Weekend Update #204
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Stocks rallied in the second half of the week to end their best week in 2024 after solid consumer sentiment data and bets that newly elected President Donald Trump’s pro-growth agenda will keep fueling the economy. Equities advanced on Friday for a fourth consecutive session, with the S&P 500 notching its 50th record this year, while the Dow briefly crossed the 44,000 milestone mark for the first time.
In recent economic developments, the Federal Reserve implemented a 25 basis point rate cut, setting the target range to 4.5%–4.75%. The Fed noted a general easing in labor market conditions, while Chair Powell refrained from signaling a clear stance on further cuts in December. He indicated, however, that the Fed might act more quickly if labor market weaknesses increase, or conversely slow the pace as rates approach a neutral level. October’s CPI and PPI data readouts will be released next week which could influence the outlook for the Fed’s December meeting.
Meanwhile, U.S. consumer sentiment reached a seven-month high in early November, while the expectations index hit its highest level since mid-2021, driven by optimism about the economy and personal finances, with consumers forecasting slower inflation. Price expectations for the coming year are at 2.6%, the lowest since 2020. However, the index of current conditions slightly declined to 64.4, along with a dip in buying conditions for durable goods.
Corporate Highlights:
Bitcoin hit an all-time high price of $77,000 following the election results as Trump and Republicans are expected to enact friendlier crypto legislation
Boeing machinists voted 59% in favor of a new contract on Monday, ending a more than seven-week strike that stopped most of the company’s aircraft production. The contract includes 38% wage increases over four years along with other improvements.
Expedia Group Inc. posted better-than-expected gross bookings in the third quarter and said it was raising its full-year guidance, suggesting that demand has proven stronger than the company had previously thought heading into the holiday season.
Stellantis is indefinitely laying off about 1,100 workers at an auto plant in Ohio. It will also cut a manufacturing shift at the Toledo South Assembly to better align output with demand for the Jeep Gladiator pickup
Pinterest Inc. forecast weak sales for the holiday quarter, a sign the search and discovery network is struggling to keep pace with larger peers such as Meta Platforms Inc. and Snap Inc.
Rivian Automotive Inc. said it’s on track to achieve a positive gross profit in the final three months of the year, counting on a surge of regulatory credit sales after production disruptions added to losses.
Sweetgreen Inc. shares tumbled after higher labor and protein costs resulted in a wider-than-expected loss for the third quarter.
Friday’s Close (Weekly Performance)
S&P 500 5,995.54 (+4.66%)
Nasdaq 19,286.78 (+5.74%)
Dow Jones 43,988.99 (+4.61%)
Thank you Blue Room Analyst NICK PEART.
The S&P 500 Index had a strong showing during Election Week, and our Fund One outperformed even this positive trend. Market optimism surged following the Trump victory, as investors tend to favor certainty, especially in uncertain political climates. This rally was further bolstered by a wave of better-than-expected earnings reports, which have had a significant positive impact on our portfolio.
Vimeo shares jumped more than 40% this week following a strong earnings report. The company exceeded analysts’ expectations, with third-quarter earnings per share surpassing consensus, and its fourth-quarter revenue guidance was notably above market expectations. The enterprise segment continues to be a bright spot, driving solid revenue growth and profitability. Despite challenges in its self-serve business, Vimeo's low valuation and improving fundamentals make it a compelling investment. We remain positive due to the company's strong balance sheet and secular growth in video consumption.
The Fund’s second largest holding, Palantir, (also a 40% gainer for the week!), saw third-quarter results exceed expectations, with adjusted earnings per share up 30% year-over-year. The company also raised its 2024 revenue guidance, signaling strong demand for its AI-driven solutions. Palantir saw robust growth in both its government and commercial sectors, with U.S. government revenue up 40% and commercial revenue up 54%. The company's AI platform (AIP) continues to gain traction, fueling new customer conversions and expansions.
We had a third holding, Coinbase, up 40% for the week. With the political landscape shifting, cryptocurrency-related stocks like Coinbase benefitted from a favorable regulatory outlook under Trump’s potential economic policies, including tax cuts and deregulatory measures. The shift away from centralized financial systems has spurred optimism in the crypto sector, making Coinbase a key beneficiary.
Exact Sciences was the only significant underperformer this week, with its stock plummeting by 28% after the company reported disappointing third-quarter results and slashed its full-year guidance. Sales growth was slower than expected, and the company cut its revenue forecast for the year. The company attributed part of the shortfall to lower-than-expected physician orders, compounded by external factors like hurricanes affecting order rates. Although Exact Sciences is addressing execution issues, investor confidence will likely be shaken until these concerns are resolved. While Exact Sciences faces near-term headwinds, there’s potential for recovery if the company can demonstrate improved execution and a re-acceleration in revenue growth by 2025.
Overall, while there were some bumps in the road, Fund One continues to be positioned well for growth, driven by strong performers like Palantir and Vimeo, and we are closely monitoring positions like Exact Sciences for any signs of a turnaround. We remain optimistic about the portfolio's outlook, especially as key growth themes such as AI, enterprise software, and crypto continue to thrive in the current market environment.
Thank you Blue Room Investing President JOHN FENLEY
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