Good Morning! We hope you’re enjoying your 4th of July weekend!
June’s Opportunity Report published last week! Don’t miss it:
Fact of the Week:
Within the S&P 500, companies related to AI gained 14.7% in market value this past quarter, whereas the rest lost 1.2%.
Notable Facts from 1H 2024:
In the first half of 2024, growth shares, especially among large cap stocks, significantly outperformed both value and small cap stocks, reminiscent of the 1H of 2023.
The Russell 2000 index, which tracks smaller company stocks, edged up by 1.7% in the first half of 2024. Excluding Super Micro Computers, which gained 188%, the Russell 2000 would have experienced a negative return.
March saw the peak in the percentage of S&P 500 companies hitting 52-week highs, while December marked the highs for companies reaching 3- and 6-month peaks, indicating a narrowing participation in the index's advance.
During Q2 2024, the S&P 500 outpaced its equal-weighted counterpart by 6.9%, marking the third-largest difference since the equal-weighted index was established in 1989. It is worth noting that the two other higher differentials immediately preceded the dotcom crash..
The top 25 largest members of the S&P 500 collectively hold a market capitalization equal to the rest of the index combined.
Technology led the pack with a 28.2% gain, followed closely by Communication Services, which rose by 26.7% in the first half of 2024. Meanwhile, every other sector lagged the overall market. Real Estate Investment Trusts (REITs) were the worst performer, posting a loss of -2.4%, followed by Materials which saw a modest gain of +4.1%.
As of June, the Federal Reserve's economic projections forecasted one rate cut for 2024, a notable change from the beginning of the year which suggested up to 3 cuts. Bond futures markets in January had initially anticipated 6 to 7 cuts for the year.
Bank of America Research noted that the S&P 500 has advanced between 10% and 20% for the first half of the year 26 times. In 88% of these instances, the index saw further gains in the second half, with a median return of 10.1%.
Nvidia surged with a 149% advance in the first half of 2024, reaching a market value of $3 trillion by June, less than 4 months after crossing the $2 trillion mark.
The "Magnificent Seven" stocks contributed nearly 60% of the S&P 500's gains, with Nvidia alone accounting for 31% of the index's first half advance. These stocks trade at an average of 37 times their forward earnings, compared to the overall index's historically elevated 21x.
The MSCI index of approximately 48 global markets gained 11.5% in the first half of 2024. Excluding the US would have halved this figure, highlighting the dominance of US markets.
Despite comprising 37% of the S&P 500, the top ten index constituents contributed to only 26.8% of its earnings.
The current unemployment rate of 4.1% is meaningfully below its 50-year average of 6.2%.
As of June 30th, the 10-year Treasury yield stood at 4.36%, below the long-term average since 1958 of 5.75%. Even taking inflation into account, the 10-year yield is still below its historical average.
The yield curve has remained inverted for nearly seven consecutive quarters.
Some of the above information was sourced by The Market Intelligence Desk Team at Nasdaq.com.
Notable Reads:
How the Investment World is Trying to Navigate Geopolitics
https://www.ft.com/content/23ce295d-bf65-47fd-bebd-808b5a7bcab5
Attended by prominent figures such as tech billionaire Michael Dell, Blackstone chief Stephen Schwarzman and Yasir Al-Rumayyan, the head of Saudi Arabia’s $925bn Public Investment Fund, the FII Priority conference in Miami in February was one of the most high-profile business events in the US this year.
The first morning audience listened to former US secretary of state Mike Pompeo who warned the investors that it had become “impossible to separate geopolitical risk from capital allocation”.
A week later, at another event down the street in Miami, former Trump White House chief of staff Reince Priebus was the keynote speaker at JPMorgan’s flagship event for high-yield bond dealmakers. When the futures and derivatives industry convened up the coast in Boca Raton the following month, a prominent historian was brought in to lecture attendees on the “era of rising political turbulence”.
At the Milken Institute conference in Beverly Hills in May, one of the world’s largest gatherings of top money managers and their clients, there were speakers from the US state department, the White House National Security Council, West Point and Nato, a former major general and multiple current and former world leaders.
Boyar’s Take: We certainly do not mean to minimize what is occurring in the world today (it is clearly a scary place). Investing during times of crisis is something we wrote about for Forbes during the pandemic when markets were in free fall (and of course later recovered). We, however, think Warren Buffett said it best when he wrote,
“In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
Investors in our opinion would be better off ignoring the geopolitical (as it’s impossible to forecast what will occur and what the market’s reaction will actually be) and investing for the long-term in high quality businesses at good prices. However, it never hurts to have some cash on the sidelines to deploy during a crisis.
Boston Celtics’ Majority Owner Puts Team Up for Sale Weeks After NBA Championship
https://www.cnbc.com/2024/07/01/boston-celtics-for-sale-after-nba-championship.html
The 2024 National Basketball Association champions are up for sale.
The Boston Celtics’ ownership group announced Monday that it plans to sell the team, according to a statement posted to the Celtics’ account on social media site X.
The controlling family of the ownership group, Boston Basketball Partners LLC, said it intends to sell all of its shares in the team “for estate and family planning consideration.”
The sale of a majority stake is expected to be completed by the end of 2024 or early 2025, with the remainder of the sale closing in 2028, according to the statement.
As sports franchise valuations soar, the Celtics could fetch a particularly high price. The team is among the most successful and most widely followed in U.S. professional sports, and won its NBA record 18th championship last month.
Boyar’s Take: The sale of the Celtics will be an interesting comp for Madison Square Garden Sports. We have heard speculation that the Celtics could fetch north of $5 billion. Currently, Madison Square Garden Sports, which owns BOTH the Knicks, and the Rangers has an enterprise value of $5 billion.
JP Morgan Guide to the Markets
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets
Boyar’s Take: We have always found this guide to be quite helpful and wanted to share this resource with you. (But JPM will only hand you the Quarterly Guide.)
Important Disclosures. The information herein is provided by Boyar’s Intrinsic Value Research LLC (“Boyar Research”) and: (a) is for general, informational purposes only; (b) is not tailored to the specific investment needs of any specific person or entity; and (c) should not be construed as investment advice. Boyar Research does not offer investment advisory services and is not an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”) or any other regulatory body. Any opinions expressed herein represent current opinions of Boyar Research only, and no representation is made with respect to the accuracy, completeness or timeliness of the information herein. Boyar Research assumes no obligation to update or revise such information. In addition, certain information herein has been provided by and/or is based on third party sources, and, although Boyar Research believes this information to be reliable, Boyar Research has not independently verified such information and is not responsible for third-party errors. You should not assume that any investment discussed herein will be profitable or that any investment decisions in the future will be profitable. Investing in securities involves risk, including the possible loss of principal.
Important Information: Performance Information. Past performance does not guarantee future results. The reports in this sample are for informational purposes only and the performance of the stocks selected is not indicative of the performance of all the stocks profiled in Boyar Research. The performance of the stocks selected and the performance of the stocks in Boyar Research may in fact diverge materially. Additional information regarding the performance of other companies featured in Boyar Research is available from Boyar Research upon request. This information is not a recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security, including an interest in any investment vehicle managed or advised by affiliates of Boyar Research. Any information that may be considered advice concerning a federal tax issue is not intended to be used, and cannot be used, for the purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter discussed herein. Clients of an affiliate of Boyar Research and employees of Boyar Research own shares in MSGS.