Cover:
-Nvidia, a leading AI chip company, has surpassed Microsoft in market capitalization, reaching $3.3T on June 18, 2024. The company's stock price tripled over the past 12 months due to high demand for its AI chips. Nvidia's stock has been a historically good investment, with investors enjoying a 33% annualized compounded return from its initial public offering in 1999 to the end of 2023. If an investor had purchased $10,000 of Nvidia stock in 1999, it would have been worth $13.2M on December 31, 2023. The company's culture begins with its founder, Jen-Hsun Huang, who has already gained fame as a prominent figure in the industry. As Nvidia's value has grown, his profile has grown, with his trademark leather jacket and silver hair being referred to as the "genius you've never heard of."
Interview:
-The retail industry has been challenging to invest in this year due to concerns about inflation and high interest rates impacting consumer spending. However, as rates fall and companies correct their mistakes, the industry could see potential winners. Barron's recently consulted Mari Shor, a senior equity analyst at Columbia Threadneedle Investments, who has covered consumer stocks for nearly 20 years. Shor joined the investment firm in 2003 and now heads the consumer research team, working with portfolio managers across various funds to find stocks that best fit their strategies and criteria. Barron's spoke with Shor in October and mid-November about investing in the rapidly changing retail industry and what to expect from this year's holiday shopping season.
Tech Trader:
-no update
The Trader:
-Inflation may not be as dead as previously thought, as the consumer price index released this week showed inflation growing at a 2.6% annual clip. Federal Reserve Chair Jerome Powell has said that the central bank could pause rate cuts if inflation looks hot, and market expectations for a December cut went from a near certainty to a coin flip. Markets had been pricing in all of the positive moves Donald Trump could make for stocks, including an extension of tax cuts. However, they seemed to have forgotten the other side of the ledger, including the possibility that some of the president-elect's expected policies, such as tariffs, could goose inflation even more.
-Airline investors are expected to experience a long and profitable trip in the coming weeks, with the recent news promising a long and profitable journey. Spirit Airlines, the industry's biggest disrupter, is looking to restructure its debt, which would wipe out existing shareholders. However, the election of Donald Trump could give the rest of the industry stocks some of their best tailwinds in years. Airline stocks have already soared on Trump's victory, in hopes that consumer spending will respond to pro-growth policies such as lower taxes and a change in regulation. Trump is less likely to share the Biden administration's concerns about monopoly power. The airline industry has been one of the biggest beneficiaries of consolidation over the past couple of decades, with fewer players giving existing airlines more power to push prices higher and build market share on lucrative routes. Delta Air Lines, United Airlines Holdings, and American Airlines Group have substantial market power, with Delta, United, JetBlue Airways, and Southwest Airlines more than doubled from late 2012 to late 2014, and American Airlines soared after emerging from bankruptcy in 2013.
Features:
-President Elect Trump's Cabinet-level Treasury job has been a surprise, with Larry Kudlow emerging as a top contender. He was not previously considered among the top contenders, including Cantor Fitzgerald CEO Howard Lutnick, fund manager Scott Bessent, and former Trump trade advisor Robert Lighthizer. Trump met with Bessent on Friday, and Kudlow's odds of being chosen rose from near-zero to 24%. However, his odds fell to 4% after Bloomberg reported that Kudlow had told the transition team that he isn't interested in the position. By 5 PM (ET), Bessent's odds were up to 74%, with Lutnick at 19% and Lighthizer at 4%. Kudlow's odds had fallen to 3%. The Trump administration is making decisions on who will serve in his second administration, and hints on a decision will be announced when they are made.
-The drug industry has remained relatively quiet following Donald Trump's announcement to install Robert F. Kennedy Jr. as Secretary of the Department of Health and Human Services. Kennedy, a former leader of the most influential antivaccine group in the country, has previously criticized the pharmaceutical industry as a criminal enterprise. Public-health experts and investors have criticized the choice, but the industry itself has been more muted. The industry's two main lobbying groups, PhRMA and the Biotechnology Innovation Organization, have released low-key statements expressing their anticipation of working with the incoming Trump administration. This may be due to the industry groups not wanting to directly antagonize Kennedy, or they see room for a give-and-take with the Trump administration and an opportunity to roll back Biden-era reforms like the Medicare drug-price negotiation program.
Europe:
-The strong dollar suggests that US stocks may still be a better investment than foreign ones, according to Yardeni Research. The S&P 500 has outperformed the rest of the world over the past decade, with an average return of 13% a year. This is due to the health of the US economy and the growth of the tech sector. However, US stocks now trade more than 21 times earnings, compared to less than 14 for international ones, leading some to worry about a "lost decade." Yardeni Research, which recently predicted the S&P 500 would hit 10,000 by 2030, has been recommending investors stay home in US stocks since at least 2010. The S&P 500 was down by 1.6% on Friday but remains up 1.3% since November 5. The strong dollar could provide another driver, as the dollar has rallied 3.3% since Trump's election victory, its largest eight-day jump since 2022. This rally is partly due to Trump's tariff proposals and rising Treasury yields, which make the dollar more attractive for global investors. Yardeni believes that potential tariffs and the strong dollar could reduce the value of other countries' assets and put pressure on their economies.
Emerging Markets:
-No update
Commodities:
-Commodities may be a good investment option as higher inflation is potentially looming under a Trump administration and the asset class underperforms stocks for a second year. The Bloomberg Commodity Index is down 2% this year, against the 25% gain in the S&P 500 index. Most retail investors have little or no direct exposure to commodities, even as alternatives like private equity, real estate, and private credit become increasingly popular with wealthy individuals. A Goldman Sachs survey of family offices found that they had just a 1% allocation to commodities, against 26% for private equity.
It's estimated that $250B in various strategies, including mutual funds and exchange-traded funds, are devoted to commodities, less than 0.5% of the $50T-plus market value of the S&P 500. Commodities could perform better in the future, particularly if Donald Trump follows through on election promises regarding tariffs, which could spur higher prices.
Streetwise:
-AppLovin, a stock that has recently risen to $100B, is a company that specializes in helping app developers reach new users who will download their apps and become paying customers. The company's name, which dates back to 2012, was inspired by a 2007 movie called Superbad, where a high schooler secures a fake Hawaii driver's license with his photo and the name McLovin. The company's software platform, Axon, is powered by artificial intelligence and can help app owners grow in-game advertising revenue. The company also has a couple of hundred of its own casual games that generate valuable user data. The stock's recent rise is a testament to the company's ability to predict stock prices ahead of time and the rapid growth of the stock. The stock's current value is a testament to its potential for growth and success.