The Bull Thread

Six and Six
Tue, Nov 26, 2024

Both the S&P 500 and Russell 2000 came into the day riding 6-day winning streaks, and based on where both indices are trading at mid-day, the S&P 500 looks poised to extend that streak while the streak looks like it’s going to end for small caps. The current six-day streak for the two indices is the first time that both indices have simultaneously been up six days in a row since February 2021. Since 2000, there have only been 16 other streaks, so while they aren’t particularly rare, they aren’t too common either.

In the charts below of the S&P 500 and the Russell 2000, the red dots show each time the two indices were up six days in a row at the same time. Looking at the various occurrences, there were several from 2013 to 2014 and then from late 2016 through 2017, and in most cases, they occurred within longer-term uptrends. The only notable exception was in June 2007.

 

Thankful Investors -- Last 20 Years
Tue, Nov 26, 2024

It's a holiday-shortened Thanksgiving week, so over the next few days, we plan on writing about some of the stocks that investors can be most thankful for. Yesterday we looked at the best performing stocks over the last five years, and in this post, we're highlighting the 30 best-performing stocks in the S&P 1500 on a total return basis over the last twenty years. In the table below we rank them from 1st to 30th and show how much a $1,000 investment in each stock twenty years ago (on 11/25/04) would be worth today. Below the table, we provide a one-sentence blurb generated by AI that describes what each company does.

AI chip maker NVIDIA (NVDA) has easily been the best-performing stock over the last twenty years, and it has made a large number of investors extremely wealthy. Incredibly, a $1,000 investment in NVDA twenty years ago would have almost turned you into a millionaire today! Unbelievably, $1,000 in NVDA back on 11/25/04 would be worth roughly $944k today. (By the same math, $10k would be worth $9.44 million, while $100k would be worth $94.4 million.)

Twenty-year returns for streaming giant Netflix (NFLX) haven't been too shabby either. $1,000 in NFLX twenty years ago would be worth more than $550k today. Rounding out the top five are Texas Pacific Land (TPL), Apple (AAPL), and Booking Holdings (BKNG).

In total, eight stocks have turned $1,000 into more than $100k over the last twenty years. This includes the aforementioned NVDA, NFLX, TPL, AAPL, and BKNG along with Monster Beverage (MNST), Intuitive Surgical (ISRG), and Amazon.com (AMZN).

Other notables on the list include Deckers Outdoor (DECK), Salesforce (CRM), Domino's Pizza (DPZ), and United Rentals (URI).

For anyone out there who has been riding any of these big winners for the last twenty years, bravo to you, and Happy Thanksgiving!



For a quick description of each company listed above, we asked AI to give us its best one-sentence blurb:

• NVIDIA (NVDA): A leader in graphics processing units (GPUs) for gaming, artificial intelligence, and data centers, driving innovation in computing and visual technologies.
  
• Netflix (NFLX): A global streaming service offering a vast library of movies, TV shows, and original content, accessible on-demand across various devices.
  
• Texas Pacific Land (TPL): Manages oil and gas royalties, land leases, and water services for energy production in Texas.
  
• Apple (AAPL): Designs and sells consumer electronics like the iPhone, Mac, and iPad, along with software and services like the App Store and iCloud.
  
• Booking Holdings (BKNG): Operates online travel brands like Booking.com, Priceline, and Agoda, providing services for hotel reservations, car rentals, and flights.
  
• Monster Beverage (MNST): Produces energy drinks, including the flagship Monster Energy brand, targeting consumers looking for enhanced energy and focus.
  
• Intuitive Surgical (ISRG): Manufactures robotic-assisted surgical systems, including the da Vinci system, enhancing precision and minimally invasive procedures.
  
• Amazon.com (AMZN): A global e-commerce leader offering retail, cloud computing, and digital streaming services, alongside innovations like Amazon Web Services (AWS).
  
• XPO (XPO): Provides freight transportation and logistics services, specializing in less-than-truckload (LTL) and last-mile delivery solutions.
  
• UFP Technologies (UFPT): Designs and manufactures custom packaging, components, and engineered products for medical, automotive, and industrial applications.
  
• Regeneron Pharmaceuticals (REGN): Develops biopharmaceuticals to treat serious medical conditions, including eye diseases, cancer, and autoimmune disorders.
  
• Comfort Systems USA (FIX): Provides mechanical systems installation and services, specializing in HVAC and building systems for commercial clients.
  
• RadNet (RDNT): Operates outpatient diagnostic imaging centers offering MRI, CT scans, and other radiology services across the U.S.
  
• NeoGenomics (NEO): A cancer diagnostics company providing genetic and molecular testing for oncologists, pathologists, and researchers.
  
• Deckers Outdoor Corporation (DECK): Markets lifestyle footwear and apparel under brands like UGG, Teva, and HOKA ONE ONE, known for comfort and performance.
  
• AAON (AAON): Manufactures heating, ventilation, and air conditioning (HVAC) equipment, focusing on energy efficiency and innovative designs.
  
• Salesforce (CRM): A cloud-based customer relationship management (CRM) platform that enables businesses to manage sales, service, and marketing operations.
  
• Tyler Technologies (TYL): Provides software and technology services for local governments, focusing on public safety, tax, and financial management.
  
• Old Dominion Freight Line (ODFL): A leading less-than-truckload (LTL) carrier offering efficient freight transportation across North America.
  
• Fair Isaac Corporation (FICO): Best known for its FICO credit scoring system, it provides analytics and decision-making software for risk management.
  
• Monolithic Power Systems (MPWR): Designs power management solutions for electronics in industrial, automotive, and consumer markets.
  
• Repligen (RGEN): Develops bioprocessing technologies and materials used in the production of biologic drugs and gene therapies.
  
• O'Reilly Automotive (ORLY): A retailer and distributor of automotive parts, tools, and equipment, serving professional and DIY customers.
  
• Domino's Pizza (DPZ): A global leader in pizza delivery and carryout services, leveraging technology for fast and convenient ordering.
  
• EMCOR Group (EME): Provides construction and facilities services, specializing in mechanical and electrical systems installation and maintenance.
  
• Lennox International (LII): Produces HVAC and refrigeration equipment for residential and commercial applications.
  
• United Rentals (URI): The largest equipment rental company in the world, offering construction, industrial, and specialty equipment.
  
• Manhattan Associates (MANH): Provides supply chain and omnichannel commerce solutions to help retailers and wholesalers optimize operations.
  
• Quanta Services (PWR): Delivers infrastructure services for energy and communications, including electric power and pipeline construction.
  
• Copart (CPRT): An online vehicle auction company specializing in salvaged and used cars, serving insurance companies, dealerships, and buyers worldwide.

As always, past performance is no guarantee of future results.

 

When Stocks Are Up Big YTD Before Thanksgiving

S&P 500 is having another banner year up an impressive 25.5% year-to-date through yesterday’s close on pace for more gains today. When stocks logged double-digit gains YTD on the on the Tuesday before Thanksgiving, in general market gains continued into yearend.

2024 is set to exceed my 2024 Annual Forecast best case scenario of 15-25% made 11 months ago. I expect more new all-time highs before yearend. I would not be surprised if the market outperformed the average December and ended up tacking on another 4-5% or more, pushing the index over 6200 for the year or upwards of a 30% gain for 2024.

There are a few blemishes in the 35 previous years, but most importantly, there are no major selloffs on this list. The big December decline of -9.2% in 2018 came after the S&P 500 was down -1.2% at this point in the year. After double-digit YTD gains the S&P 500 was up 70% of the time from the Tuesday before Thanksgiving to yearend for an average gain of 2.4%.

Also of note is that the Santa Claus Rally suffered only five losses in these years. But these four down SCRs in 1955, 1968, 1999, 2014 and 2023 were followed by flat years in 1956 and 2015, down years in 1969 and 2000, but solid gains in 2024. As Yale’s famous line states (2024 Almanac page 116 and 2025 Almanac page 118): “If Santa Claus Should Fail To Call, Bears May Come to Broad and Wall.”

 

Five Things To Know About December


“To appreciate the beauty of a snowflake it is necessary to stand out in the cold.” Aristotle

The final month of 2024 is nearly here and in today’s blog I wanted to take a look at why we think the chance of another strong month to end this record-breaking year is likely. Here are five things to know about December.

First, you should know about the Santa Claus Rally (SCR). The SCR is named for the period that includes the last five days of December (usually starting after Christmas) and the first two trading days of the new year. You will hear all about the SCR over the coming weeks. Just know it isn’t about the full month — it is about the late year/early year rally see most years. We will discuss the Santa Claus Rally more next month.

Second, December is the S&P 500’s second-best month of the year in an election year, with only November better. Given stocks have soared so far in November, this one is playing out again so far. Also note, December is higher 83.3% of the time, making it the most likely month in an election year to be higher.



Third, since 1950, December is the third best month on average (only April and November are better). In the past decade it is only the 10th best month, thanks in part to a 6% drop in 2022 and a 9% crash in 2018.



Fourth, no month is more likely to be higher overall, with the S&P 500 up in December nearly 75% of the time. The next closest is April up more than 71% of the time.



What about if stocks are up a lot going into the final month? History says a chase into year-end is quite possible. We found the past 10 times the S&P 500 was up at least 20% going into December, that final month gained nine times and was up a solid 2.4% on average.



Thanks for reading and here’s to a relaxing Thanksgiving holiday.

 

More Gains Likely in December, the Third Best Month of Year

December is the number three Dow Jones Industrials and S&P 500 month since 1950, averaging gains of 1.6% and 1.5% respectively. It’s also the third-best NASDAQ (since 1971) month. It is the second-best month for Russell 2000 (since 1979). The market rarely falls precipitously in December and a repeat of 2018 does not seem highly likely this year. In 2018, DJIA suffered its worst December performance since 1931 and its fourth worst December going all the way back to 1901. When December is down it is usually a turning point in the market—near a top or bottom. If the market has experienced fantastic gains leading up to December, stocks have consolidated in the first half of the month.

In the last eighteen election years, December’s ranking changes modestly to #2 for DJIA and S&P 500, NASDAQ’s slips to fifth place. Small caps, measured by the Russell 2000, have had a field day in election-year Decembers. Since 1980, Russell 2000 has lost ground just once in eleven election-year Decembers. The average small cap gain in all eleven years is a solid 3.5%. The Russell 2000’s single loss was in 1980 when the Prime Rate was 21.5%.

 

Berkshire Hathaway – The Newest Trillionaire


Berkshire Hathaway’s market capitalization stands at $1,032,347,000,000 (FactSet data) as of Tuesday’s close. It is the newest addition to one of the most exclusive clubs in the world – the Trillionaire Club. Notably, it is the only financial stock so far to gain entry to this club, whose membership is largely populated by technology-related stocks. Berkshire’s rise to the four-comma club cannot be fully encapsulated in a single blog, but it’s worth highlighting some of the fundamentals of the business that Warren Buffet and the late Charlie Munger have built.

The rise of Berkshire’s share price has been supported by the growth of book value of equity per share. In fact, the two nearly perfectly mirror each other. Let’s examine Berkshire Hathaway’s rise from $100 billion market cap to $1 trillion market cap. The last day Berkshire had a closing market cap below $100 billion was on December 22, 2000, when the Class B share price was $43.70 and the reported book value per share was $25.96 (all FactSet data). As of October 18, 2024, the closing price of Berkshire’s Class B stock was $464.80, with a reported book value per share of $279.20 – marking the first week the company’s market cap closed above $1 trillion (FactSet data). Over this period, book value per share grew 976%, while the share price increased 964%. A nearly exact match! I believe it underscores how Berkshire’s own investor base embraces Buffett’s philosophy of focusing on a company’s fundamentals to derive value.



One of Berkshire’s pillars of growing shareholder equity is to acquire and optimize businesses across a range of industries. I believe the results Berkshire has produced in its BNSF segment illuminate their operational expertise that they bring to all their businesses. Berkshire famously bought the railroad in the wake of the 2008/2009 Great Recession; it currently operates one of the largest railroad networks in North America. Since the purchase, Berkshire has implemented strategies that have enabled BNSF to grow its operating income at a higher rate than industry competitors, as shown in the table below. I think this serves as a prime example of Berkshire’s business acumen and integration expertise across its operations.



Another pillar of Berkshire’s rise to the $1 trillion milestone is the renowned investing insights Mr. Buffett and the late Charlie Munger are known for. If Berkshire can’t outright acquire a business they find exceptional, they might invest in the publicly traded equity of that company. This approach has led Berkshire to invest in American stalwarts such as American Express, Coca-Cola, and, most notably, Apple. Since Berkshire’s initial investment in Apple in the spring of 2016 at roughly $24.75 per share (split adjusted), Apple has largely maintained the title of largest company in the world (though recently lost that title to Nvidia) and has seen a price increase in its stock of nearly 850% (FactSet data). It could be called a home run investment.



The results of this investment are eye-watering. I estimate, based on FactSet data of 13-F filings, that Berkshire may have seen as high as a $143.3 billion unrealized gain on their investment. We may never know precisely what Mr. Buffett, Mr. Munger, and their investment team, saw in Apple to make such a significant and long-term bet. But the results are undeniable. It is likely that, on an after-tax basis, Berkshire’s investment in Apple has contributed approximately 16% of the company’s current book value of equity.



Berkshire Hathaway’s journey to a $1 trillion market capitalization is a testament to the operational expertise and disciplined investment philosophy that Warren Buffett, the late Charlie Munger, and all managers within the company have championed. From acquisitions like BNSF to astute investments in companies like Apple, Berkshire has consistently delivered value to its shareholders.

 

Why December Will Probably Be Strong and a Few More Random Thoughts


“To be an investor is to be an optimist.” Jason Zweig, writer for the Wall Street Journal

I touched a lot on why more strength is expected in December in Five Things To Know About December, but I wanted to add a few more things today.

As I noted last week, when the S&P 500 was up 20% or more for the year heading into the final month, December has been up nine of the past 10 times.



Taking this a step further, in an election year stocks have closed green nine of the past 10 times as well!



Good friend Tom Lee, Founder of Fundstrat, mentioned on CNBC on Monday morning that when the S&P 500 was up at least 10% at the midpoint of an election year, December has never been lower. Sure enough, that is true.



The worst month this year was about a 4% drop in April. Here’s the good news … It is quite rare for December to be the worst month of the year, as that has happened only once in history. By the way, that was in December 2018 when the market threw a big fit after the Fed didn’t cut rates. Bottom line, now isn’t the time to be expecting a big drop.



Here’s the flipside to this. December has been the best month of the year four times, but months like April and October have the most at 12.



November just had a huge gain, up more than 5% in fact, for the best monthly return since November 2023. Do big monthly gains matter? We’d say yes, as the S&P 500 is up an average of 13.5% a year later and higher nearly 84% of the time after a calendar month gain of more than 5%. Breaking it down by month, after a 5% or gain in November, the next year is up almost 13% on average and higher nearly 77% of the time, both better than your average yearly return.



November was a huge month, but it was also very broad-based strength. The big winner though? It was small caps. The table below we share with our Carson Partners and shows just how strong last month indeed was.



Thanks for reading and stay warm out there!

 

Biggest Winners and Losers Since the Election
Wed, Dec 4, 2024

It's been nearly a month now since the Presidential election, and from the close on 11/5 through yesterday (11/3), 354 (71%) stocks in the S&P 500 have experienced gains and the average performance of all 500 stocks in the index has been a gain of 3.89%. Of the ones that have rallied since the election, 13 have posted gains of at least 20%, and we have listed each one below with one-year price charts below that. Of the 13 biggest winners, most of them were already big winners leading up to the election, and all but four are currently up over 40% YTD. Looking at the charts, it's also worth noting that the only four that experienced reversals in their trends around the election were EPAM Systems (EPAM), Super Micro Computer (SMCI), Tesla (TSLA), and Warner Brothers Discovery (WBD). In most cases, the reason for these reversals had little to do with the election and were more company-specific events. EPAM and WBD both reported earnings two days after the election, and SMCI had news related to hiring a new auditor. Tesla (TSLA) is the only stock that really saw a notable shift in its trend due to the election, and given CEO Elon Musk's role as the right-hand man to President-Elect Trump, that move is understandable.





Turning to the losers, only 12 stocks in the S&P 500 were down 10% or more between 11/5 and the close yesterday (12/3). Unlike the list of biggest winners, though, some of these names, especially in the Health Care sector, were in steady uptrends ahead of the election but have seen those rallies reverse. Shares of Leidos (LDOS) were also at 52-week highs just after the election but have plunged since, as Vivek Ramaswamy has discussed the large amounts of bloat in funding for federal contractors. In several cases, though, the declines have been company-specific.





Finally, within the "Trillion-Dollar Club", most have seen gains but to varying degrees. Leading the way higher, TSLA has rallied nearly 40% (Elon's bet really paid off!), and next on the list is Apple (AAPL) with a gain of 8.6%. There's been a lot of talk about Mark Zuckerberg not being welcomed at Mar-a-Lago, but it hasn't impacted the stock of Meta Platforms (META) as it has rallied 7.2%. Behind META, the other members of the "Trillion-Dollar Club" that have outperformed the S&P 500 are Amazon.com (AMZN), Berkshire Hathaway (BRK/B), and Microsoft (MSFT), which have rallied 7.0%, 5.7%, and 4.8%, respectively. That leaves Alphabet (GOOGL) and Nvidia (NVDA) as the only two members of that club that have underperformed the S&P 500 since the election.

As with anything, it's tempting to look at these recent performance numbers and extrapolate the out or under-performance throughout the entire Trump Administration, but remember that it hasn't even been a month yet, so expect a lot of changes along the way.

 

Growth, Value, and Dividends
Thu, Dec 5, 2024

When panning across the US styles screen of our Trend Analyzer tool, one dynamic has become clear over the past week: growth has trumped value. Across the board, most ETFs in this screen are overbought as of yesterday's close trading a full standard deviation or more above their respective 50-DMAs. However, it is growth oriented ones that have gotten the most extended thanks to outsized year-to-date in addition to 5-day gains. While those growth ETFs like the Vanguard Growth ETF (VUG) have risen to new highs, value and dividend ETFs have mostly pulled back in the short term.



Taking a sample using the Vanguard family of ETFs, again growth (VUG) is the top performer in the past week and this year while value (VTV) is closer to the bottom of the list. Meanwhile, the Vanguard Dividend Appreciation ETF (VIG) has likewise fallen in the past week albeit by a more modest amount. As shown below, the relative strength lines of growth versus value and dividends have tracked one another closely this year. In both scenarios, growth has outperformed value and dividends throughout most of 2024 with a notable swing higher since early last week.



Impressively, that favoritism towards growth in the past week has been historic. Below we show the rolling 5-day relative strength of growth (VUG) versus dividends (VIG) going back to 2006 when the Vanguard Dividend Appreciation ETF (VIG) first began trading. That current short-term stretch of relative strength in growth ranks as one of the most dramatic on record. The last time there was more than 4 percentage points of outperformance in growth versus dividends was over a year ago in the spring of 2023. Looking back further, there have been multiple other comparable instances since the COVID crash, but there are zero examples before 2020.



For value, that relative weakness versus growth is again at historic levels for a one-week span. There has been a five percentage point difference between the two over the past week. As with growth versus dividends, that is the widest degree of outperformance since the spring of 2023 with many other occurrences since early 2020. One difference, however, is that there are also a couple of examples to draw from back during the Financial Crisis years (the first in October 2008 and the second in March 2009).

 

The 10 Stocks Up More Than Bitcoin
Fri, Dec 6, 2024

As you can see in the chart below, bitcoin's move up towards $100k leaves the cryptocurrency up 1,219% over the last five years:



We looked at stocks in the Russell 3,000 to see how many have done even better than bitcoin over the last five years. Of the stocks in the index with market caps of more than $5 billion, there are exactly ten.

Below is a list of the ten along with an AI-generated one-sentence description of what the company does. As you'll see, the 2nd and 3rd best performers are bitcoin-related stocks, and they're both up more than 2,000% versus bitcoin's gain of 1,219%.

• NVIDIA (NVDA): A leader in graphics processing units (GPUs) for gaming, AI, and data centers, driving advancements in computing and visual technologies.
  
• MicroStrategy (MSTR): A business intelligence and analytics software provider, also known for its significant investments in Bitcoin.
  
• MARA (MARA): A cryptocurrency mining company focusing on Bitcoin mining using blockchain technology.
  
• Modine Manufacturing (MOD): Designs and manufactures thermal management solutions, including heating and cooling products for vehicles and industrial systems.
  
• Super Micro Computer (SMCI): Develops high-performance, energy-efficient server and storage solutions for data centers, enterprise IT, and cloud computing.
  
• Celsius (CELH): A beverage company specializing in fitness-oriented energy drinks and health-focused beverages.
  
• GameStop Corp (GME): A retailer of video games, consumer electronics, and collectibles, with a focus on e-commerce and digital gaming.
  
• Tesla (TSLA): A pioneer in electric vehicles and renewable energy, known for its electric cars, solar products, and energy storage solutions.
  
• Antero Resources (AR): An energy company engaged in the exploration and production of natural gas, natural gas liquids (NGLs), and oil.
  
• Sterling Infrastructure (STRL): Provides infrastructure services, including heavy civil, transportation, and building projects across the U.S.