Investing Update: Q1 Recap
What I'm buying, selling & watching
If you started the year as being bearish, you’re feeling a bit uncomfortable. The S&P 500 has now returned back-to-back quarterly gains. The Nasdaq is up 25% from the October lows. This was its best quarter in three years. This was the best week for the Dow and S&P 500 since November.
We now enter April which is one of the best months historically for stocks. Just how good has April been? Over the last 20 years the Dow has been positive 85% of the time in April.
We’ve now seen a banking crisis, continued high inflation, the ongoing raising of interest rates, fear of a looming recession and tighter lending. Yet the market has prevailed higher and everyone still remains so negative. The last time there was an “I can’t explain it” market rally opposite of the consensus was the rise up after covid.
Trying to time the market and following everyone else seems to be proving wrong again. If you’ve been trying to time the market you’ve been caught offsides. A bear trap? It’s why staying invested long-term is so important. I wrote a post about this recently called Staying Invested.
Tech Is Leading the Rally
The Nasdaq is outperforming the Dow by the biggest margin since 2001. The mega-cap tech stocks are leading the market rally higher. Here is where the five biggest stocks in the Nasdaq have done sorted by weighting in the QQQ 0.00%↑ YTD.
Microsoft MSFT 0.00%↑ +11.44%
Apple AAPL 0.00%↑ +31.85%
Alphabet GOOGL 0.00%↑ +16.39%
Amazon AMZN 0.00%↑ +20.36%
Nvidia NVDA 0.00%↑ +94.04%
There is a big spread in the best and worst performing sectors. What worked in 2022 (energy & financials) has not worked in 2023 and what didn’t work in 2022 (technology) is working in 2023.
Positioning Is Still Overweight Cash, Underweight Equities
The BofA Fund Managers Survey for March still shows that positioning is overweight cash and still underweight US equities. Still no love for US stocks? Too many are still thinking that what worked in 2022 is going to work in 2023. As the market continues to rally people will be forced to chase. I continue to stand by this, in turn setting up for a big rally.
The popularity of cash is actually rising. Money market funds have just seen the biggest quarterly inflows since the pandemic. There is now a record $5.1 trillion in money markets. How much of that finds its way into stocks?
As Eric Balchunas points out money market mutual funds have taken in $200 billion in the past two weeks. While bank deposits continue to decline.
The Market Isn’t Expensive
I still hear people say that the stock market is still expensive. This also is a common phrase from the perma-bears. The two charts below show that relative to history the P/E ratio says the S&P 500 is not expensive at these levels.
The 12-month forward P/E ratio is 17.1. That’s below the 5-year average of 18.5 and the 10-year average of 17.3.
The 12-month trailing P/E ratio is 19.4. That’s below the 5-year average of 22.6 and the 10-year average of 20.6.
Q1 Recap
As the first quarter concludes, I wanted to look at where my portfolio and my 3 Stocks For 2023 have fared so far against the major indicies.
Dow: YTD +0.42%
S&P 500: YTD +7.46%
Nasdaq: YTD +17.67%
My Portfolio (Actively Managed): YTD +27.52%
Deere DE 0.00%↑ YTD -2.69%
Nvidia NVDA 0.00%↑ YTD +94.04%
Amazon AMZN 0.00%↑ YTD +20.36%
Moves I’ve Made
Substack This week I made a private company investment in the platform that you’re reading Spilled Coffee on, Substack. Substack offered to invest at their pre-money value of the 2021 fundraising round at a $585 million evaluation. This is a speculative investment and something that I’m willing to consider a donation if I don’t receive any return and view this as a way support the company that supported me.
I used Substack to start Spilled Coffee. Their platform enhancements and growth is astounding. The financials I’ve seen to date make me feel comfortable putting some money directly into the company that helped me create what you’re reading today.
VanEck Semiconductor ETF SMH 0.00%↑ As I indicated back on October 15th in Investing Update: What’s Priced In?, I bought the SMH ETF at $167 a share. It has run up to return me over 60% in under six months. So I decided to sell some this week and take some profits as it hit an 11-month high.
S&P 500 Index I made my monthly contribution to my S&P 500 index holding on Thursday of this week.
What I’m Watching
I’ve mention Lululemon LULU 0.00%↑ a few times in what I’ve been watching. Well I missed my chance in the near term this week. I had a buy order in at $280 and although the stock did dip down, it didn't quite hit $280. Tuesday after the bell, Lulu announced earnings and they crushed it. The stock has took off to $368.
I missed it but won't chase it. When I saw it was cheaper on a valuation basis than Nike NKE 0.00%↑ I should have just bought it. I don't know the last time if ever that has happened. I noticed that when the stock was at $290. But I anchored to my $280 price target and didn't just buy it.
I've owned and sold it in the past at a higher level and will own it again at some point. It's a great company and I love their products. As does my wife. So on the watchlist it remains. After I do a bit more work on the updated financials I'll decide what price I move my buy order to. You win some, you lose some.
The Coffee Table ☕
Spilled Coffee was recently featured on the site Bankeronwheels. This was the first time I’ve come across their site and I was very impressed with the layout and delivery of the curated financial related content they delivered in their Weekend Reading. You can check out their recent post here. I think you’ll enjoy it as well.
I liked Tony Isola’s post called Ten Ways To Deflect Market Fear Merchants. He talks about how to deal with all the people who are the doom and gloomers and how they’re always trying to stoke fear that the market is collapsing. He calls them fear merchants. Like his examples of “self-defense.” He is spot on!
- who writes wrote a good piece called Bond prices mean revert after all. As rising interest rates are still working their way through both the economy and stock market, she looks at what this means on the road ahead.
Phil Bak
had the head writer of the Substack publication on his podcast. Doomberg: Provocative Not Polarizing. It was an outstanding interview on gearing your product to your client, crafting creative content and beginning your dream business venture. The Doomberg team has had tremendous success and I learned a lot from this conversation. Actually listened twice.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.