The SPC Mid-Year Review — And Our "Desert Island Stocks Challenge"
Part I of Our Blueprint for the Rest of 2024
When you really get down to it — for long-term Wealth Builders like us — the “mid-point” of a year is really just a date on a calendar.
After all, folks like you and I are playing the “long game.” We’re working to make “time” — and the power of strong storylines and the muscle provided by “compounding” — our personal allies. Our goal is to find stocks and special situations that we can buy today … add to at opportunistic moments … and see the long-term payoff that comes with such a savvy approach.
And yet … there’s still great value in that staple of financial publishing — the mid-year review.
Like the one we’re starting today.
Notice I said “starting” because this is the first installment of the Stock Picker’s Corner (SPC) Mid-Year Review series that will take you through the next half a dozen installments we have planned.
As part of our review over the next two weeks, we’re going to:
Look at the first six months of 2024 — and then do a bit of “table-setting” for the six-month sprint to the finish.
Delve into our network of experts to bring some surprises — and a look ahead.
And we’re also going to have a bit of fun — a game I call “Desert Island Stocks.” We challenged each expert to tell us — if they’re “marooned” on a Desert Island for a longer stretch, where would they park some of their money, knowing they couldn’t trade it, hedge, sell or or even check on it for as long as five years. Sort of what a Wealth Builder does.
As you’ll soon see, our experts took this “Desert Island Challenge” super-seriously. And had fun — as we did.
The first installment comes on Wednesday. And we’ll round it out with a poll — to see which Desert Island Stock you like the best.
Let’s get started.
The Fed Sez …
Overview: We all entered 2024 with prognosticators predicting as many as six cuts in the Federal Funds Rate — a benchmark that helps set the “price of money” throughout the rest of the economy. Instead, we’ve got no cuts. But that hasn’t slowed stocks.
The S&P 500, Dow Jones Industrial Average and Nasdaq Performance
What to Watch: Beware of “The Wildcard.” But watch the September meeting of the U.S. Federal Reserve Federal Open Market Committee (FOMC) — when that first cut could come. And most calendars already have circled the November U.S. Presidential Election. With that, expect more updates to our “New Cold War” storyline. Russian President Vladimir Putin and North Korean leader Kim Jong Un just formed a “mutual assistance in case of aggression” pact, and Pyongyang likes to celebrate big U.S. events with missile launches of its own.
The (TEPID) RETURN OF THE IPO
There’ve been 93 IPOs so far this year, a 25.68% increase from last year’s 74 in the same stretch, according to StockAnalysis.com.
This year’s IPOs have been priced an average 48.8% higher than last year’s.
The increase could signal bullishness about stock prices. Or these private firms may just need cash.
The biggest IPO (in terms of interest) has been Reddit Inc. RDDT 0.00%↑.
Reddit YTD Return: 26.67%
Astera Labs Inc. ALAB 0.00%↑ — a chip venture with AI connections — also grabbed some headlines.
What to Watch: If we have a rate cut and stocks surge, expect IPO deals to increase in 2025. Retail investors don’t typically get pieces of the best deals. And we aren’t traders. Before you pursue an IPO, ask if it’s a company you’d like to own for a decade.
The Magnificent 7 Revisited
The investing joke of 2023 was that the S&P 500 should be called the “S&P 493” because seven stocks accounted for most of the index’s 24.2% climb. This meant the performance of the “Non-Magnificent-Seven” was likely a better barometer of the stock market’s health.
Indeed, as a group, Nvidia Corp. NVDA 0.00%↑, Tesla Inc. TSLA 0.00%↑, Microsoft Corp. MSFT 0.00%↑, Apple Inc. AAPL 0.00%↑, Amazon.com Inc. AMZN 0.00%↑, Alphabet Inc. GOOGL 0.00%↑, GOOG 0.00%↑, and Meta Platforms Inc. META 0.00%↑ generated a 75.7% return.
This year, there are still mostly winners from that group. But only Nvidia made the S&P 500’s Top-10 performers list.
One factor that separated the group this year was how well they told their own AI story. Let’s look for ourselves to see how they did.
Nvidia YTD Return: 156.47%
The AI Era has spooled up stratospheric demand for Nvidia’s next-generation graphic processors; it still controls 90% of the data-center GPU market and 95% in AI chips.
Tesla YTD Return: -20.34%
Tesla’s AI connection is through its full self-driving (FSD) tech and supercomputer Dojo, but the attention has been more on its stumbling in the car market and being buried with distractions. It had an underwhelming first quarter that underscored the EV sale slowdown, a market fight in China, recalls of its vaunted Cybertruck and a bruising court battle over CEO Elon Musk’s massive compensation package. After Musk scored a moral victory in court, I’m now watching to see if he’s reenergized in a way that revs up Tesla.
Microsoft YTD Return: 20.51%
Over a billion people already use Microsoft Office products or services, but the new narrative we mentioned is Microsoft giving its products an “AI Facelift.” Coca-Cola Co. KO 0.00%↑ and Microsoft have signed a five-year partnership, with Coke investing $1.1 billion in the Microsoft Cloud and its generative AI capabilities. But a recent lawsuit against Microsoft and OpenAI (which Microsoft holds a $10 billion stake in) by Investigative Reporting (America’s oldest nonprofit newsroom) bears watching. The suit alleges the duo used the media venture’s content to train AI models —without consent or compensation. Author, filmmaker and former actress Justine Bateman recently told reporters that AI “training” strategies like this are “the largest theft in the United States, period.”
Apple YTD Return: 13.46%
Apple looked to be flat on the canvas — missing the chance to trumpet its AI forays. But then it masterfully flipped that script at this year’s Worldwide Developers Conference (WWDC), unveiling “Apple Intelligence.” Here’s what Wall Street missed about Apple.
Amazon YTD Return: 28.89%
Amazon’s pursuit in AI thus far is largely business-focused, as it offers the AI assistant “Amazon Q” through Amazon Web Services (AWS). It also poured $4 billion in Anthropic, a San Francisco-based AI company, to build models for generative AI systems. Amazon also aspires to upgrade Alexa to an AI version called “Remarkable Alexa,” and along the same lines, they want to develop a chatbot that can go head-to-head with ChatGPT.
Alphabet YTD Return: 31.43%
At the Google I/O Developer Conference on May 14, Alphabet insisted it is prioritizing AI. A key announcement: AI-powered Google search results. Searches still yield links but also spotlight AI-generated summaries. AI searches could help monetize traffic. But they’re also roiling the waters. Google products and software will also get AI upgrades with Gemini AI. Gmail and Google will have voice-command potential via AI assistant Gemini Live, and Google Workspace will have Gemini as a paid add-on subscription.
Meta YTD Return: 45.61%
Meta is touting the clunky-sounding “fediverse” (named like something Tony Soprano would avoid) as a global social network whose servers allow people to connect across platforms. For instance, someone on Instagram could follow someone on Pinterest or see content from Facebook. Meta itself doesn’t own the fediverse, but its Threads platform is compatible with the open social network, which may bode well for users who want greater engagement and to reach across previously isolated social-media platforms.
What to Watch: Investors remain captivated by AI. So whether through increased sales from products and services infused with AI or through the cost-saving potential of AI, Big Tech needs to prove this generational innovation can actually deliver sales and profits.
The Year of Weight-Loss Drug Stocks
Overview: The weight-loss-drug market could grow 16 times — from $6 billion last year to $100 billion down the road, according to Goldman Sachs Research. And two heavyweights lead the pack.
Eli Lilly & Co. LLY 0.00%↑ YTD Return: 52.88%
Eli Lilly is pulling out all the stops here in 2024 to meet soaring demand for its weight-loss drugs Zepbound and Mounjaro: It invested a company-record $5.3 billion in its Indiana production plant, it inked a delivery partnership deal with Amazon and (on June 14) it unveiled still another plant in North Carolina. Lilly’s shares have soared this year and are approaching the $1,000 level. Watch for a possible stock split.
Novo Nordisk NVO 0.00%↑YTD Return: 39.79%
Like Lilly, Novo faces a supply crunch that it’s working to fix. It bought drugmaker Catalent for $16.5 billion and will buy three more Catalent plants from Novo Holdings for $11 billion. TD Cowen analyst Michael Nedelcovych recently said this strategy offers quicker relief than building factories from scratch. But in late June, Novo also said it’s spending $4.1 billion to build a new plant in North Carolina.
What to Watch: Eli Lilly is developing an oral weight-loss drug – Orforglipron – with late-stage trial data available in 2025. Structure Therapeutics Inc. GPCR 0.00%↑ may be right behind Lilly in launching an obesity pill, while Novo, AstraZeneca AZN 0.00%↑ and Pfizer Inc. PFE 0.00%↑ are also developing their own versions.
I’ll be back tomorrow with Part II of this series, which will include updates on Bitcoin (BTC), gold and silver and other commodities.
See you then.
I like the Desert Island Stock game. I fear I'd be boring and go for Apple. Over any given five years, I guess Apple has given solid returns so I'd be reasonably confident of going back home to a decent nest egg. But if I were in a gambling mood....Sweetgreen.