Weekend Update #208
Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
Markets were mixed this week, with the Nasdaq 100 extending its rally for the fourth consecutive week, fueled by a Friday surge in Broadcom Inc. and gains across the chip sector. The index rose 0.8%, hitting an all-time high for the second time in three days, while other major U.S. stock indexes faced losses: the S&P 500 fell 0.6%, and the Dow Jones Industrial Average dropped 1.8%. Despite the S&P 500 hovering near record highs, the rally's breadth has weakened, with more stocks declining than rising for nine straight days—the longest streak since 2004—highlighting the concentration of gains in a few major tech stocks. This has raised concerns among strategists, with some warning of potential cracks in the bull market due to the top-heavy nature of the rally, though others note that such concentration aligns with broader market trends observed throughout the year.
With a slew of economic news this week, reports showed mixed data. The NFIB Small Business Optimism Index rose by eight points in November to 101.7, after 34 months of remaining below the 50-year average of 98. This is the highest reading since June 2021. The net percent of owners expecting the economy to improve rose 41 points from October to a net 36%, the highest since June 2020, while the percent of small business owners believing it is a good time to expand their business rose eight points to 14%, the highest reading since June 2021.
U.S. unemployment benefit applications rose to a two-month high of 242,000 last week, exceeding expectations, though the increase is likely influenced by seasonal volatility around Thanksgiving. Recurring claims have hovered near a three-year high, reflecting longer job searches and aligning with broader labor market trends, including a rise in long-term unemployment and an overall jobless rate of 4.2%.
Headline CPI showed its strongest month-over-month rise since April 2024, while year-over-year services inflation slowed to 2.76%, with shelter costs continuing to decline to their lowest level since January 2022. Supercore inflation (core services excluding shelter) has trended upward month-over-month since June, but its annual rate fell, driven by cooling transportation services at 1.69% YoY. Overall, sticky inflation components are on a slow decline, supporting expectations for Federal Reserve rate cuts
Wholesale inflation data revealed a 0.7% jump in goods prices, the largest increase since February, driven by an 80% contribution from food prices, including a sharp 55% rise in egg costs due to bird flu. Services inflation rose just 0.2%, the slowest pace in four months, with healthcare costs remaining stable and portfolio management fees and airfares declining. While recent hotter inflation numbers add uncertainty to price and interest rate trajectories, key PPI components tied to the Fed’s preferred inflation measure showed favorable trends, potentially signaling easing pressures despite tariff threats from the incoming administration.
Corporate Highlights:
Apple released the latest updates for its software, including a long-awaited integration that will bring OpenAI’s ChatGPT to Apple’s Siri assistant to iPhone, iPad and Mac
Macy’s Inc. climbed after the Wall Street Journal reported that activist investor Barington Capital has built a position in the department-store operator and plans to push for changes, including the establishment of a separate real estate unit.
Super Micro Computer Inc. jumped after the embattled server maker said Nasdaq had granted the firm more time to become compliant with listing rules.
Warner Bros. Discovery Inc. reached an early renewal of an agreement to provide networks such as TNT and CNN to Comcast Corp.’s roughly 12.8 million cable-TV customers.
Shares in Broadcom Inc. jumped 26% to a record after predicting a boom in demand for its artificial intelligence chips and reaching a $1 trillion market value.
General Motors said it will no longer fund its Cruise division’s robotaxi development, citing an increasingly competitive robotaxi market, capital allocation priorities, and the considerable time and resources necessary to grow the business.
Friday’s Close (Weekly Performance)
S&P 500 6,051.09 (-0.64%)
Nasdaq 19,926.72 (+0.34%)
Dow Jones 43,828.06 (-1.82%)
Thank you Blue Room Analyst NICK PEART.
Fund One Performance and Market Overview
Fund One’s performance this week mirrored the volatility of the S&P 500 index. As the year draws to a close, investors seem to be adjusting their portfolios—selling underperforming assets to offset gains and repositioning into stocks they believe will benefit from the incoming administration’s policies. This trend has put additional pressure on our pharmaceutical holdings, which are facing heightened uncertainty, particularly in light of rhetoric from Robert F. Kennedy Jr., who is being considered for the role of Secretary of Health and Human Services under the new administration. We are closely monitoring the biotech space and will continue to hold only those companies that provide the clearest path to success.
One area that has shown resilience this year, despite a slight pullback this week, is the restaurant industry. The fast-casual dining sector, in particular, has benefited from a surge in innovation, driven by the growing demand from health-conscious consumers for fresh, customizable, and sustainable meal options. Among the standout players in this space are Sweetgreen and Cava Group. While both companies are experiencing rapid growth, a closer analysis of their business models, operational efficiencies, and long-term positioning suggests that Sweetgreen presents a stronger investment case, while Cava faces greater risks—making it a candidate for shorting.
Sweetgreen: Positioned for Long-Term Success
Sweetgreen has firmly established itself as a leader in the healthy fast-casual salad market. The company’s commitment to fresh, locally sourced ingredients, combined with a robust technological infrastructure that includes mobile ordering and a loyalty program, sets it apart from competitors. Sweetgreen is well-positioned to capitalize on key consumer trends, including the growing preference for healthier eating and sustainable food sourcing. Moreover, its scalable business model and strong brand identity give it a clear edge in the competitive fast-casual space. With a strong focus on operational efficiency and long-term growth, Sweetgreen remains one of our top holdings in the sector.
Cava Group: Growth Challenges and Valuation Concerns
Cava Group, a Mediterranean fast-casual chain, has garnered attention for its bold flavors and unique offerings. However, despite its rapid expansion, we have several concerns about the company’s long-term prospects. Cava faces significant challenges that could impede its ability to sustain growth and profitability. These include pricing pressures, scalability issues, and the intensifying competition within the fast-casual dining space.
Moreover, we believe that Cava’s current valuation does not accurately reflect the risks associated with its business model. Unlike Sweetgreen, which benefits from a well-defined competitive advantage, Cava’s operations are more complex, and its differentiation from other fast-casual brands is less compelling. These factors could result in margin compression and slower-than-expected expansion, which we believe will weigh on its stock price. Given these concerns, we have taken a short position in Cava, as we expect its valuation to come under pressure in the near term as investors reassess its long-term growth potential.
Thank you Blue Room Investing President JOHN FENLEY
RICHERT SPACE
Opening Reception: Friday, December 13, 6-8p
On view: December 13, 2024 – February 15, 2025
RULE Gallery, 808 Santa Fe Drive, Denver, CO
Clark Richert in his studio, 2007
photo by Valerie Santerli
pigmented ink print with hand embellishment
RULE Gallery proudly presents Richert Space, a solo exhibition of paintings, drawings and prints by artist and polymath Clark Richert (1941–2021). A public reception opens the exhibition on Friday, December 13, from 6 to 8 pm; and will be on view through February 15, 2025. Gallery hours are Wednesday through Saturday, 11am–5pm, and by appointment.
Richert Space builds a narrative that intertwines structural systems and human connection, offering a meditation on the many ways he explored this fundamental element of existence. It includes some of the artist’s most iconic works, along with smaller works never before seen in public.
Central to the show is The True Story of the Quasicrystal, a visually arresting masterwork that engages viewers in Richert's imagined studio, a space filled with his interests, from polyhedral forms and structural lattices to Richert-Penrose Tiling and the golden ratio. Through a window we glimpse Drop City, the artist-built community he helped co-found in the mid-1960s in Trinidad, CO. The inclusion of the human figure invites reflection on the intersections between the personal and the mathematical. The painting articulates an overarching view of Richert’s mind, transforming principles into an environment that feels both expansive and introspective. Other works in the exhibition explore themes such as subatomic quarks, the Snelsonian model of the atom, and Richert's own analytical methods for categorizing and understanding the subjects he pursued.
Similar underlying structures are examined in Richert’s prints, where he uses computational tools to explore the beauty of non-repeating patterns and higher-dimensional forms. With their symmetry-breaking arrangements and an array of vibrant hues, these prints fill in the interstices of the artist’s ideas, investigating higher-dimensional possibilities within a two-dimensional framework and challenging our perception of space itself.
Snelsonian Motion V
2016
pigmented ink print with hand embellishment
acrylic on canvas
CLRI0045
Three large, grid-based drawings capture the process-oriented rigor behind the artist’s vision. With meticulous attention to detail, they depict complex breakdowns of molecular-level material latices and polyhedral subdivisions designed to maximize dense matter packing alongside coffee stains and other marks, showing the hand and life of an artist who saw all of it as essential to his work. These drawings serve as blueprints for broader inquiries into the intersections of art, science, and philosophy. Delicate, gridded, and intricate, these sketches serve as bridges between mathematical inspirations and visual outcomes.
A pioneer in community building, pattern painting, and structural abstraction, Richert dedicated his career to uncovering the hidden universal patterns that shape our understanding of space, order, and our place within it Together, these works reveal a unified thread in Richert's practice: his fascination with the structures that underpin both natural and constructed realities. His use of quasicrystals, which defy periodicity while adhering to mathematical order, embodies a broader inquiry into how clarity and order can emerge from seeming chaos. Richert’s work invites viewers to explore the boundaries of perception, encouraging them to contemplate how these patterns inform both the cosmos and the self, bringing them into Richert Space.
Clark Richert (1941-2021) was born in Wichita, KS. He earned his BFA from the University of Kansas in 1963 and his MFA from the University of Colorado in 1972. He is one of four founding members of Drop City (Trinidad, CO, 1965), considered the first counterculture artist's community in the US. Over the past 50 years, Richert has exhibited widely in galleries and intuitions across the world, including the Walker Art Center of Minneapolis; The Denver Art Museum; Museum of Contemporary Art, Denver; the Scottsdale Museum of Contemporary Art, AZ; The Kirkland Museum, Denver; The Museum of Modern Art, Vienna Austria; the Neues Museum, Nuremberg Germany; The Biennial of the Americas, Denver; Berkley Art Museum, CA; RedLine Contemporary Art Center, Denver; the Cranbrook Art Museum, MI; among many others. In 2019, Richert was given a dual career retrospective staged at the Museum of Contemporary Art, Denver, and the Boulder Museum of Contemporary Art. In addition to public and corporate commissions, his work can be found in the collections of the Smithsonian Museum; LACMA; Nelson-Atkins Museum; Denver Art Museum; Kirkland Museum; University of Colorado, Boulder; University of Texas Southwestern Medical Center, Dallas; Amoco, Container Corporation of America, as well as many prominent private collections.
RULE Gallery, founded in 1991, has locations in Denver, CO, and Marfa, TX. RULE represents emerging and mid-career contemporary artists and artist estates, with a focus on fostering investigative art practices while developing artists' long-term careers. Outside their robust in-house exhibition schedule, RULE coordinates programming in prominent institutions and non-traditional settings, expanding community engagement with the work. In addition, the gallery actively endeavors to bring greater recognition of the region's historic art movements to a broader audience.
The True Story of the Quasicrystal
1989
acrylic on canvas
84 x 136 in / 213.4 x 345.4 cm
CLRI0012
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