🔬A Look Into The Best & Worst Of The Stock Market in 2024
🔬A Look Into The Best & Worst Of The Stock Market in 2024
Plus: I give a brief on super stock Supermicro; X is having a subscriber crisis; the market likes JPow's Fedspeak; and much more.
"Bulls make money, bears make money, pigs get slaughtered"
- Old Wall Street saying
"A bank is a place that will lend you money if you can prove that you don't need it"
- Bob Hope
Strong day for the big US markets with the S&P 500 +1.0% and Nasdaq +1.5%, primarily the result of positive interest rate commentary from Fed Chair JPow.
9 of 11 sectors closed in the green led by Tech (+1.9%) and techy Communication Services (+1.8%). Financials (-0.1%) and Real Estate (-0.0%) were the only two weak points.
Ozempic maker Novo Nordisk popped 9% on positive trial data for its next gen drug. The move took it’s market cap to ~$566 billion, surpassing Tesla and Visa.
Street Stories
Best & Worst (so far)
2024 is off to a strong start with the S&P 500 already up 8.1% for the year. So, I thought I’d take a minute to dive into what exactly has gone into the market’s outperformance thus far.
To start, 321 of the 500 companies (64.2%) are up on the year. While 315 companies (63%) have returns within +/- 10%, meaning that even this early in the year 37% of companies are either having a really good or a bad year already. That’s pretty high btw.
As far as the best/worst performers, you can definitely see some of the prominent themes at play, such as the Tech rally continuing, with particular outperformance by the big semiconductor companies. Whereas in the ‘Worst’ bucket, you can see an overrepresentation of media names (Charter, Paramount, Warner Bros.) as that space has faced something of a reshuffling in the last few months. Real Estate and Materials are also money bonfires notable weak spots.
Looking just at the sectors, it’s pretty clear that that Tech and techy Communication Services are continuing on their strength from last year. Utilities have continued to fair poorly given the interest rate overhang and broader market ‘risk-on’. Consumer Staples and Health Care have had solid starts to the year following a rather muted 2023. Both are considered ‘defensive’ sectors, so their performance could be an indication that investors are broadening their bets in the event that the market runs out of steam. Not that it will, because stocks only go up 🚀🧐✌️
X’s Exodus
Following Elon Musk's acquisition of Twitter in 2022 and its rebranding to X in 2023, a survey by Edison Research reveals a 30% decrease in U.S. users, with usage falling from 27% of the population to 19%. This significant drop highlights a changing landscape for the social media platform under its new ownership. Coupled with a gaggle of lost advertisers, things ain’t looking too hot for X.
Supermicro’s Super Rally
On Monday I wrote briefly about about how Supermicro and Deckers Outdoor will be joining the S&P 500 - and booting out Whirlpool and Zion Bancorp as a result. Well, above I mentioned that Nvidia is the best performing stock in the S&P 500 year-to-date (+86%), but that will look paltry when Supermicro joins, with the shares currently up 296% this year alone. And since not too many people have heard of Supermicro, I thought I’d take a few minutes to run through the basics of the S&P’s newest growth hammer.
Supermicro Computer, Inc. was founded in 1993 and went public in 2007, just in time for the financial crisis. And for most of that existence, saying they were ‘under the radar’ would be more than just an understatement. And there’s a pretty good reason for that, as up until recently selling computer servers wasn’t exactly a sexy business. But sprinkle in a little AI-hype and a solid working relationship with Nvidia products, and you’ve got a once boring story that is now up +2,700% in the last two years.
Now, normally you’d be right in thinking that a 30 year old company that goes up several thousand percent in the span of a few years would have some seriously red flags when it comes to valuation. In this case, however, you’d be wrong. Well kinda. At 43x forward P/E, Supermicro definitely isn’t cheap but a ~30% premium to Microsoft doesn’t seem too outlandish when one company is expected to grow revenue 15% next year and the other 104%.
While it does seem like it has several years of impressive growth ahead of it, where demand and competition will be in a few years now that this industry is hot again is anyone’s guess. I’ll just add it to the pile of ‘s*** I shoulda bought’.
On the lighter side, you can often tell when a company becomes ‘new money’. In Supermicro’s case it’s the elementary school quality presentation, which not only uses the default Microsoft PPT graphs, but also calibri and the actual f****** default color palette. The chart snob in me is embarrassed for them.
Powell's Playbook: Rate Cut Prelude
Federal Reserve Chair Jerome Powell indicated that the U.S. central bank is close to being confident enough in the decline of inflation to start reducing interest rates. During a Senate Banking Committee hearing, he emphasized the need for assurance that inflation is sustainably moving towards the 2% target to avoid pushing the economy into a recession. Powell's remarks provided a nice tailwind to stocks and added modestly to rate cut expectations.
Joke Of The Day
There's a great market for big letters....too bad nobody's capitalizing on it.
Ronald Reagan used to say that if trivial pursuit were designed by economists, it would have 100 questions and 3,000 answers.
Hot Headlines
Barron’s / Rivian stock pops +13.4% after EV maker unveiled new lineup. The R2 will start at around $45,000, and is slated to hit the streets in 2026.
Bloomberg / A hidden crisis in US Housing is coming for ‘climate vulnerable’ areas. Interesting read but the basic idea is that the rate of natural disasters has the potential to make home insurer prohibitively expensive for some of America’s most populous regions.
CNBC / Why private equity has been involved in every recent bank deal. The $1 billion-plus injection that New York Community Bank announced Wednesday is the latest example of private equity players coming to the need of a wounded American lender. CNBC says speed and firepower; I say regulatory capture. jk. kinda
The Mirror / YouTube personality Jake Paul set to fight boxing legend Mike Tyson - and vows to put him to sleep. Sports are basically just memes at this point.
Bloomberg / What Has Biden Accomplished? Look at These 10 Metrics, Not the Polls. Good charts (and you know how much I love a good chart).
Trivia
This week’s trivia is on famous companies, and today’s is on General Electric.
When was General Electric (GE) founded?
A) 1876
B) 1892
C) 1901
D) 1911Who were responsible for the founding of GE?
A) Alexander Graham Bell and Elisha Gray
B) Thomas Edison and J.P. Morgan
C) Henry Ford and Harvey S. Firestone
D) Andrew Carnegie and John D. RockefellerGE is known for being one of the original 12 companies listed on which stock exchange?
A) NASDAQ
B) Dow Jones Industrial Average
C) S&P 500
D) New York Stock ExchangeGE played a crucial role in the development of which energy source?
A) Solar power
B) Wind power
C) Nuclear power
D) Geothermal power
(answers at bottom)
Market Movers
Winners!
The Honest Co. (HNST) [+24.8%]: Q4 revenue, GM, and EBITDA exceeded forecasts with GM benefiting from cost savings and pricing. FY24 guidance aligns with expectations, anticipating steady operational improvements, supported by positive feedback on the Transformation Initiative.
Rivian (RIVN) [+13.4%]: Announced a new midsize SUV platform with details on R2 and R3 launch and pricing. R2 starts at $45K, with deliveries expected by early 2026.
Arhaus (ARHS) [+12.1%]: Surpassed Q4 expectations across comps, revenue, GM, and EPS. Q1 guidance slightly affected by new warehouse system and weather; FY24 looks promising, with a special dividend announced.
Kroger (KR) [+9.9%]: Q4 performance better than anticipated with lesser comp decline, expanded GMs, and EPS beat. FY24 EPS outlook positive, balancing macro pressures with cost-saving strategies.
Novo Nordisk (NVO) [+9.0%]: Shared promising phase 1 results for GLP-1 and amylin co-agonist amycretin, showing a 13.1% weight loss over 12 weeks and a favorable safety profile.
Burlington Stores (BURL) [+7.5%]: Beat Q4 expectations for EPS, EBITDA, and revenue with positive comps. FY25 guidance optimistic, with analysts noting benefits from sourcing and freight.
ABM Industries (ABM) [+6.3%]: Fiscal Q1 revenue, EBITDA, and EPS all above estimates, with a slight increase in FY EPS guidance. Highlighted growth in Aviation and Technical Solutions and benefits from focusing on high-performance properties.
New York Community Bancorp (NYCB) [+5.8%]: Clarified details on a $1B+ equity investment at $2/share for common and preferred stock, resulting in a 41.4% ownership on a fully diluted basis and reduced quarterly dividend to $0.01.
Losers!
Victoria's Secret (VSCO) [-29.7%]: Q4 EPS exceeded expectations with revenue on target, thanks to gross margin expansion. However, Q1 and FY23 revenue and earnings forecasts fall significantly below consensus due to weaknesses in the North American intimates sector, with comps down 6%, mirroring last year and slightly better than the 7% decline in Q3.
Ciena (CIEN) [-14.7%]: FQ1 EPS, EBITDA, and revenue surpassed expectations, with improved GM and OM. Despite a shortfall in Networking Platforms revenues, gains in Platform Software and Services compensated. Service providers' slow inventory turnover is delaying expected progress.
Infinera (INFN) [-11.8%]: Preliminary Q4 results were promising, but Q1 and FY24 guidance disappointed, anticipating a slow first half. The focus was on ongoing inventory management and the timing of customer capital expenditures, with a highlight being the first contract with a major hyperscaler for 800G 3-nm ZR+ pluggable technology.
HighPeak Energy (HPK) [-9.7%]: Downgraded from buy to sell by Gerdes Energy Research, pointing to a decrease in 2024 production forecasts, increased operating expenses, and higher capital intensity.
Market Update
Trivia Answers
B) GE was founded in 1892.
B) GE was founded by Thomas Edison with the help of J.P. Morgan.
B) GE was one of the original companies in the Dow Jones Industrial Average.
C) GE played a big role in establishing nuclear power.
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