investors, especially with tariff pressure and cautious US shoppers in the mix.

Thursday

• GameStop (GME) [-22.1%] Tanked after announcing a $1.3B convertible debt offering tied to buying Bitcoin.

• Applovin (APP) [-20.1%] Slammed by a Muddy Waters short report claiming weak e-commerce conversions and questionable data collection practices.

• Concentrix (CNXC) [+42.4%] Soared after crushing Q1 expectations and sounding upbeat on AI, market share, and cash flow.

• General Motors (GM) [-7.4%] Slipped after Trump proposed a 25% tariff on all autos not made in the U.S.

• Advanced Micro Devices (AMD) [-3.2%] Downgraded by Jefferies over lagging AI traction and rising pressure from Intel.

Wednesday

• Grab Holdings (GRAB) [+5.3%] Rose on reports it’s eyeing a $2B loan to possibly acquire Indonesian rival GoTo.

• Dollar Tree (DLTR) [+3.1%] Popped on a solid Q4 and news it’s selling Family Dollar for just over $1B, though tariffs remain a concern.

• NVIDIA (NVDA) [-6%] Dropped after FT reported China’s energy rules could cost it $17B annually in chip sales.

Tuesday

• Trump Media & Technology Group (DJT) [+8.9%] Gained after announcing a planned partnership with Crypto.com to launch ETFs under the Truth.Fi brand.

• Mobileye Global (MBLY) [+8.7%] Jumped as Volkswagen picked it to help upgrade driver assistance tech in upcoming vehicles.

• Carvana (CVNA) [+3.8%] Upgraded by Morgan Stanley, which called it a leader in auto retail with strong free cash flow and execution.

• CrowdStrike (CRWD) [+3.3%] Got a boost from a BTIG upgrade, citing clearer skies after an earlier IT outage and potential reacceleration.

• Lyft (LYFT) [+2.2%] Moved up after Engine Capital reportedly took a stake and is pushing for strategic changes.

• United Parcel Service (UPS) [-5.1%] Weakened on a price target cut and softer Q1 outlook tied to tariff uncertainty and freight weakness.

Monday

• Intuitive Machines (LUNR) [+30%] Surged despite weak Q4 results, as the company guided toward positive EBITDA by late 2025.

• Fannie Mae (FNMA) [+11.1%] Jumped on reports that the Trump admin may push to privatize it and Freddie Mac via executive order.

• Dutch Bros (BROS) [+7.7%] Got a lift from a Morgan Stanley upgrade, citing strong growth potential and room for margin expansion.

• FedEx (FDX) [+5.2%] Upgraded by Jefferies, which sees earnings growth and cost cuts outweighing macro challenges.

• Pinterest (PINS) [+5.1%] Rose after Guggenheim said its recent dip is a buying opportunity with user growth and monetization both looking strong.

Please consider giving this post a Like, it really helps get Substack to share my work with others.

Trivia Answers

1. C) Nike was founded in 1964.

2. B) Nike’s original name was Blue Ribbon Sports.

3. B) Nike paid $35 for the famous ‘Swoosh’ design.

4. B) 2024 revenues were $45.9 billion.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Hey Readers!

Sending out a bit later to see if afternoons = higher open rate. Let me know in the comments when you would prefer.

Have a good weekend,

- Ryan

Street Stories

Market Corrections

The S&P 500 closed up 2.1% on Friday. A nice end to a week that still saw the index bleed another 2.3%. However, this did mean the index is no longer in a correction - a decline of 10% from the recent market peak. Score!

The market technically entered a correction on March 13th, after falling a combined 10.1% from its February 19th all-time high of 6,144.

So, after being in correction territory by a mere 0.1% for a grand total of 24 hours, I think it’s safe to safe everything is just peachy again.

Ok, it probably isn’t.

Now I wanted to dig into the history of Corrections to see if there is any useful information to be gleaned by it but I had some issues getting the data to match historical convention for the dates of Corrections and Bear Markets - and it was also super annoying¹.

Basically, I tried to manually massage the data but going back to 1978 is 12k trading days and I kinda gave up.

1. For example, if the market is goes -10.1%, -9.8%, -10.2%, -9.7%, and -10.4% - surely that isn’t three separate corrections? Or when a Correction ends with a Bear Market or if the Bear Market ‘technically’ goes back to being a Correction but in the zeitgeist it’s still considered a Bear Market. Blaa.

My easier solution was to look at declines of more than 10% to see how they ended. Are they typically short or long? How bad do they typically get? Etc.

Turns out that there have been 38 events that meet this criteria since 1978 which doesn’t really seem that bad.

A few times this millennium (November 2023, July 2018), the market was able to just scrape -10% before picking up steam again.

More often, however, is that once a -10% decline is clocked, things often get worse. Much worse.

The average low-point for a ‘major decline’ ends up at around 20% - the threshold for a Bear Market.

[Note that some years have multiple ‘major declines’. For example, 2008 has four alone. In actuality this is generally considered to be one Bear Market but based on my model’s criteria for a major decline (ends if it’s gained 10% from it’s floor), the super volatile 2008 made for one weird year]

As for how long they last, well that’s often no picnic either.

On average, once the market has dropped 10% from it’s relative high, it’s taken 72 days for the ‘major decline’ to end (either by reaching a new high or by bouncing +10% from the lows) which puts us at the end of May before things start making sense again. Ooof.

Also working against us here is the elevated valuation of the S&P 500.

Sitting at a 20.4x forward P/E multiple, the only two other times the market has been more ‘expensive’ ended particularly terribly (DotCom Bubble and 2022’s ‘Everything Bubble’), with the market seeing declines of 49% and 25% respectively.

Basically, there’s a good possibility this turns into a Bear Market - and those ain’t pretty.

On the sector front, there’s some interesting nuance in what’s worked in 2025 and what hasn’t.

Tech and it’s techy little buddy Communication Services knocked it out of the park in 2024 (+36% and 39% respectively) but they are some of the worst performers so far this year (-9.9% and -3.8%).

Consumer Discretionary was also a big stand out in 2024 (+29%) but is already down 14% this year. And Tesla and Amazon being down 38% and 10% respectively hasn’t helped revive any enthusiasm for the consumer.

Meanwhile, the classic non-cyclicals of Health Care (+4.8%), Utilities (+2.9%) and Consumer Staples (+1.3%) are proving their defensive value.

In the Developed World, the US has fallen short this year with the S&P 500 only besting Japan amongst their global peers.

Hell, even the TSX Composite here in Canada is beating the S&P and I wouldn’t exactly call things here tranquil at the moment…

Even the historically more economically sensitive developing world has hung in there quite well. Of the biggest players, only India’s Nifty 50 has failed to out pace the S&P 500 this year.

When defensive sectors and ‘safety assets’ are the best performers, things obviously aren’t at their best.

Sure, there’s certainly a chance that the 24hrs the S&P spent in correction is the end of it, and we’ll just go back to banging out ATHs like in 2024. But my guess, however, is that we’re going to see a little turbulence first.

Buckle up!

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Joke Of The Day

My IQ test results came back. They were negative.

Macro Update

Consumer Sentiment [Friday]

• Preliminary March University of Michigan consumer sentiment fell to 57.9 (vs. 64.0 expected), the lowest since November 2022 and down from February’s 64.7.

• March 1-year inflation expectations jumped to 4.9% (vs. 4.3% in February), signaling renewed inflation concerns.

Producer Price Index [Thursday]

• February PPI was flat m/m (vs. +0.3% expected), with annualized at 3.2% (vs. 3.3% expected), slowing from January’s 0.6% m/m and 3.7% annualized rise.

• Core PPI fell 0.1% (vs. +0.3% expected), with annualized at 3.4% (vs. 3.5% expected), down from 3.8% in January.

• While inflation pressures eased, economists warn tariffs could drive future price increases.

Consumer Price Index [Wednesday]

• Annualized headline CPI increased 2.8%, below the 2.9% consensus and January’s 3.0%.

• Notables:

  • Shelter costs, which accounted for nearly half of the monthly increase, rose 0.3% but slowed from January’s 0.4% gain.

  • Airline fares fell 4.0%, while used car prices rose 0.9%, slowing from 2.2%.

  • Car insurance inflation eased to 0.3% from 2.0%, while food away from home rose 0.4% after last month’s 0.2% gain.

• Equities initially rallied on the softer report but pared gains as concerns over economic growth and potential tariffs offset optimism about inflation cooling.

NY Fed Survey of Consumer Expectations [Monday]

• The Survey showed inflation expectations were unchanged at 3.0% for both the 3-year and 5-year outlooks, while the 1-year expectation ticked up to 3.1%. However, uncertainty about future inflation had a big increase across all time horizons.

• Labor market sentiment was mixed, with earnings growth expectations flat at 3.0%, while the probability of higher unemployment in a year surged 5.4pp to 39.4%, the highest since September 2023. The probability of losing one’s job in the next 12 months dipped slightly to 14.1%.

  

  

Trivia

Today’s trivia is on the father of value investing, Benjamin Graham.

1. Benjamin Graham wrote a famous book on investing, which is this?
   A) The Wealth of Nations
   B) The Intelligent Investor
   C) Security Analysis
   D) Common Stocks and Uncommon Profits

2. Which future billionaire was a student of Benjamin Graham at Columbia University?
   A) Bill Gates
   B) Stan Druckenmiller
   C) Warren Buffett
   D) George Soros

3. Which of the following concepts is NOT associated with Benjamin Graham’s investment philosophy?
   A) Margin of Safety
   B) Efficient Market Hypothesis
   C) Mr. Market
   D) Diversification

4. Graham was a pioneer of a particular type of analysis for evaluating stocks. What is it called?
   A) Fundamental analysis
   B) Technical analysis
   C) Sentiment analysis
   D) Predictive analysis

(answers at bottom)

This Week In History

March 10, 1876 – First Successful Telephone Call
Alexander Graham Bell made the first successful telephone call, saying, "Mr. Watson, come here, I want to see you."

March 15, 2011 – Syrian Civil War Begins
Protests erupted in Syria against President Bashar al-Assad's regime, leading to a prolonged civil war with significant humanitarian and geopolitical consequences.

March 12, 2009 – Bernie Madoff's Guilty Plea
Financier Bernard Madoff pleaded guilty to operating the largest Ponzi scheme in history, defrauding investors of nearly $65 billion. This event led to widespread reforms in financial regulations.

March 16, 2020 – Global Stock Market Crash
Global stock markets experienced significant declines due to fears over the COVID-19 pandemic, leading to economic turmoil and prompting unprecedented fiscal and monetary interventions.

Market Update

Market Movers

Friday:

• RBRK (Rubrik) [+27.8%]: Strong Q4 beat across earnings, revenue, and margins, with Subscription ARR and guidance exceeding expectations.

• PTON (Peloton Interactive) [+16.1%]: Upgraded to buy at Canaccord Genuity, citing valuation and optimism on revenue initiatives.

• DOCU (DocuSign) [+14.8%]: Q4 revenue, EPS, and billings topped estimates, though Q1 guidance was light; analysts positive on growth acceleration.

• XPOF (Xponential Fitness) [-38.5%]: Q4 earnings missed, FY25 guidance disappointed, and 2023 financials will be restated, citing rapid scaling issues.

Thursday:

• INTC (Intel) [+14.6%]: Named Lip-Bu Tan as CEO, with analysts mostly positive despite lingering concerns over industry headwinds.

• AVDX (AvidXchange Holdings) [+13.8%]: Reportedly exploring a sale after attracting takeover interest.

• ADBE (Adobe) [-13.9%]: Q1 earnings beat but guidance was weak; concerns over discontinued ARR metrics offset positive AI growth commentary.

• S (SentinelOne) [-5.5%]: Q4 earnings mixed with ARR and billings missing expectations; analysts disappointed as expected tailwinds failed to materialize.

Wednesday:

• RBRK (Rubrik) [+6.1%]: Upgraded to buy at Rosenblatt, citing valuation and strong subscription growth outlook.

• INTC (Intel) [+4.6%]: Reports suggest TSM is exploring JV partnerships to run Intel factories.

• SEAT (Vivid Seats) [-23.1%]: Q4 revenue and EBITDA beat, but FY25 guidance and order volume missed expectations amid competitive pressures.

• RUN (SunRun) [-5.2%]: Downgraded at Jefferies due to weak residential solar market and policy uncertainty.

• PEP (PepsiCo) [-2.7%]: Downgraded at Jefferies, citing limited upside until Frito-Lay turnaround gains traction.

Tuesday:

• PAY (Paymentus Holdings) [+24.6%]: Q4 results topped expectations, and management highlighted a strong backlog and higher digital payments adoption.

• RDDT (Reddit) [+14.4%]: Loop Capital called shares "extremely attractive" after a sharp 50% decline, citing ad growth potential.

• LUV (Southwest Airlines) [+8.3%]: Lowered Q1 RASM guidance but announced an accelerated $2.5B buyback and upcoming bag fees.

• JBLU (JetBlue Airways) [+4.2%]: Adjusted capacity outlook slightly lower but maintained revenue guidance; demand remains healthy during peak periods.

• TER (Teradyne) [-17.1%]: Announced acquisition of Quantifi Photonics; terms undisclosed, deal expected to close in Q2 2025.

• DAL (Delta Air Lines) [-7.3%]: Cut Q1 revenue and EPS guidance, citing macro uncertainty impacting consumer and corporate travel confidence.

Monday:

• RDFN (Redfin) [+67.9%]: To be acquired by RKT (Rocket Cos) [+15.4%] in an all-stock deal worth ~$1.75B, at a ~115% premium.

• NVO (Novo Nordisk) [-9.4%]: CagriSema trial data was positive but fell short of competing weight-loss drugs.

• DXCM (Dexcom) [-9.2%]: Received an FDA warning letter over facility inspections, but management downplayed the impact.

• NOW (ServiceNow) [-7.9%]: Acquiring Moveworks for ~$2.9B.

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Trivia Answers

1. B) Graham wrote The Intelligent Investor.

2. C) Warren Buffett was a student and mentee of Graham’s.

3. B) The Efficient Market Hypothesis isn’t something Graham is known for. That was Eugene Fama in 1970.

4. A) Graham literally wrote the book on Fundamental analysis.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Hey Readers,

The only thing I’m going to say about the US/Canada trade war is:

1. <1% of Fentanyl smuggled into the US passes through Canada.

2. Using that as a fake excuse for a trade war is playing brinksmanship with tens of millions of livelihoods on both sides of the border.

3. There is no way to cripple the Canadian economy to the point at which they will decide to become the 51st State.

Let’s hope we can go back to being friends again soon. 🍁🦅

Have a good weekend,

- Ryan

Street Stories

The Cult of Momentum

Maintaining index data is pretty boring so the good people at Standard & Poor’s Global spice up their day-to-day lives by thinking up new and weirder ways to cut up the markets into data rich chunks.

One such way was the 1994 introduction of their ‘Momentum’ indices; the most important of which slices up the S&P 500 into the 100 companies that exhibit the strongest price performance over the 12 month period prior to the rebalancing reference date (ie: stocks that have gone up the most in the last year are included).

[If you’ve ran out of Ambien, here’s the index methodology document]

Spoiler Alert: We are currently going through one of the greatest periods of momentum in history.

As you can see above, historically the S&P 500 and the S&P 500 Momentum index have moved pretty much in lockstep. Generally it’s more than just the top quintile of companies that exhibit momentum traits, and often by the time a company gets included into the Momentum Index its outperformance can be a bit long in the tooth. Thus, it wanes or reverts to the mean.

What we’re seeing right now, however, is that the names that crushed it in 2023 also crushed it in 2024. And the names that crushed it in 2024, seem to be hanging in so far in 2025.

Looking back over the last decade, you can see how tightly the S&P and the S&P Mo have moved.

But you can also see that in 2024 the S&P finished up +22.3% while the S&P Momo clocked in a blistering +44.9%.

That’s massive or, as the French say, ‘gigantesque’.

This means that last year the Mo beat the S&P 500 by +21.6%.

At this point I should highlight that the only two other times in its history that the Mo has done better on a relative basis were in 1998 and 1999.

You know, right before the Tech Bubble burst. ☠️☠️

This brings me back to something I’ve written about quite a bit over the past year: the lack of breadth in the market. While 66% of companies in the S&P 500 are positive since the start of 2024, only 33% of them are actually outperforming the market.

As you would expect, the median 12-month forward P/E multiple for companies that have outperformed the market has increased materially since January 2024, while the multiple has actually declined for companies underperforming the market (EPS estimate increases > share price increases).

This really serves to skew the value proposition and makes those formerly unloved stocks that much more desirable.

To wrap this up, the winners keep winning, but that increasingly represents a smaller and smaller proportion of the market. So whatever happens when the music stops for those few gilded stocks, it will certainly be noteworthy.

EV Stocks Are Terrible

Ok, sure, Tesla has done great for shareholders brave enough to weather the triannual bloodbaths. And there’s a half decent case to be made that BYD is the best car company in the world (sadly).

But as an asset class: Terrible.

I updated the above chart from a July post to include the fact that Canoo (Jan 2025) and Nikola (Feb 2025) have joined the bankruptcy club.

My favorite has to be Mullen Automotive. Publicly traded since October 2012, they most recently did a 1-for-60 reverse stock split (world record?) in February to avoid being delisted from the Nasdaq for min bid price requirements (they are subsequently down 84% since then so expect another one shortly).

Meanwhile, Tesla shares have roundtripped (again). For a stock that has roughly matched the performance of the S&P over the last two years, it’s certainly taken the scenic route.

The 31% decline in the shares since the start of the year can be blamed on a plethora of reasons (never good when your bad stuff gets measured in plethorae).

In January, Tesla's sales in Europe dropped 45% year-over-year, while February sales of China-made Teslas plunged 49%, marking the lowest monthly sales since August 2022. Meanwhile, Chinese competitor BYD saw its sales surge 90.4% in China, further eroding Tesla’s market share.

Elon Musk’s involvement in politics has also sparked a backlash, leading to protests and a damaged brand image, particularly in Europe. Production delays, including downtime for the Model Y refresh, have contributed to Tesla missing delivery estimates, prompting analysts to lower their price targets. Tariff concerns and supply chain uncertainties have added to investor fears, putting further downward pressure on the stock.

Hell, even the Elon fanboys are annoyed he has spent <1% of this time this year CEOing.

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Joke Of The Day

Question: How do you define optimism?
Answer: An investment banker who irons five shirts on a Sunday.

Trivia

Today’s trivia is on electric vehicles.

1. When was the first electric vehicle invented?
A) 1889
B) 1832
C) 1910
D) 1955

2. What was the best-selling electric vehicle of all time as of 2023?
A) Nissan Leaf
B) Chevrolet Bolt
C) Tesla Model Y
D) BYD Qin

3. Which country currently produces the most electric vehicles?
A) United States
B) Germany
C) Japan
D) China

4. The first Formula E (sorta electric Formula 1) race took place in:
A) 2014
B) 2016
C) 2018
D) 2020

5. What automaker introduced the first electric pickup truck to the U.S. market?A) Rivian (R1T)
B) Tesla (Cybertruck)
C) Ford (F-150 Lightning)
D) Chevrolet (Silverado EV)

(answers at bottom)

This Week In History

March 3, 1931 – "The Star-Spangled Banner" Becomes U.S. National Anthem
President Herbert Hoover signed a law designating the song as the national anthem, solidifying its place in American identity.

March 5, 1946 – Churchill's "Iron Curtain" Speech
Winston Churchill's speech in Fulton, Missouri, introduced the term "Iron Curtain," symbolizing the division between Western democracies and Eastern communist countries. Topical.

March 9, 1997 – The Notorious B.I.G. Murdered
Influential rapper Christopher Wallace, known as The Notorious B.I.G., was killed in a drive-by shooting in Los Angeles, intensifying the East Coast-West Coast hip-hop rivalry.

Market Update

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Trivia Answers

1. B) The first electric vehicle was invented in 1832.

2. C) The Tesla Model Y is the best selling EV of all time.

3. D) China produces the most EVs.

4. A) The first Formula E race took place in 2014.

5. A) Rivian (R1T) was the first electric truck to enter the US market.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Subscribe now

Disclaimer (that I totally didn’t steal from another newsletter): The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. The information presented is based on our best understanding of the subject matter at the time of publication. The information contained in this newsletter is not intended to be a comprehensive analysis of any particular topic, and it should not be relied upon as the sole basis for investment decisions. We do not guarantee the accuracy, completeness, or timeliness of the information provided. The financial landscape is subject to change, and the content may not reflect the most current developments. Past performance is not a guarantee of future results, and it is important to conduct thorough research and consult with a financial advisor before making any investment decisions. All investments carry risks, and the value of investments can go up or down. It is essential for readers to understand the risks associated with any financial decisions they make. We may, from time to time, have positions in the securities mentioned in this newsletter, and we may profit from any changes in the value of those securities. However, we do not receive compensation from any companies or individuals mentioned in this newsletter. By subscribing to this newsletter, you acknowledge that you understand and agree to these terms and conditions.

Street Stories

The Bull Market

The market’s run since bottoming out in late 2022 after the ‘Everything Bubble’ popped has felt like something other worldly. Maybe it’s because every step has seemed fraught with fear (wars, sticky inflation, overextended valuations) and euphoria (AI, Crypto, resilient consumers, Trump-trades).

However, in the grand scheme of things, this Bull Market isn’t particularly exceptional.

Lemme explain…

Since the late ‘70s, the US market has actually been in a Bull Market 86% of the time. The COVID blip and 2022’s meltdown were actually pretty minor in both their drawdown and duration.

The run we are currently in has actually been relatively minor: The S&P 500 is *only* +71% since the October 2022 lows.

The caveat to this is of course that the two Bear Markets we’ve experienced in recent memory (2020, 2022) were minor events. A case can be made that we’ve been in a secular Bull Market since as the end of the Great Financial Crisis back in 2009.

What should have investors concerned, isn’t the run that the market’s had or it’s persistence, but rather how steeply stock valuations have risen.

As you can see above, on a forward P/E basis, the S&P 500 has only been more expensive in the Tech Bubble and during Covid’s ‘Everything Bubble’ - and much of the former had to do with temporarily suppressed EPS estimates which skew the multiple upward.

High growth should be rewarded with a higher multiple and the companies that make up the S&P 500 are clearly expected to deliver. Whether or not that growth is realizable or is sufficient to warrant the current market premium remains to be seen. 🙃

What is clear is that going back to the mid-'70s, the current Bull Market is pretty nascent in comparison with its predecessors.

Focusing in on the current situation, the market has been a bit wobbly as of late but being up +3.6% so far in 2025 shows that investors aren’t panicking.

The high-flying, techy Nasdaq has looked even stronger recently.

This is important as this index is more concentrated towards the techy names like Nvidia, Meta and Apple which are the most responsible for this Bull Market’s success - and will likely be harbingers for it’s retrograde.

Expanding on this (in something of a concerning manner), I’d highlight that these Tech mega-caps weren’t just the biggest contributors in 2024 (due to their market cap influence) but the best overall performers.

This trend has continued in 2025, with size being the biggest determinant of performance. To shocking degree.

As a result, I’m a bit mixed on my outlook for the future. Growth is expected to be strong but it will need to be in order to warrant the steep valuations. Narrow market leadership by a handful of mega-caps poses serious risk should the fan favorites start to lose their luster - particularly since every company in the Mag7 is heavily invested/dependent on mass adoption and profitability in AI.

None of this is to say that the current Bull Market is in jeopardy: As multiples and factor risks get digested and normalize, we may not see anything implode but could just find the market sitting on its hands or trading sideways until things start making sense again.

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Joke Of The Day

What’s ET short for? He’s only got little legs.

I have not slept for ten day - because that would be too many. (RIP Mitch Hedberg)

Macro Update

February Preliminary PMI Composite (Friday)

The Preliminary February PMI composite dropped to 50.4, its lowest in 17 months and below the consensus of 53.0.

Manufacturing PMI rose to 51.6, ahead of the 50.5 consensus, marking its second consecutive month of improvement, while Services PMI fell to 49.7, missing the 53.0 consensus and signaling its first contraction in over two years.

January Existing Home Sales (Friday)

January existing home sales declined 4.9% month-over-month to 4.080M, falling short of the 4.113M consensus, with sales down in all regions except the Midwest.

The median existing-home price rose 4.8% year-over-year to $396,900, while February's final consumer sentiment came in at 64.7, below the 67.5 consensus, with 1-year inflation expectations at 4.3% and 5-year expectations ticking up to 3.5%.

Trivia

Today’s trivia is on Bull and Bear Markets.

1. What is the traditional definition of a bear market?
   A) A market decline of 10% from recent highs
   B) A market decline of 15% from recent highs
   C) A market decline of 20% from recent highs
   D) A market decline of 25% from recent highs

2. Which bull market was known for the “irrational exuberance” speech by Alan Greenspan?
   A) 1982-1987
   B) 1990-2000
   C) 2009-2020
   D) 1949-1956

3. How much did the S&P 500 fall during the Dot-com bubble burst?
   A) 35%
   B) 49%
   C) 42%
   D) 55%

4. Which stock index is considered the most volatile during bear markets?
   A) S&P 500
   B) Dow Jones
   C) Nasdaq
   D) Russell 1000

5. Which company was the first to reach a $1 trillion market cap, contributing to the 2009-2020 bull market?
   A) Amazon
   B) Apple
   C) Microsoft
   D) Google

(answers at bottom)

This Week In History

Fidel Castro Becomes Prime Minister of Cuba (February 16, 1959)

• Event: After leading a successful revolution that ousted dictator Fulgencio Batista,
  Fidel Castro was sworn in as the Prime Minister of Cuba.

• Significance: Castro's rise to power marked the beginning of communist rule in Cuba, significantly impacting U.S.-Cuba relations and Cold War dynamics.

Volkswagen Beetle Becomes Best-Selling Car (February 17, 1972)

• Event: The Volkswagen Beetle surpassed the Ford Model T's record for the most units sold, with the 15,007,034th Beetle produced on this day.

• Significance: This milestone highlighted the Beetle's global popularity and symbolized post-war economic recovery in Germany.

Assassination of Malcolm X (February 21, 1965)

• Event: Civil rights leader Malcolm X was assassinated while delivering a speech in New York City.

• Significance: His death was a significant loss for the civil rights movement, and his ideas continue to influence discussions on race and equality.

Raising the Flag on Iwo Jima (February 23, 1945)

• Event: U.S. Marines raised the American flag on Mount Suribachi during the Battle of Iwo Jima.

• Significance: This iconic moment, captured in a famous photograph, symbolized hope and determination during World War II.

Market Update

Market Movers

Friday

• UNH (UnitedHealth Group) [-7.2%]: DoJ is reportedly probing UnitedHealth over billing practices tied to Medicare Advantage plans, but the company slammed the claims as "outrageous and false."

• CELH (Celsius Holdings) [+27.8%]: Celsius crushed Q4 estimates, announced a $1.8B deal to acquire Alani Nu, and got analyst love for the growth potential.

• MELI (MercadoLibre) [+7.1%]: MercadoLibre posted a strong Q4, with big growth in Brazil and Argentina, better margins, and solid credit performance.

• XYZ (Block, Inc.) [-17.7%]: Despite an EBITDA beat, Block missed on revenue and gave weaker gross profit guidance, making analysts cautious despite solid go-to-market efforts.

• HIMS (Hims & Hers Health) [-25.8%]: Shares tanked after the FDA reported the semaglutide injection shortage is now resolved.

Thursday

• WMT (Walmart) [-6.5%]: Walmart beat on Q4 numbers, but the FY26 guide and leap year/VIZIO deal headwinds had investors underwhelmed despite strong market share gains.

• HAS (Hasbro) [+13.0%]: Hasbro beat Q4 expectations, especially in Wizards/Digital Gaming, and rolled out a strategic plan aiming for $1B in savings over the next three years.

• SHAK (Shake Shack) [+11.1%]: Shake Shack delivered in-line Q4 results but impressed with better margins thanks to new labor scheduling, and gave upbeat guidance for Q1 and FY25.

• RCL (Royal Caribbean Group) [-7.6%]: Shares dipped after Commerce Secretary Lutnick claimed cruise lines dodge US taxes.

Wednesday

• HIMS (Hims & Hers Health) [+17.5%]: Hims & Hers stock jumped after buying an at-home lab testing facility, though deal terms stayed under wraps.

• GRMN (Garmin) [+12.6%]: Garmin had a strong Q4 beat, driven by Fitness and Outdoor demand, plus it announced a 20% bump to its annual dividend.

• BMBL (Bumble) [-30.3%]: Bumble tumbled after soft guidance and concerns about declining paying users, despite beating Q4 revenue and EBITDA estimates.

• ETSY (Etsy) [-10.1%]: Etsy missed across the board in Q4, citing Marketplace weakness and flagging further GMS declines with lower active buyers and sellers.

Tuesday

• INTC (Intel) [+16.1%]: Intel spiked on reports that TSM and AVGO are in early talks about deals that could split the US chipmaker into two.

• NKE (Nike) [+6.2%]: Nike announced a new women's line, NikeSKIMS, in collaboration with Kim Kardashian’s SKIMS brand.

• WBA (Walgreens Boots Alliance) [+13.9%]: Walgreens shares jumped as reports hinted the Sycamore buyout deal might still be alive after being presumed dead in January.

• BIDU (Baidu) [-7.5%]: Baidu beat Q4 estimates, but weak ad spending and scrutiny over its AI Cloud adoption dragged the stock down.

• HOOD (Robinhood Markets) [-7.4%]: Robinhood dropped after Wolfe Research downgraded it, citing rising competitive risks and limited upside left in the stock.

(Market closed on Monday for Washington’s BDay)

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Trivia Answers

1. C) A Bear Market is generally a market decline of 20% from recent highs.

2. B) The 1990-2000 Bull Market was referenced in the ‘Irrational Exuberance’ speech.

3. B) The S&P fell 49% after the DotCom bubble burst.

4. C) Nasdaq is considered the most volatile during Bear Markets.

5. B) Apple was the first to reach a $1 trillion market cap.

Thank you for reading StreetSmarts. We’re just starting out so it would be great if you could share StreetSmarts with a friend that might be interested.

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Hey Readers!

Short note this week as I’ve been a bit under the weather and also limping around from a bad knee injury.

Yep, last week I joked about learning how to ski and ‘if there was no note next week you can guess how that went’. I’m hilarious.🫠

Anyway, please provide knee brace recommendations in the comments.

Have a good weekend,

- Ryan

Street Stories

Surge Pricing: Uber Shares Take Off

It still feels like 2025 is just starting out, but as you can see above, some companies have already experienced massive pops in their share prices: Uber being near the top of the list.

I haven’t really talked about Uber much because, despite being around for over 15 years, the company just never actually made any money. And I kinda like it when companies do that.

So, despite growing revenues at +25.5% since 2018, the shares have underperformed the market.

Uber’s biggest growth days are likely in the past but ‘high-teens’ revenue growth the last few years is still pretty darn impressive, and Wall Street expects double-digit growth to continue late into the decade.

In fact, Uber has only grown its position as the dominant player in the west. Lyft was once touted as being a potential foil to Uber: One that could potentially overtake the king one day.

Since closing the gap to just under a third the revenue of Uber by 2019 (28%), Lyft’s revenue now sits at less than half of that at the end of 2024 (13%).

Uber’s transformation into a ‘real company’ is probably best seen in its margins. A double-digit Net Income Margin is most impressive, especially for a company that only a few years ago seemed allergic to profitability.

Uber’s diversification into Eats and Freight is expected to continue to add nicely to growth, but Rides is still the dominant contributor.

This is partly the result of them being a dominant player in less competitive ride-hailing, while food delivery continues to be an extremely competitive landscape to navigate.

While Wall Street estimates are still a bit off their 2022 peaks, given how much has changed in the world since then - both for the better and for worse for Uber - little has actually moved the estimates.

Given Uber’s volatile past, I’m a little shocked that estimates for medium-term revenues have proved infinitely more stable than even Walmart’s or Disney’s.

Speaking of stability, Uber’s earnings release last week ticked off yet another quarter of solid beats: 5 straight for Revenue and 8 out of the last 9 for EPS.

On the valuation front, Uber trades at a big premium to its legacy shipping peers like FedEx and UPS but is expected to grow significantly faster - potentially warranting the premium.

What stands out most is the fact that Lyft trades at such a steep discount to Uber despite expectations for a comparable amount of growth. There’s a lot of nuance to this, such as a much wider dispersion of Wall Street estimates for Lyft and more concern about long-term profitability, but I’m not sure that goes far enough to explain the spread (trading at 2.4x the multiple of your closest peer is pretty weird).

Wall Street has remained consistently positive on the shares throughout the company’s history. Presently, 87% of analysts hold a ‘Buy’ rating on the stock, while the average target price represents a 13% premium to the current market price.

While Uber still has a lot maturing to do, after shedding its ‘tech bro’ culture and posting two consecutive years of profitability, I think it’s pretty clear that the company is no longer a meme stock or pipe dream: It’s a legit, investible company.

The Signal & The Noise

An overly simplified - but still pretty useful - framework to look at the price change of stocks or the market as a whole is:

Share Price △ = (1+EPS △) x (1+P/E △) - 1

Basically, the change in the share price is a function of how much EPS has changed and how much the P/E changed.

For example, if EPS grew 5% and the P/E multiple went from 20x to 22x (+10%), then the share price went up 15.5%¹

1. Price Change = (1 + 5%) x (1+ 10%) -1.

Above I compiled this information for the S&P 500 using the rolling change in two year forward EPS estimates. If you look at the return of the S&P 500 in this way since 2001, two things really stand out:

1. EPS change is usually positive; Multiple change is a crapshoot

The S&P 500 has been up 71% of the time, while EPS growth has been positive a massive 83% of the time. Strong stuff.

However, the change in the multiple has only been barely positive at 54%. This makes sense if you believe that over the long-term the multiple should bounce around based on fear/greed, as well as for reasons beyond just the change in EPS two years out (longer term issues, etc.), but generally stay at the same level.

Ryan’s Takeaway: Betting on stocks getting cheaper or more dear is hit or miss, but growth (in this case using EPS to illustrate the point) is really the clearest determinant in price performance.

This is essentially why I’d classify myself as a growth investor.