Worst Quarter in 4 Years, Oil vs Stocks, Win Rates From Buying Corrections, the Case for T and VZ
The Compound and Friends Podcast Recap
Published:
Duration: 1 hr 10 min
Summary
This episode covers the financial market's turbulent quarter, evaluating sector performances and the broader economic landscape. Key insights include the energy sector's unprecedented gains and the strategic positioning of telecom giants AT&T and Verizon.
What Happened
Public, an investing platform, has introduced a genetic AI feature that allows users to automate their investment portfolios by writing specific rules, such as buying protective puts or adding stop-loss orders. This innovation aims to enhance user experience and provide more control over investment strategies.
The market experienced significant volatility, with the Dow Jones rallying by a thousand points due to optimistic headlines about Iran's willingness to negotiate. Despite the rally, the market was in correction, with a nearly 10% decline and 40% of the index in a bear market. The S&P 500 had its worst quarter since Q2 2022, with a 19% multiple contraction, particularly affected by the tech sector.
Energy stocks shone as the S&P 500's energy sector appreciated by 39% for the year, marking its best quarterly performance ever. This contrasts with significant declines in other sectors, such as tech, where the NASDAQ fell over 10% and Microsoft led losses with a 34% drop.
Consumer-facing companies like Delta Airlines and American Express reported positive developments. Delta's CEO stated that premium market revenue remained robust, while American Express bookings increased by 25% year over year, despite high fuel prices and geopolitical tensions.
The episode also explored the challenges and strategies of major telecom companies. AT&T and Verizon are focusing on reducing debt and restructuring, which has made them leaner and more competitive. Verizon's strong subscriber base and dividend history are highlighted as strengths in maintaining its market position.
The podcast analyzed the performance of '60/40' portfolios, which have suffered a 6.3% loss since the war's onset, due to rising bond yields. However, earnings revisions are trending upwards, indicating a potentially positive outlook moving forward.
Ben Carlson notes that buying stocks after a 10% or worse monthly decline historically results in positive returns 93% of the time. This suggests that periods of market correction may offer favorable buying opportunities for investors.
The episode concluded with a discussion on the potential of Apple and Nvidia as promising investments, given their expected strong performance, with Nvidia trading at 15 times next year's earnings and projected 74% earnings growth this year.
Key Insights
- Public's new genetic AI feature allows investors to automate their portfolios based on custom rules, boosting control and efficiency in managing investments.
- The energy sector outperformed, with a 39% rise, marking its best quarter ever, contrasting with tech, which saw a 25% multiple contraction despite strong earnings growth.
- Delta Airlines and American Express are seeing robust consumer demand, with Delta's revenue largely driven by the premium market and American Express bookings rising 25% year over year.
- AT&T and Verizon are focusing on deleveraging and restructuring, which has strengthened their market positions, with Verizon offering nearly a 6% yield and maintaining a 20-year streak of dividend increases.