🔬What It Feels Like When Doves Cry & The QQQ Turns 25
Plus: Apple might be getting lapped by Nvidia, Non-Farm is confusing, and much more.
"The best time to plant a tree was 20 years ago. The second best time is now"
- Chinese Proverb
"A bank is a place that will lend you money if you can prove that you don't need it"
- Bob Hope
The big US markets had a rocky end of the week with the S&P 500 -0.7% and the Nasdaq -1.2%, as a unexpected Non-Farm Payrolls print weighed on the market (more below). The move Friday was enough to put both Indices negative on the week (S&P: -0.3%; Nasdaq: -1.2%).
4 of 11 sectors closed higher. Real Estate (+1.1%) was best, while Tech (-1.8%) was worst.
My beloved Costco plunged -7.6% on Friday on weak(ish) reporting, after missing on Revenues but beating on EPS. Q was decent but not enough when you’re up +46% in the past 12 months.
Street Stories
Happy Birthday Qs
The venerable Invesco QQQ Trust Series I - better known as the QQQ or Qs - turned 25 on Sunday and I thought we should celebrate with a bit an update on the famed ETF.
To start, for those unfamiliar, the Qs is an ETF that tracks the Nasdaq 100 - the 100 largest(ish)* companies on the Nasdaq. As the Nasdaq 100 has a very ‘tech heavy’ lean to it, the Index attracts a lot of attention, and the QQQ has been the best way to passively invest in it since its debut in March 1999.
*I say ‘ish’ because it only updates the companies every December so there is typically some amount of mismatch/lies.
As you can see, the QQQ is one of the largest ETFs in the world, with only the big three S&P 500 ETFs and Vanguard’s Total Stock Market ETF claiming larger AUMs.
The QQQ garnered a lot of hype when it launched (sorry, I don’t have the data back to 1999 so just imagine) but after interest in Tech died after the Dot-Com Bubble, the ETF was of middling importance. It eventually bottomed out with $10.1 billion in assets under management (AUM) in March 2009. Since then the popularity of the QQQ has blown-up: increasing AUM by 24.2x over the period. Meanwhile, the ETF itself has returned 15.7x since then - also incredibly impressive.
Another thing that stands out about the QQQ, is that it’s only had 5 down years since its launch (~19.2%*). Compare that to the ‘safer’ S&P 500, which had 8 down years over the same period. And while the QQQ has averaged annual returns of 10.8% over the period, the S&P 500 has only averaged 6.7%.
*That’s including the partial years of 1999 and 2024.
The QQQ’s valuation has rarely ever been called ‘cheap’; averaging a forward P/E premium of 38.5% compared to the S&P 500 over the last 22 years. While valuations are nowhere near where they were in the Dot-Com bubble, it’s worth noting that - excluding the Covid valuation blip - multiples are near the highest they’ve been since the Tech Bubble’s slow unwinding. Disconcerting.
And lastly as you can see above, the QQQ is still quite heavily weighted towards the Tech sector. Just as it was when it first launched.
Happy Birthday Qs. May you never be shorted.
Non-Farm Is A Whopper (But Fake)
U.S. Non-Farm Payrolls (NFP) came in at +275k, well ahead of the Wall Street estimate for +200k. The offset, however, was that January’s monster figure of +353k was revised down to only +229k, meaning the take-aways for the labor market are a bit muddled. Unemployment also ticked up to 3.9% from 3.7% as a result, and wage inflation sits at its lowest levels in over two years. Overall, the market interpreted this on Friday as dovish, with bonds optimistically rallying in the hopes of Fed cuts on the horizon.
***In case you were wondering, it excludes farm employees because they tend to be complicated by a number of factors, including seasonality, self-employment, unpaid family labour, part-time/hobby farmers, etc.
Nvidia Is Almost The Size Of Apple
I’ve defended Nvidia’s valuation; its economic moat; its developer ecosystem; etc. but I draw the line at saying that Nvidia should be bigger than Apple. That just feels dirty…
Joke Of The Day
❄️It was so cold today I saw a stockbroker with his hands in his own pockets.
Hot Headlines
NPR / FDA approves Wegovy (Ozempic) for lowering heart attack and stroke risk in overweight patients. Miracle drug… until we all start growing ‘Habsburg Jaws’.
Tech Crunch / Why most AI benchmarks tell us so little. From OpenAI’s Chat-GPT and Google’s Gemini to plucky upstarts like Anthropic and Inflection, everyone claims ‘best in class’ performance but the benchmarks aren’t clear.
Liberty Street Economics / How ‘stable' coins react to Bitcoin shocks. Hint: Not as stable as advertised.
The Verge / Chevy lifts stop-sale order on glitchy Blazer EV — and slashes prices. Chevy announced it was cutting the Blazer EV’s price by an average of $5,900 and that the vehicle will qualify for the full $7,500 federal EV tax credit when sales resume.
Axios / Walmart opens new front in same-day delivery war. The retailer launched an early morning on-demand delivery service where orders placed at 6am are delivered in an hour or less. Witchcraft.
ARS Technica / Apple backtracks, reinstates Epic Games’ iOS developer account in Europe after public backlash. The David & Goliath battle… of the App Store.
Trivia
This week’s trivia is on famous companies, and today’s is on General Motors.
When was General Motors founded?
A) 1897
B) 1908
C) 1911
D) 1920In what year did General Motors file for bankruptcy?
A) 2007
B) 2009
C) 2010
D) 2011GM currently has around 17% market share in the US. In the 1960s this figure was around how big?
A) ~25%
B) ~85%
C) ~50%
D) ~35%
GM acquired which startup in 2016 to strengthen its position in the field of autonomous driving technology?
A) Waymo
B) Cruise Automation
C) Lyft
D) Uber ATG
(answers at bottom)
Market Movers
Winners!
Samsara (IOT) [+14%] Q4 ARR exceeded expectations with FY25 revenue guidance also surpassing forecasts. Highlights included ACV strength from enterprise momentum and multi-product wins, alongside improved efficiency and operating leverage. Guidance was noted for its conservatism.
Gap (GPS) [+8.2%] Surpassed Q4 EPS expectations due to improved gross margins, credited to lower commodity and air freight costs and better promotional activities. Positive execution and strategic initiative traction were noted, with growth at Gap and Old Navy and improvements at Athleta, alongside significant inventory reductions.
Carvana (CVNA) [+7.3%] Received an upgrade from RBC from underperform to sector perform. The upgrade was based on potential better-than-expected cash generation and recent enhancements in per car profitability.
Coinbase (COIN) [+5.8%] Upgraded to neutral from sell by Goldman Sachs, following a surge in crypto activity that elevated daily volumes to the highest level since 2021. However, caution was advised regarding the visibility of broader adoption in the long term.
Losers!
Amylyx Pharmaceuticals (AMLX) [-82.3%] Phase 3 PHOENIX trial of AMX0035 in ALS failed to meet its primary endpoint. Game Over.
Marvell Technology (MRVL) [-11.4%] Q4 EPS and revenue matched forecasts, but Q1 EPS and revenue guidance fell short of expectations. AI contributed to Q4 success, but reduced demand in Carrier Infrastructure, Enterprise Networking, and Consumer sectors pose significant challenges for Q1. Recovery in non-AI segments anticipated in the second half of the fiscal year.
Costco Wholesale (COST) [-7.6%] Exceeded FQ2 EPS expectations, though net sales and membership fees were slightly below forecasts. Positive trends in renewal rates, new member signups, and loyalty noted, with an eventual membership price increase. FQ2 saw a 5.3% rise in traffic and a strong 18.4% increase in e-commerce growth.
Broadcom (AVGO) [-7%] Fiscal Q1 outcomes were favorable, highlighted by general AI and VMware. Despite good AI guidance and margin dynamics, semiconductor sales were disappointing. The company maintained its annual guidance amidst cyclical challenges.
MongoDB (MDB) [-6.9%] Beat FQ4 EPS and revenue expectations, yet provided weaker than anticipated FQ1 and FY24 revenue guidance. FQ4 highlights included Atlas growth and stable consumption trends, with a focus on long-term AI benefits despite the guidance shortfall.
Market Update
Trivia Answers
B) GM was founded in 1908.
B) The company went bankrupt in 2009.
C) In the ‘60s GM averaged around ~50% market share.
B) Cruise Automation
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