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How our stocks performed since the bear market bottom a year ago
The S & P 500 closed at its bear market low a year ago Thursday — ending Oct. 12, 2022, at its lowest close since November 2020 . At the time , investors were looking ahead to the following day’s consumer price index release, hoping the latest inflation data would offer insights into the Federal Reserve’s interest rate policy going forward. That CPI report ultimately proceeded a wild session on Wall Street — the S & P 500 was down 2.4% at its lows of the day on Oct. 13, 2022, before a massive reversal ensued and the broad equity index closed up 2.6%. In hindsight, that dramatic turnaround was the start of a rally that saw the S & P 500 climb 22% from the close on Oct. 12, 2022, through Wednesday. The index was still nearly 9% below its all-time closing highs on Jan. 3, 2022, not including Thursday’s market action. While Jim Cramer was calling a new bull market at the start of 2023, it was not until June that it was confirmed by some Wall Street historian standards . Others still are waiting for a new record high to declare the end of the bear. During those troubled times last year, it was hard to know for certain whether a market floor had been reached. Inflation remained hot, and fears of a Fed-induced recession loomed large. A pronouncement reminiscent of the ” Haines Bottom ” was nowhere to be found. However, our approach as long-term investors was shrouded in less uncertainty: Stay patient, and maintain resolve, as Jim Cramer urged members on Oct. 13, 2022 , during the Club’s Monthly Meeting. “I am here to tell you today that we are not folding. We’re going to stay invested with a decent chunk of cash … because we don’t know when the Fed will have its win” against inflation,” Jim said then. “But by the time we do, the upward move — the bullish, beautiful move we all expect — will have happened already,” he insisted at the time. “In fact, we are buying. We will buy even during this Club meeting because we think that the Fed will start to win, and you can’t wait until they start to win. And you can’t give up just because they’re losing. That’s just the way it is. It always is like that.” While not everything has gone our way over the past year (it rarely does for any investor), the market comeback demonstrates the importance of staying in the market for the long haul, as Jim advises, and looking for opportunities even when doom and gloom reign supreme. The bottom is only recognized in the rear-view mirror and not advertised on the road sign ahead. Club stock performance One of the dominant market themes over the past 12 months has been artificial intelligence, and the potential for the technology — specifically a variety known as generative AI, which can create images and human-like written responses — to transform the financial fortunes of companies. This theme, which emerged in late 2022 after ChatGPT went viral, has propelled numerous technology stocks including Nvidia (NVDA) to soaring heights. That fact is on display in the graphic below showing the Club holdings that have outperformed the S & P 500 since the index’s closing bear market low on Oct. 12, 2022. In addition to Nvidia, Meta Platforms (META), Broadcom (AVGO), Oracle (ORCL), Microsoft (MSFT), Salesforce (CRM) and Alphabet (GOOGL) have been seen as AI beneficiaries. To be sure, the gains at Salesforce and Meta, the parent of Facebook and Instagram, have also been fueled in large part by aggressive cost-cutting moves at the companies. It’s worth noting: We took stakes in Broadcom and Oracle in August, so they weren’t part of our portfolio for much of these gains. Still, in both cases, we believe their best days are yet to come. Eli Lilly’s near-double since the Oct. 12, 2022 close for the S & P 500 has been driven by optimism around Mounjaro, its diabetes drug that’s soon expected to gain regulator approval as a weight-loss treatment. There’s also excitement around Lilly’s potential Alzheimer’s opportunity. Palo Alto Networks, meanwhile, has successfully pivoted to profitability, joining the S & P 500 as a result, and repeatedly demonstrated the quality of its cybersecurity platform. Amid the S & P 500’s rally, many market watchers have raised concerns about its “breadth,” noting that much of the gains have been driven by a pool of technology stocks with large weightings in the index. Indeed, an exchange-traded fund that gives each S & P 500 constituent the same influence — the Invesco S & P 500 Equal Weight ETF — has advanced only 11.2% since Oct. 12, 2022. That’s half of the regular, market-capitalization-weighted index’s 22.4% gain during the same stretch. While we’ve acknowledged the breadth concerns at various times this year, an 11.2% gain is still a respectable performance. Viewed through the top-heavy rally lens, though, it’s not a surprise to see a number of Club stocks underperforming the S & P 500. In general, this year’s market has been colored by a rotation from last year’s winners, such as a defensive stock like Humana (HUM) or oil-and-gas plays such as Coterra Energy (CTRA), into the aforementioned tech winners. That dynamic is evident in the graphic below. Some stocks, like Costco Wholesale (COST), just barely trailed the index, while the likes of Amazon (AMZN) and Procter & Gamble (PG) also have rallied in the mid-teens percentage. Others have lagged more considerably, such as shoe retailer Foot Locker (FL), which didn’t join our portfolio until March, and cosmetics giant Estee Lauder (EL), which has given back all of its late 2022 and early 2023 gains and then some. Club holding’s GE Healthcare (GEHC) and Veralto (VLTO) don’t appear in either graphic because they were not publicly traded a year ago. Both companies were spun out from their former parents in 2023. Bottom line The market’s day-to-day movements are hard to predict, and not the basis of our investment strategy. Of course, we lean on Jim’s trusted S & P Oscillator to help us raise cash in overbought market moments, and strategically redeploy it in oversold situations. But in the bigger picture, our fundamental approach is to stay invested for the long haul, as we’ve done over the past 12 months and continue to do. That’s where the real wealth generation occurs. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Michael Nagle | Bloomberg | Getty Images
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