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Motley Fool Hidden Gems Investing
2024’s Winners and Losers
00:25:04
The S&P 500 finished the year up about 24%, more than double the index’s average annual return.
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- [00:00]
A
Foreign. You're listening to Motley Fool Money. I'm Ricky Mulvey here with the king of New Year's Eve himself, It's Asa Sharma. Asa, good to see you.
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B
Ricky, great to see you.
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A
What are you doing for New Year's?
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B
Well, I am chilling with the fam, but in an alternate universe, Ricky, I'm showing up with a few beers and a pack of cards at your house to spend New Year's Eve coming over.
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A
To, coming over to Denver. I'm not going to be here. But you are welcome to to hang out in this half duplex and is.
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B
Your dog sitter there?
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A
What? Let's get into the show. Now's a good time to look back. Winners and losers. 2024. I almost said 2025. Brains in a weird space. When you look at the list of the companies that have done really, really well this year, Asset, I bet you can find the theme. So as we look back, these are the best performers of the S&P 500 top five. One is Palantir. This is a questionable addition since it got in there in September, but It's up about 350% this year. If you want a, if you want a clean ranking, there's Vistra. First utility to take the top spot since 2001. A boring utility company with a 264% gain. Then how about Nvidia still in the mix at number three with 177%. This is the one that was surprising to me. United airlines at number four, up more than 130%. And then I'm sure Dylan Lewis will be happy about the number five spot going to Axon Enterprise. So as we think about the list, the best performers of this past year, the true winners, the long term investors holding those companies offset. What are your general reflections when you break it down?
- [01:55]
B
AI, AI, AI. I'm just going down this list. Second general reflection. I like that you said that Vistra is a clean ranking because this small energy company in Texas specializes in clean energy and nuclear energy. And so now it's a hot play for those who are interested in the prospect of having nuclear reactors at data centers. We've talked about this before on Motley Fool Money. I think another theme that pops to mind looking at these is that there's still space for a company that's been overlooked to succeed and grab the attention of longer term investors. United Airlines, we can talk about that as well. Axon Enterprise, another company with a flair for improving our safety. Not necessarily an AI play itself, although it has you know, a bit of an AI bent. So I think we have two themes going on here. One is that investors are going to continue to look for opportunities where generative AI or just the requirements to supply that to consumers juices companies earnings over the long term. And second is you can be yourself in this market. I think we're going to see more of this in 2025 as some of the enthusiasm from AI fades a bit and investors look for bargains. We'll see some companies that are underappreciated, maybe in the mold of United Airlines.
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A
Let's yeah. What the heck's going on with United Airlines? That is the one that is unlike the others in that list. It's AI, AI, AI, United Airlines, AI.
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B
I mean they have a few things going for them, Ricky. One is the tailwinds that we have talked about here all throughout 2024 for the airline industry. We which include more passenger traffic, better affinity revenue for the airlines are getting better and better at tacking on those ticky tack charges that we all love so much. Also, United Airlines has been investing in its fleet. So on two sides, the narrow body configuration and also widebody planes, they have a really nice hub configuration here in the United States. They're very active with new markets internationally. So this new generation of airlines should be more cost efficient. Some of what's happened though is that United Airlines has just caught up to peers like Delta and American Airlines in valuation terms. So now after a not so great 2023, it's more fairly valued than it was before. It trades where its peers trade. Part of the story is just the market recognizing that United Airlines is still there kicking this investing in their business. They're worthy of some investment dollars.
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A
So here's one trend. Mary Long was was kicking this around at our programming meeting earlier that was not on the list. When you look at the top performers of this year, and that's, that's the folks in the weight loss drug space after a monster 2022, 2023, Eli Lilly of which I'm a shareholder, more in line with the market this year. Novo Nordisk actually down and you have a small cap player called Hims, which I have skepticism about for reasons that I'm going to set aside for right now that shot up this year. But these, you know, this is a transformational thing and I wonder if there's a parallel to the energy storage stuff, which is that a lot of growth was pulled forward by investors and then things flatten out a little bit. We're not seeing the weight loss Drugs trend show up on these top performers. What's going on?
- [05:20]
B
I think the weight loss drug GLP1 class drugs are catching a breath and you're pretty much spot on. I do think that some of the growth is priced in. This is a long term trend. And we've belabored this point so much we don't know what the tail end of this is. Whether the extension into other areas, cardiovascular health, et cetera, become a thing or we see side effects that as yet haven't just manifested in the general populations. But for the meantime, you know, we've had a few years in on these drugs. It looks like the market is priced in the potential of the big pharmaceutical companies. And we have to remember that they are now an investment stage. You know, for example, you mentioned Lilly. They are investing $3 billion in manufacturing capacity. We just announced this just for the injectable forms of Mounjaro and Zepbound. So when you think about refresh cycles, it is sort of like a longer race. We have to stop and catch your breath. And investors realize that further gains are going to come, but they're not going to be immediate. So some of the nearer term, shorter term investors bail. Longer term investors like yourself just hold steady. But the trend still is fairly positive for the major manufacturers.
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A
Here's what else we saw this year. There's a return to assets by investors and there are two ways of reading this. One is that there's more speculation going on in the market. People are chasing returns elsewhere. And there's also concerns about fiat money. The federal deficit for 2024, about $1.8 trillion. That is double pre pandemic. So the government is getting significantly worse at spending money. They're spending a lot more of it. And investors might be saying I want to put my money in inflation protected ideas. That includes Bitcoin up 120% year to date. Also gold up 25% after some disappointing years recently. What do you make of the rise of these assets over 2024?
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B
I really like your reasoning here. I'll just add to that some 70% of the total market capitalization in the world of publicly traded equities are in US markets now. The US market has become so big it's still sort of the only game in town. And now we have the explosion of generative AI. There is a lead in the US on investment capital pouring in and investable ideas here. So it just seems like the US markets keep attracting more and more money as other markets suffer. We've seen the German Market, although recently strong, is undergoing some headwinds. The manufacturing base there needs to evolve more quickly than it has. And all around the world, you look at markets. The Chinese market's another example. There's so many headwinds. And the US Markets had a great run, really, except for a few down years, ever since the Great Recession. So what's happening here is as that market goes from other investments and geographies to the U.S. i think investors worry that the market itself is too concentrated. So they also want to diversify away from US US equities. And then you have the bitcoin story, obviously, the incoming Trump administration, a lot more friendly from a regulatory aspect, which is part of the story there. And as you point out, if you're worried about fiat money, the fate of the US Dollar if we don't get our fiscal act together. Gold is a traditional place to park assets.
- [08:51]
A
Let's look at some of the losers, the losers of the past year. I think there's some common themes that emerge from this as well. Offsetting Walgreens Boot alliance, the number one loser of the S&P 500, down about 64% this year. Intel down at 60%. Moderna down about the same. Celanese down about 55%. It's a specialty materials company. Didn't know about it until today. Shout out specialty materials, then also dollar tree down 50%. We've got some retail in there. We've got a little bit of healthcare, medicine. We've got an older former tech giant. What are your general reflections when you look at the worst performers of 2024? Sure.
- [09:31]
B
So let's take number one, Walgreens Boot alliance, not AI. Number two, intel minus 60% should have been AI. Number three, Moderna. Nice bump during COVID Not AI. Celanese, shout out to specialty materials and Dollar Tree minus 50%, not AI. Okay, so some more specific reflections. Dollar Tree, tough to be a scale business where your bigger competitors are Walmart and Target. You have to compete even with Costco. So there's some obvious headwinds that this whole industry is under. The dollar industry. Intel we'll talk about in just a moment. I know Walgreens Boot alliance, very difficult to be in the pharmacy business. Companies like Walgreens and CVS have spent years trying to reinvent themselves over and over again. This is a tough industry. I wouldn't play in it if I had a few billions of capital. And I think in general, this shows that the economy, while we see great gains over the last couple of years, we see GDP growing at nearly a 3% clip the last few quarters. It's still uneven. There's still sectors that are hurting and it reflects, I think, the broader mood of where we are today. I mean, people are still struggling economically in many areas and some people are doing extremely well. We are imbalanced when you look at the composition of The S&P 500 across sectors, just as we are becoming an imbalanced society in terms of who capital accrues to and who has to fight just to pay the bills.
- [11:15]
A
Yeah, I want to focus on Walgreens for a second. That's also one where you're competing against Walmart. And in some ways, yeah, you're competing against Walmart. And also Amazon is, Amazon is selling some more of those. Like, it's easier to get like a three to five dollar thing shipped directly to your door. And also it's, it's the, it's the Peter lynch thing. If you've been in a Walgreens lately, the vibes are not good. Things are kind of cleared out. It's not a great customer experience. It hasn't been a great customer experience for me. And turnarounds are extraordinarily difficult.
- [11:45]
B
I agree with that. If I could just take off this stock investing hat for a second and just join you here inside Walgreens. The Walgreens that I've been into lately, I mean, they're clean, I grant them that, and they're fairly well laid out. But so much of the merchandise seems to be under lock and key. They're out of the things that you need in some places. Then if you want to buy a toothbrush, and this is not just Walgreens, other retailers of this bin as well. You can only buy the Costco like package. Right. You'd spend seven bucks to get a couple of toothbrushes or 10 or 15 bucks. When all you want perhaps is just if you're traveling, as I was a few months ago, just one toothbrush for a couple of bucks. So the dynamics are hard for the consumer that's walking in. And when you couple that with a pharmacy business, which has to compete from big players who don't even, who don't even specialize in pharmacy, that model is hard.
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A
Yeah, I've. I have felt walking out of a Walgreens, the feeling I felt was punished if I had to buy like a travel thing of soap there versus giving myself a couple of days to buy it on Amazon. I think I bought like a travel thing of soap. And it was like it was between five and seven dollars. And I was. I was personally offended by it. Offset.
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B
Yeah. You can't see this because we're audio, but I was laughing while you were telling that story, thinking, well, actually, that's how I felt a little bit. We don't mean to beat up on Walgreens here, but to say that we're.
- [13:21]
A
Quite literally kicking them while they're down, that's kind of cruel of us.
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B
Well, we have to be realistic, too. It's a story you see play out not just in pharmacy but in retail. As you've mentioned, Ricky, this is like, one of the more difficult spaces to.
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A
Play in the fall of Intel. Also interesting to me because this was a comeback story. This had all the signs of a comeback story. You had a new CEO, you had a lot of government money coming in with the CHIPS Act. We're getting advanced manufacturing back in the US Baby. We also have an artificial intelligence boom that could benefit this company. But what's happened? The CEO's left, the stock is down by more than half. It's still struggling despite what could have been a lot of tailwinds. Asit?
- [14:08]
B
Yeah, I mean, Ricky, if we have time, if you can read the quote that you mentioned to me, I think this is interesting and we should discuss this.
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A
All right. I was giving you an earlier setup for a broad thing. So John Sidru was writing about this in the Wall Street Journal in a column, sort of comparing the problems at intel with the problems at Boeing. And he wrote, quote, since the 2000s, both firms have became too narrowly focused on present profitability, despite operating in sectors in which big spending is essential to maintain a competitive edge. Decades down the line, dividend payouts and share repurchases jumped, and company cultures moved away from technical talent to rewarding managers based on financial metrics instead. End quote. Is that a better setup for you? Asit?
- [14:52]
B
Thank you. I won everything on a platter in 2024. But, hey, tomorrow it'll be different.
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A
That's right.
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B
So I think this is somewhat fair. It's more fair for Boeing, I think, than for Intel. It's more applicable, I should say, for Boeing than in intel, because they famously did emphasize financial management over engineering, and you see the results. So we don't have to dwell on that too much for Intel. I think one of the things noted here is correct. So company culture. A company culture moving away from technical talent. You know, it was so interesting before Pat Gelsinger was shown the door recently. And for those of you who don't know, intel is searching for an interim CEO to help the turnaround be completed, a really prominent board director resigned. Lip Bhutan, he was the CEO, is the former CEO of Cadence Design System and sort of through the grapevine, different articles in the financial press. You know, we got back that he really was frustrated with this middle management layer of intel and didn't feel that the company really had what it took to be nimble, to compete, to even have the that culture, scrappy culture, to affect a turnaround, to be in the mode of efficiency and research and development and to make great things happen. I thought that was very telling. Intel itself is glorified for former CEO Andy Grove giving American business this idea and I'll quote, only the paranoid survive, which has been sort of a mantra as companies reach scale out in Silicon Valley. In fact, Jensen Huang sort of lives by this. I mean, he professes to be very paranoid about his business. And somewhere along the way intel lost its paranoia. Ricky, I want to say when you think of any paranoid person, you know you're looking at someone you probably should be careful around. Yes. But you're probably also looking at a very creative person. Paranoid people and paranoid businesses are highly creative and at some point intel lost that. It was already clear when AMD overtook them in the chips space and it was clear when they lost opportunity to TSMC and other great companies and moved away from a business that should have been there, the foundry business. So there is a lot going on in this story. I look forward to seeing who's going to come on board because intel still has great assets. I mean, they've got government money, they've got decent balance sheet, they have the ability to build out fabs and they're working on that now. So let's see if they can get a CEO on board who can change that culture. But it is a, you know, it's a culture that's in need of a lifeline and an injection of excitement and passion.
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A
I want to move on to maybe some more positive things. We've got the winners and losers and you know, when we look back at the year, that was something that I think is worth worth doing is reflecting on what's a discovery you made, what are some things you found out about it, found out about, what are some new things that you've been looking at. So more broadly, asit, it doesn't have to be a stock, a company, an etf, but when you think of investing discoveries, what is an investing discovery that you have made this year?
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B
Well, I've looked at a lot of AI models and how applicable they are to investing like large language models, some small language models. One of the things that I really love though finding out about this year was sort of new product. It's Notebook LM by Alphabet. If you haven't seen this listeners, check it out. It's really interesting. It has a different take on being sort of this ChatGPT like interface because it asks you to input your document. Be that like a PowerPoint presentation or maybe something that you just want to understand. It could be a transcript of an earnings call, it could be a scientific paper, it could be the script of a Seinfeld episode. If there's something that you want to make sense of, just dump it into NotebookLM and start talking to the large language model. Somehow this has an older school vibe to it. Ricky, for me, what about you? What discovery did you make?
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A
So I'll stay on NotebookLM for a second. We were trading slacks before this and I was using it to help plan a vacation itinerary. So you can put. I put in basically a Google Doc with, with my, my like flights and where I'm staying and what I got going on so far. Based on this, what else would you recommend? What could we, what could we do on this trip? It's pretty good. I'm going to go a little bit more stocky, stock focused. There's an X account that I recently started following called Insider Radar because something that I try to follow OSIT is what you doing with that wallet CEO we say there's a lot of reasons that insiders sell a stock, but there's only one reason to buy. I'm sure if you've listened for a while, you've heard Jason Moser say that on the show. Back In January of 2022, Reed Hastings picked up about $20 million worth of Netflix. It's done pretty well since then. Even just In September, Calvin McDonald, CEO of Lululemon, picking up a million bucks worth of Lululemon stock that's also done pretty well since he's done that. So one of the things I'm going to be focused on in 2025 is sort of following the CEO. They know more about the company than me and if they're buying a lot of stock, that sends a strong message to me.
- [20:27]
B
Asit, I love that Ricky. I myself have gotten more interested in sort of other indicators that I haven't worked with before. I love like social media sentiment. I love stock sentiment. I love news sentiment. So understanding how the news flow about a company is trending. So this, it seems along those lines and you found a great indicator that can get you quickly, you know, to a place you can research a CEO of a company that you might have invested in is picking up shares. I think yeah, it means, it usually means good things. Sometimes in some cases, especially if the numbers are a bit smaller, it can be wishful thinking or just trying to send off a little bit of confidence signal to the market. But when you see CEOs who are plunking down real cash for their own shares, the companies they lead, I think that's a nice indicator.
- [21:18]
A
Yeah, it's something you don't want to read into it too much. And you know, I see it all over X where it's like the congressional trade activity going on that people want to follow. I would look at the insiders and what they're doing. There's a few companies where if you see the CEO that hasn't made a lot of moves plunking down millions of dollars on his or her company, it might not be the worst idea to follow. And as we close out asit, it's been a year, not just of investing, but you're a curious person. You're a true renaissance man. Any non investing related discoveries, you know, a book, a band, a movie that you would want to share with Motley fool money listeners.
- [21:54]
B
So I'm going to be so, so boring here, Ricky. Because anyway, we have to set a high bar every day. We get to the end of the year. Let's set the bar lower.
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A
Okay.
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B
Nothing too exciting to share except that I used a lot of different online word processors this year that are sort of minimalists. And this is what.
- [22:17]
A
Yes, I tried to get something entertaining and you came back with word processor, Microsoft Word.
- [22:24]
B
I'm going back, way, way back. But you can Google up. There are many tools of this sort. They provide a distraction free environment. If you're trying to just get through your workday or if you're a student and you have to write that paper, pull up one of these word processors online. What they do is often they'll present you your text and markdown. So it's just very bare bones. But it is for me something that really, really helps because otherwise, you know, it's, it's all distraction. So I. Yes, did. Do I have many colorful discoveries under my sleeve that I could have shared? Yes, but 2025 is right around the corner. I set the bar low. What about you?
- [23:07]
A
I was trying to follow the. Speaking of prompts, I tried to follow the prompts that we were doing something fun for listeners to Check out maybe if they're traveling. I found out about this author on a podcast I really enjoy listening to called the Watch. And it is Jordan Harper. He writes thrillers. I read a lot from my job when we're interviewing authors checking out books to discuss on the show. And the sharpness of Harper's writing is something that is incredibly impressive to me. He writes thrillers that are a little dark, but I found myself just absolutely ripping through. I read two of his books and I'm excited to read his new one, the Last King of California. So if you want something to get you back on track, reading, if you feel that you've left fiction behind a little bit, you know, you don't mind something a little dark. I, you know, people condemn things with the strongest possible terms. I recommend Jordan Harper's thrillers in the strongest possible terms. Osit.
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B
That's one more book that I have to put on a long list of recommendations from yourself and Mary 2025. I'm gonna pick it up. Pick up the reading.
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A
You know what? I think this is a good place to end it. I like this. We've started with stocks and we've ended with words, word processors and thrillers. You get a grab bag when you listen to the show. Asta Sharma, appreciate you being here. Have a, have a good New Year's and I'll, I'll see you in a few days.
- [24:26]
B
See you next year, Ricky.
- [24:31]
A
As always, people on the program may have interests in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by Apple advertisers. Motley fool only picks products that it would personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We will be back on January 2nd.