2023 was both a bull market and a stock picker’s market.
In May, the S&P 500 and Nasdaq entered a technical bull market (up 20% from their October 2022 lows), but it didn’t feel like a bull market. Why? Because a handful of mega-cap stocks – Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA), collectively dubbed the “Magnificent Seven” – were responsible for virtually all of the market’s gains. Due to their immense sizes, with an average market cap well north of a trillion dollars, they account for roughly 30% of the S&P 500; the other stocks that comprise the benchmark U.S. index – the “Not-So-Magnificent 493,” I like to call them – were rather lackluster, at least until the last two months of the year.
To wit: The S&P Equal Weight Index (SPXEW), which captures the performance of the 500 stocks in the S&P by weighing each of them equally, was down for the year until the second half of November. So while we had technically been in a bull market for six months at that point, few people were making money unless they had a portfolio full of Magnificent Seven stocks.
[text_ad src='/ad/money-show-ad’]
But not all stocks were down the first 10 months of 2023. If you picked the right stocks, you actually could have made money, as many of our Cabot analysts did. Last January, in fact, several of our analysts participated in MoneyShow’s annual Top Picks report, which features stock picks from some of the top analysts in the investment publishing industry. The results were mixed, as I’m sure they were for the dozens of other experts who contributed to the 2023 report. But a couple of our picks fared quite well.
Tyler Laundon, Chief Analyst of our Cabot Small-Cap Confidential and Cabot Early Opportunities advisories, selected Huron Consulting Group (HURN), a small-cap management consulting firm that offers its consulting services to healthcare companies, life sciences companies and higher education institutions. HURN was up 42.5% last year, far outpacing the 24.2% gain in the S&P 500 and more than tripling the 13% return in the Russell 2000 small-cap index.
Bruce Kaser, Chief Analyst of our Cabot Value Investor and Cabot Turnaround Letter value-based newsletters, recommended ZimVie (ZIMV), an even smaller company than Huron that specializes in dental implants and spine innovations. It was up a whopping 90.2% in 2023.
Bruce also recommended more familiar names Comcast (CMCSA) and Citigroup (C) (the report permits analysts to submit up to two stock picks per investment publication), and while neither performed as well as ZIMV or HURN, their respective total returns – 18.7% for Citigroup including dividends, 16.3% for Comcast including dividends – outpaced the Equal Weight Index last year, making them better-than-average picks.
Which brings me to this year’s Top Picks report. Seven Cabot investment analysts – Bruce, Tyler, growth investing whiz Mike Cintolo, global investing guru Carl Delfeld, Cabot Money Club editor Nancy Zambell, metals expert Clif Droke, and yours truly – were among the 53 contributors (and 91 total picks submitted) to Money Show’s 2024 report, which also appears in places like Forbes.com, Yahoo Finance, Investing.com and TheStreet.com. To see all 91 picks, you can view the full (free) report by clicking here.
My guess is, the picks – both ours and our fellow contributors’ – will fare even better this year. Why? Because now it’s a true bull market, as the major indexes are now hovering near new all-time highs not simply due to the might of the Magnificent Seven, but as the rest of the market has finally picked up the slack in the last two months. Now, we are in a true bull market, not a technical one. And new bull markets rarely up and fizzle in their first year, or even two years.
Thus, while the headline returns among the major indexes are unlikely to match last year’s performance – the S&P up more than 24%, the Nasdaq up an eye-popping 53% – it will be easier to make money in 2024. The Mag Seven will not replicate their 111% average return this year – even half that number would be a surprise, given their current values – other stocks, including 2023 underperformers like small caps, value stocks, Chinese stocks, REITs, could have a nice bounce-back year as the Fed starts to cut interest rates, inflation further eases, a U.S. recession becomes increasingly unlikely and China’s economic recovery picks up steam.
The best way to take full advantage of what’s shaping up to be a more inclusive year for stock outperformance is to subscribe to one of our investment newsletters. But if you’d like to first familiarize yourself with our analysts’ thinking and rationale – and to see a few of their best stock picks for this year – then I recommend reading MoneyShow’s Top Picks report now. You can get it at the link above.
[author_ad]
