Wayman Value Investing December 2023 Portfolio

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December 2023 Outlook

In November, the S&P 500 surged by 9.1%, concluding the month positively amid rising investor confidence that the Federal Reserve would refrain from further interest rate hikes in the current cycle. The latest economic indicators suggest a robust economy, with strong U.S. consumer performance and a consistent decline in inflation.

Closing the month with a year-to-date gain of 20.8%, investors are eyeing December, historically one of the S&P 500’s strongest months, hoping the bullish momentum will persist.

The focus in December remains on two key market factors: inflation and interest rates. Despite a decrease in the consumer price index to 3.2% in October from a peak of 9.1%, inflation remains above the Federal Reserve’s 2% target. Federal Reserve Chair Jerome Powell, in a November speech, indicated a commitment to policy changes but emphasized a cautious approach to minimize risks to the labor market and the economy.

The Federal Open Market Committee’s last interest rate hike was in July, marking the eleventh increase since March 2022. While the Fed’s policies are considered “significantly restrictive,” analysts anticipate a measured economic slowdown.

Economists suggest that the Fed may pause until the middle of the next year, with the bond market indicating a high probability of the Fed maintaining its current rate range in December.

Concerns about a potential U.S. recession in 2024 arise as some economic indicators show mixed signals. While consumer spending during  the Thanksgiving weekend suggests a healthy retail sector, rising credit card delinquency rates and an inverted U.S. Treasury yield curve raise caution.

The New York Fed’s recession probability model estimates a 46.1% chance of a U.S. recession in the next 12 months. However, positive signs include a robust 5.2% U.S. GDP growth in the third quarter, indicating a healthy economy.

Despite higher interest rates, S&P 500 companies have managed a 4.3% earnings growth in the third quarter, with some sectors experiencing significant rebounds.

User Guide - Tracking the Spreads

What are spreads, and why should you care? I believe that tracking spreads is essential for making informed investment decisions. Each month I categorize stocks into tiers based on the spread between their calculated value and market value.

Here’s how it works:

STASH: This tier includes stocks with the largest spreads. These are the hidden gems that offer significant potential upside. Based on my valuation, now is the perfect time to capitalize on their undervalued status.

GATHER: Stocks in this tier have a substantial spread, but not as significant as those in the Stash tier. They still offer attractive opportunities for investment, and I recommend considering them for your portfolio.

STORE: The Store tier consists of stocks with modest or tightening spreads. While they may not have as much potential for immediate growth, they still hold value and can contribute to a balanced portfolio. Wayman holds these stocks, but I am not actively buying additional shares this month.

CACHE: In this tier, stocks have narrow or no spreads, indicating that their market value aligns closely with Wayman’s calculated value. It may be time to consider exiting positions in these stocks and reallocating your resources.

Categorizing stocks based on spreads helps you identify stocks with the greatest potential for growth. I believe in capturing maximum upside while minimizing potential losses, and Wayman’s tiered system allows you to prioritize your investment decisions.

Model Allocation

For the purpose of third-party portfolio tracking and validation we use the following model portfolio allocation:

• 65% invested in Stash tier stocks

• 30% invested in Gather tier stocks

• 5% invested in Store tier stocks

Wayman Value Investing Portfolio - December 2023

STASH

• ASO - Academy Sports and Outdoors

• APAM - Artisan Partners Asset Management

• ATKR - Atkore

• BERY - Berry Global Group

• OBDC - Blue Owl Capital Corporation

• CE - Celanese

• CNC - Centene

• CVS - CVS Health

• FOX - Fox Corporation

• JPM - JPMorgan Chase & Co.

• MTZ - MasTec

• MCK - McKesson

• PATK - Patrick Industries

• SAH - Sonic Automotive

• SYF - Synchrony Financial

• TMHC - Taylor Morrison Home Corporation

• GS - The Goldman Sachs Group

• TRV - The Travelers Companies

• THO - Thor Industries

• TPH - Tri Pointe Homes

• TSN - Tyson Foods

• VCTR - Victory Capital Holdings

GATHER

• ALSN - Allison Transmission Holdings

• ARCB - ArcBest

• BLDR - Builders FirstSource

• CACI - CACI International

• CAH - Cardinal Health

• EVR - Evercore

• GILD - Gilead Sciences

• GL - Globe Life

• GEF - Greif

• KNSL - Kinsale Capital Group

• LAD - Lithia Motors

• DOOR - Masonite International

• SFM - Sprouts Farmers Market

• SF - Stifel Financial

• TROW - T. Rowe Price Group

• ALL - The Allstate Corporation

• CI - The Cigna Group

• HIG - The Hartford Financial Services Group

• TOL - Toll Brothers

• URBN - Urban Outfitters

• WGO - Winnebago Industries

• YELP - Yelp

STORE

• ABBV - AbbVie

• CENT - Central Garden & Pet Company

• CTSH - Cognizant Technology Solutions

• CORT - Corcept Therapeutics

• EXPE - Expedia Group

• FLT - FLEETCOR Technologies

• HLI - Houlihan Lokey

• LEN - Lennar Corporation

• OC - Owens Corning

• PGR - The Progressive Corporation

• SAIC - Science Application International Corporation

• UHS - Universal Health Services