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🧠 Stocks That Let You Bet On The Brain
Plus, shrinking more than just waistlines and shorting criminals.
Happy Sunday to everyone on The Street.
What the heck just happened? The stock market just staged a remarkable rally in November, with the S&P 500 Index surging 8.9%.
This impressive gain not only snapped a three-month losing streak but also secured its position as the 18th-best monthly performance since 1950, and the fourth-best of the past decade.
The recent bullish surge on Wall Street can be largely attributed to increasing expectations of interest rate cuts by the Federal Reserve in 2024. This optimism is rooted in the ongoing decline in inflation rates, progressively moving towards the Fed’s 2% target. (More below in our review section)
So what now? Well, December is historically a bullish month as well, with a high proportion of positive returns for the S&P 500. However, there are concerns about whether this trend will continue after the extraordinary gains in November.
In December, stock prices typically see a more pronounced increase in the latter half of the month, averaging a gain of 1.5%, compared to a modest 0.1% in the first half. This trend has fostered the concept of the Santa Claus rally, where investors anticipate a year-end boost in stock prices.
However, as George Smith, a portfolio strategist for LPL Research notes, a robust November has historically led to a subdued December, with average returns of 0.83% following a positive November, compared to 2.78% after a negative November.
And how about next year? Smith highlighted that strong monthly returns have historically been a harbinger of continued market strength over the following year.
Instances where the S&P 500 gained over 8% in a month, as it did in November, have typically been followed by an average return of almost 16% in the subsequent year.
Following instances where the S&P 500 ended a three-month losing streak, as it did in November, subsequent one-year returns have significantly exceeded the average.
In the 22 such occasions since 1950, the S&P 500’s year-forward return averaged 17.9%, which is more than double the index’s typical annual gain.
Then again, next year is an election year, so you really never know. Let’s dive in.
PRESENTED BY URBANIMMERSIVE
Step into the future of real estate with Urbanimmersive's groundbreaking 3D Digital Twins and 360 Video Fusion Technology.
This game-changing innovation promises to revolutionize the industry by bridging the gap between potential buyers' expectations and the flat, uninspiring presentations of traditional online listings.
Urbanimmersive offers a solution that transcends the norm, allowing clients to explore properties in rich, lifelike detail from anywhere in the world, at any time.
It’s a full, digital walkthrough experience that engages and entices customers, setting a new benchmark in property visualization. The days of distance and time-constraining real estate showings are over.
With Urbanimmersive, realtors can now present their listings in captivating, interactive formats that draw buyers in. Dive into the Urbanimmersive revolution and elevate property engagement to unprecedented heights.
Review
The S&P 500 index, as tracked by the SPDR S&P 500 ETF Trust (SPY), capped off November with a 8.9% rise, marking its 18th strongest monthly performance since 1950.
Technology stocks, as closely monitored through the Invesco QQQ Trust outpaced broader market gains, with the Nasdaq 100 index escalating by 10.8%, recording its fifth-best monthly result in a decade.
Additionally, bond markets rallied as yields took a notable dip, while metal commodities thrived in the wake of a weakening dollar.
Fueling this broad market rally was a surge in investor optimism, anticipating Federal Reserve interest rate cuts in 2024 in response to cooling inflation. Speculative bets are now leaning towards the Fed commencing its rate-cutting cycle in March 2024, with up to five rate reductions by the end of next year.
Fed’s preferred inflation measure slows to 3%, paving the way for rate cuts: The Personal Consumption Expenditure (PCE) price index, known as the Fed's preferred measure of inflation, slowed from 3.4% in September to an annual 3% rate in October, aligning with market expectations. The moderation in inflation further bolstered the prospect of multiple rate cuts in the coming year.
November rally sets treasury bonds on track for best month in 40 years: U.S. government bonds are on track for their best month in nearly 40 years, following a summer and early autumn sell off that saw foreign buyers all but desert the Treasury markets.
VIX at pre-pandemic low: Is Wall Street’s fear gauge mispricing risk of downturn? The VIX index has hit its lowest point since before the pandemic, just as equity markets are trying to regain their 2023 highs.
Fed Chair Powell remains cautious, ‘premature’ to declare victory on inflation: In a conversation with Spelman College President Helene Gayle on Friday, Federal Reserve Chair Jerome Powell underscored that it's "premature" to declare the Fed's efforts as sufficiently restrictive, highlighting a readiness to adjust policies further if needed.
Charlie Munger’s ‘buy and hold’ thesis may seem tame, but it worked for Berkshire Hathaway: "The whole secret of investment is to find places where it is safe and wise not to diversify," were the words of Charlie Munger, who died on Tuesday at the age of 99. This principle stood as one of the central tenets of his approach to investing.
Cybertruck delivery event, Elon Musk highlights Tesla’s ‘best product’: On Thursday, electric vehicle leader Tesla Inc hosted its Cybertruck delivery event at its Giga Factory in Texas. Tesla has confirmed it has over one million reservations for the electric pickup truck.
Chilling 2024 S&P 500 outlook: Why JPMorgan analysts project nightmare scenario for stocks: JPMorgan painted a rather pessimistic picture for the U.S. stock market in 2024. The biggest U.S. bank is forecasting the S&P 500 to drop to 4,200 points next year, implying an 8% fall from current levels, in what can be described as a nightmare scenario for stocks.
Preview
What To Watch In The Week Ahead: The focus will be on Friday’s non-farm payrolls, with economists anticipating a November gain of 170,000 jobs, up from October’s 150,000. Additionally, watch for the University of Michigan Consumer Sentiment report on Friday, along with Job Openings and ISM Services PMI on Tuesday.
Monday
GitLab (GTLB): Last quarter, the company announced GitLab 16.0, which included Value Stream Dashboards and AI-powered code suggestions.
Tuesday
Dave & Buster's (PLAY) and AutoZone (AZO): In its last earnings, AutoZone reported a double-digit increase in earnings as it continued to expand its business internationally.
Wednesday
Food Companies: Campbell Soup (CPB), United Natural Foods (UNFI), and Chewy (CHWY).
Other Companies: C3.ai (AI), ChargePoint (CHPT), GameStop (GME). Remember, at the end of September, the founder of Chewy, Ryan Cohen, was named CEO of Gamestop. So how’d the company do since then? We’ll find out.
Thursday
Dollar General (DG), Lululemon (LULU), DocuSign (DOCU), and Broadcom (AVGO): In late August, Lululemon reported an 18% increase in sales, including a 61% increase in China.
Friday
There are no major earnings reports scheduled.
How to Bet on The Brain
An Innovative Market
Scientists have been studying the mind for centuries, but recent advancements are pushing brain therapies to the next level.
Brain stimulation technology helps patients with neurological diseases. Some devices even offer stimulation for better focus. A research firm estimates that the market for these devices could grow from about $1.2 billion in 2022 to around $3.2 billion by 2032.
Wall Street anticipates that the future of brain stimulation lies in its accessibility. Currently, deep brain stimulation, or DBS, involves surgery for implants that send electrical impulses. The brain stimulation industry is moving towards less-invasive measures that can be utilized from home to treat more common issues like depression or pain management.
Three Ways To Play
The Street highlights a trio of businesses paving the way in this innovative realm.
Medtronic (MDT) has equipment that helps with conditions like epilepsy and OCD. Boston Scientific Corporation (BSX) has systems that treat Parkinson’s and dystonia. Abbott Laboratories (ABT) is developing brain therapies to combat depression. Abbott is moving towards producing more consumer wearable devices.
Investors who own a share of Boston Scientific are the only ones cheering this year. The stock is up more than 17% since the start of the year, with Medtronic and Abbott down around 3.8% and 9.3% respectively.
Wall Street favors ABT and BSX, with the majority of analysts giving “strong buy” or “buy” labels to the stocks. When it comes to MDT, about half of analysts label it as a hold or below.
Ditch The Red Bull
Investment firm Bernstein highlights the financial benefits of cracking the code for at-home DBS. An analyst notes that the devices could be used daily to improve users’ mental functions. He also argues that the equipment could be relatively cheap for consumers.
However, not everyone is a believer. Some scientists fear that these devices could end up on shelves before their benefits and side effects are fully realized.
For now, consumers will have to stick with coffee and energy drinks to push through their brain fog.
Which stock will have the best performance over the next five years? |
Looking Beyond Meat
Plant-Based Problems
Fake meat is getting taken out to pasture.
Beyond Meat (BYND) stock has plummeted since its 2019 highs, dropping from around $230 to below $7 a share.
Impossible Foods didn’t experience the same plummet since it has stayed private, but employees still saw the effects of the fall of alternative meat. Bloomberg reported that employee shares of the company have decreased by almost 90% since their valuation in 2021.
Despite the current turmoil in the alternative food market, Wall Street sees other companies stepping up to bat.
Helpful Health Trends
As consumers couple weight-loss drugs like Ozempic with healthier lifestyle choices, they seek food with higher levels of protein. Analysts believe they could turn to more high-protein plant-based products.
Corteva (CTVA) works on the production of high-protein soybean and corn seeds. It’s had a difficult 2023, stumbling by more than 20%, but an analyst from Morningstar sees it as a buying opportunity. Analysts attribute Corteva’s decline to a tough year with crops, but they expect a cyclical acceleration of earnings in the future.
The Street points to Ingredion (INGR) as another winner. The company has a line of plant-based dairy products that analysts think will benefit as more consumers ditch cow’s milk for oat and almond milk. INGR is up around 6% this year, lagging the almost 20% jump in the S&P 500.
A Favorable Climate for Farmers
Analysts see both investors and farmers benefiting as meat alternatives rise in popularity.
Archer-Daniels-Midland (ADM) makes nutritional products from plants, increasing crop demand for farmers. Morningstar expects ADM to help meet hunger needs as the global population grows. The stock is down nearly 20% this year, but analysts are anticipating gains ahead.
Consumers may have turned their back on Impossible and Beyond, but there’s still room at the table for plant-based proteins.
With plant-based stocks struggling this year, now might be the time for investors to fill their plates with Corteva, Ingredion, and Archer-Daniels-Midland.
Which stock will have the best 2024? |
PRESENTED BY URBANIMMERSIVE
Step into the future of real estate with Urbanimmersive's groundbreaking 3D Digital Twins and 360 Video Fusion Technology.
This game-changing innovation promises to revolutionize the industry by bridging the gap between potential buyers' expectations and the flat, uninspiring presentations of traditional online listings.
Urbanimmersive offers a solution that transcends the norm, allowing clients to explore properties in rich, lifelike detail from anywhere in the world, at any time.
It’s a full, digital walkthrough experience that engages and entices customers, setting a new benchmark in property visualization. The days of distance and time-constraining real estate showings are over.
With Urbanimmersive, realtors can now present their listings in captivating, interactive formats that draw buyers in. Dive into the Urbanimmersive revolution and elevate property engagement to unprecedented heights.
This Auto Stock Is Built To Succeed in a Changing Market
Diamond in the Rough
The transition from gas-powered to electric vehicles has not been smooth sailing for auto manufacturers.
That’s what sets Vontier (VNT) apart, according to analysts. Vontier produces parts for both gas-powered and electric vehicles. It’s positioned for success regardless of where the car market goes.
The company is currently at a crossroads, still trying to find its identity after splitting from Fortive (FTV) in 2020. Shares are down 8% since a September 2021 peak, but up more than 70% this year, possibly signaling a turnaround.
Jack of All Trades
Vontier sells products and services for every phase of driving, specializing in software and hardware for both traditional and electric vehicles. It provides equipment to gas stations, POS systems to convenience stores, tools to mechanics, and more.
The company’s international reach, versatility, and adaptability to new technology position it for future growth.
The Price Is Wrong
Wall Street analysts are forecasting around 4% sales growth per year for the next two years for Vontier. They also expect earnings growth of around 10% per year, which would put earnings per share at $3.45.
Vontier is anticipating operating profit margins to increase to 22% in 2024, well above the 16% average for similar companies.
The company is currently priced for revenue declines, not growth, despite the positive outlook. UBS has the stock rated as a “buy” with a $38 price target, up 14% from the most recent target price.
Whether or not these forecasted gains come to fruition remains to be seen, but one thing is certain - Vontier is prepared for the future.
Are you bullish or bearish on Vontier (VNT) over the next 12 months? |
Last Week's Poll Results
Are you bullish or bearish on First Citizens (FCNCA) over the next 12 months?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish
Which trade will have the most success in 2024?
🟩🟩🟩🟩🟩🟩 🛢️ Shorting Oil
🟨🟨🟨🟨⬜️⬜️ 💻 Shorting Big Tech
🟨🟨🟨🟨⬜️⬜️ 📈 Going long on TIPS
Are you bullish or bearish on Planet Fitness (PLNT) stock over the next 12 months?
🟩🟩🟩🟩🟩🟩 🐂 Bullish
🟨🟨🟨⬜️⬜️⬜️ 🐻 Bearish
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