Weekly Recap

This week, all major indices moved up slightly, ranging between 0%-1%, roughly. Monday started with a jolt as it felt like a significant sector rotation was occurring. Tech, especially chip names, took a huge hit, while healthcare, consumer staples, and energy/utilities soared. This quickly reversed on Tuesday and Wednesday with tech rebounding and early week gainers pulling back throughout the week.

PCE data came in slightly better than expected on Friday, boosting markets as inflation slows. The first public presidential election debate was also this week and was notably entertaining, to say the least.

There were a few big movers: FedEx rose 14% on Wednesday after showing significant profit boosts from cost-cutting measures. Walgreens fell over 20% on Thursday after another poor quarter, indicating a need to close even more stores. Micron dropped over 5% Thursday despite a solid quarter, future guidance just didn't meet Wall Street's hopes. Nike also dropped more than 15% as revenue continues to be weak. Lastly, large-cap growth stocks like PANW, GOOGL, AMZN, and TSLA saw a strong technical breakout, moving higher with strong momentum.

The end of Q2 is this week, and Q3 starts next Monday. We are officially halfway through the year, and I, like many of you, can hardly believe it.

Here's a quick recap of the markets so far this year: The S&P 500 is up over 15% year to date, while the Nasdaq is up around 18%. The Dow Jones is up a little over 4%, and the Russell 2000 (small caps) are up almost 2% on the year.

The technology sector has led the way, up over 19%, followed by utilities and energy, both up roughly 10% YTD. The lagging sector this year has been real estate, the only sector down, by around 3%.

Given these numbers, it's clear that technology has driven the market rally this year, with AI being a major story. The build-out of infrastructure and technology is essential to efficiently use and monetize new advancements.

As we head into the second half of the year, I have a few thoughts, ideas, and predictions. These are based on current knowledge and facts and do not account for any escalation of geopolitical tensions.

• Overall, I expect the market to slowly move higher over the next month to month and a half, rallying on the back of earnings season to start July. However, I anticipate a pullback of 5-10% in September/October. Post-election, regardless of the outcome, I foresee a rally to end the year strong, continuing into 2025.

• Technology will continue to dominate and drive market gains. While volatility may increase, we are at the start of a new generational bull market. However, it will become more of a stock picker’s market, requiring selectivity in tech investments.

• Several sectors outside of tech that I believe will perform well include: industrials, energy/utilities, materials, and financials. Industrials and energy/utilities should benefit from ongoing infrastructure expansion. Materials or commodities are expected to outperform as the dollar depreciates, making commodities cheaper for international buyers and boosting demand and prices. Lastly, financials should benefit when interest rates hopefully decrease later this year, increasing affordability for consumers on mortgages and loans, thus allowing banks to profit from the spread.

I will leave you with this... My S&P 500 end of 2024 price target (for fun) is $5,650, the S&P currently sits around $5,475.

Next week, the key economic reports to watch come out on Friday, June 5th, focusing on the unemployment rate for June and the current labor market participation rate. It’s a short week, which might lead to some unusual price actions in the market, with the market closed on Thursday. We want unemployment to remain below 4%, indicating a strong economy with people still employed and spending. The participation rate is also crucial as it can tell a compelling story if more people are entering the workforce or leaving it.

Earnings To Watch:

• Wednesday - Constellation Brands

Next week is expected to be very quiet. The short week adds to the calm, but it's truly the calm before the storm. The week after, on Friday July 12th, earnings season for Q2 kicks off with the banks, followed by big tech and hundreds of other companies. So, enjoy the calmness next week and prepare for what will likely be a rocky earnings season as always.

For next week, we have just one name on our earnings calendar to watch: Constellation Brands (STZ). Constellation Brands is my personal favorite way to play the liquor or alcohol industry. They dominate the Mexican beer market with a strong and diverse portfolio, including Corona, Modelo, and Pacifico. They also have a pretty big wine and spirits catalog. I expect a solid quarter with strong guidance as people have been traveling and heading to the beach for the summer, enjoying a cool Corona by the water. The stock is down a little over 5% in the past 3 months, to $257, and I believe we will see a pop back over $260 post-earnings.

NRG Energy (NRG) - This is a brand-new stock I stumbled upon this week after taking a deeper dive into some utility and energy stocks to find some winners or beneficiaries of the build-out and expansion of the AI boom. I found four stocks that piqued my interest. CEG and VST were the two more well-known names, each having rallied over 70% year to date. The two smaller names I came across were PEG and NRG. I wanted to speak about NRG for a few reasons. NRG is up nearly 58% year to date and close to 130% over the past year. They are one of the largest power generators in the U.S., using a combination of coal, oil, and solar to supply customers. Based mostly out of Texas, they are a leader in electrification trends and management. They serve over 8 million residential customers, are the second-largest supplier to businesses, and are now focusing on growing their data center business, which currently has 230 data centers in Texas. They have a solid 2% dividend yield, growing at a decent rate, and still have money to invest in new projects and renewable energy. At just a $16.3 billion market cap, with a P/E ratio of 11x (well below its peers), and a growing need for more power, I will certainly be keeping my eye on this name and sector. The stock is currently trading around $78, right where support sits at and if it holds we may see a bounce higher in the coming weeks.

Celsius Holdings (CELH) - This is a stock you all know I watch very closely and had some pretty bullish opinions on back in December and January. I was recommending the stock when it was in the mid-$50s six months ago, and now the stock has made a full circle and is nearly flat on the year. The stock jumped from the mid-$50s all the way up to $98, and now it is down 38% in the last three months, back down to $56. A few thoughts on this: first, this sell-off, regardless of whether it is reasonable or not, is way overdone. One Morgan Stanley analyst said he saw the company's sales and demand slowing and that they were no longer taking market share. He mentioned that Pepsi, a big partner of CELH, was not stocking up or selling as many Celsius energy drinks anymore. While these may be reasonable observations, a 10-15% pullback would be expected, but cutting the stock nearly in half without hardcore numbers or earnings to support it seems strange. There were also some pretty harsh videos on social media criticizing CELH and what they make their drinks out of. I cannot confirm or deny these claims, but let's be honest: any energy drink or chemically made food or drink we put in our bodies probably isn't the best. That said, if it is FDA-approved, it can't be that horrible for us... At least, I hope. Anyway, now that the stock has dropped back down, I feel like the floor is so low again, and the upside is massive. Arguably, I now see roughly 10% or so of downside risk remaining at current levels and nearly 70% of upside potential. A 7x (7:1) risk-to-reward ratio is not often found in the market, and that is why I am intrigued by this name again.

Meta Platforms (META) - I wanted to highlight this name this week as a reminder to buy the dip or weakness on names you love. Meta, on April 8th, hit a 52-week high just above $531. Two weeks later, the stock dropped on April 25th after releasing earnings, which weren't even that bad, causing the stock to drop over $100 to hit a bottom at $414. Less than two months later, the stock is now back over $510. We all know the quality of the META name and its products. They are a cash cow with tons of cash on the balance sheet and more coming in each year. Valuation, compared to other mega-cap stocks, is ultimately not too high, trading at 25x 2024 earnings and 22x 2025 P/E. Instagram, Facebook, WhatsApp, Threads—all these products are going nowhere and will continue to bring in an insane amount of ad revenue and continue to collect infinite data. My point here is, when you see a name like this drop 10% or more, you should look to see why. If nothing fundamentally has changed in the business and the risks are not too big or bad, you buy the stock at a discount. Thankfully, I did pull the trigger when NFLX dropped from $630 to $550 after earnings, and now the stock is at $680. I looked hard at META between $415 and $430, and for some reason did not pull the trigger to buy, and now I regret it. Take advantage of opportunities.

* Disclaimer - It's important to highlight that, on occasion, I may have existing positions in the stocks I highlight in my newsletter. This disclosure aims to be transparent about potential conflicts of interest. Although I strive for unbiased analysis, my ownership of certain stocks may influence those that I highlight. Rest assured, my commitment to providing well-researched insights remains unchanged. 

Some of you may remember a few months ago I shared a similar chart showing the key chip suppliers for the Apple Vision Pro. This week, I found a similar chart showing all the chips that power our beloved iPhones. Fun fact: over 230 million iPhones were shipped last year.

Recognizable chip names in the phone include Broadcom (AVGO), Texas Instruments (TXI), Qualcomm (QCOM), NXP Semiconductors (NXPI), and Skyworks Solutions (SWKS). These publicly traded chip companies all contribute to the creation of the iPhone, not to mention the multiple chips Apple creates itself.

Consider this: one chip ensures you have data/service, another connects you to Wi-Fi, one powers the phone, another runs applications, and another operates the camera. The diverse use cases and needs for semiconductor chips drive high demand.

While NVDA may dominate the market as a powerhouse in the industry, many niche players dominate their respective areas, like Qualcomm with mobile devices. Mega-cap players like AAPL, MSFT, or META consistently turn to these companies to create more chips to lower costs, increase capacity, and produce the best technology.

Two names in particular, AVGO and QCOM, have been significant beneficiaries of the AI boom and have rallied alongside NVDA and the chip industry. AAPL may be pushing out new iPhones and products with these upgraded chips but all sorts of new technology is coming out from the new more powerful chips being created

Remember, there will be plenty of winners in this AI boom. If you're not confident or dislike volatility, maybe NVDA or one of these names isn't for you. The SMH chip ETF is still a strong place to get exposure to the industry with less risk. Less risk equals less reward, but it doesn't mean you can't still grow your wealth—it's just something to understand.

In Weekend Favorites, I share my thoughts on events I'm attending, the new series I'm planning to marathon, the movie I'm dying to see, restaurant craving to taste, trend that ticks me off, or the big game I won't miss. 

It finally happened. You ever have those shows that everyone, and I mean everyone, loves, but for some reason you just can't get around to liking it? That show for me was Bridgerton. The third season dropped recently, so social media and a bunch of my friends have started watching and talking about the show again. I had tried twice to watch this show before, when it blew up after season 1 and when season 2 dropped. Both times I stopped watching within 5-10 minutes; I just did not like it and was not interested. This time, after the drop of season 3 and the talk was coming back, I told myself I have to give it a legitimate try. I turned the first episode on again and told myself 10 minutes in that this show sucks, but I will give it the benefit of the doubt and watch the whole episode. I did that, then two, then three, and now I am addicted—finally through the first two seasons. This show is certainly a slow burner, but man, is it good. Who thought I was going to say that?

This has now happened a few times where someone would recommend or talk about a show, I would try it, think it sucks, and end up trying a few years later and falling in love with the show. The other show I did this with—any guesses? Suits! My buddy tried to put me on it almost seven years ago, and I just watched it within the last year after giving it a second chance. Bridgerton combines history and royal families, with love and riches, and tells an amazing, jaw-dropping, teeth-grinding story. I recommend it to all. Plus, it's hard not to imagine what life would have been like living in a town like this back in the day. Royal queens, dukes and duchesses, peasants, and so much more. I see why this show has become so popular and again proves why Netflix is THE KING OF CONTENT.

I also wanted to share, if you are not aware, a Mexican restaurant called Amelia's. The reason I want to share is because on Tuesdays they have $2 taco Tuesdays. The tacos are small (4-inch tortillas), but damn, are they delicious. Flavors range from carne asada, carnitas, pastor, birria—the list goes on and on. I recommend trying this spot because these are probably the cheapest tacos you will get without crossing the border, and the quality is just as good as any place in town. How could you pass on that deal?

P.S. - My three favorites (in order) are Carnitas, Pastor, Ground Beef.

To read more of Jake's Analysis on Seeking Alpha where he shares his thoughts, opinions, stock ratings, and price targets on different stocks and ETFs, use the link below!