Wayman Value Investing December 2024 Portfolio
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December 2024 Outlook
As we reflect on November's market performance, it's clear that we're witnessing a remarkable period of resilience and optimism. The S&P 500 delivered an impressive 5.73% gain for the month, bringing its year-to-date return to 26.47%. This performance isn't just a number—it's a testament to the market's ability to navigate complex political landscapes and economic uncertainties with remarkable composure. The post-election rally demonstrated how markets can quickly digest political outcomes, with the initial relief giving way to a nuanced reassessment of potential policy implications.
The election's aftermath revealed fascinating shifts in market sentiment and sector dynamics. Financials surged 6.2%, buoyed by expectations of reduced regulatory pressures and potential consolidation opportunities. Conversely, sectors like solar and dollar stores experienced notable headwinds, illustrating the delicate interconnections between political transitions and market expectations.
Earnings continue to paint an encouraging picture, with Q3 2024 projections suggesting record-breaking performance. With 95.6% of market value reported, we're seeing robust metrics—72% of companies beating earnings expectations and 61.9% exceeding sales projections. Operating margins remain impressively high at 11.89%, significantly above the historical average of 8.46%. These figures suggest that corporate America remains fundamentally strong, capable of generating value even in complex economic environments.
The Federal Reserve's monetary policy remains a pivotal factor in market dynamics. The current consensus suggests a potential 0.25% interest rate cut at the December meeting, with a 66% probability. This measured approach reflects the Fed's careful balancing act between supporting economic growth and managing inflationary pressures. The continued focus on data-dependent decision-making provides a sense of stability that markets tend to appreciate.
Looking forward, several key themes emerge for investors to consider. The ongoing technological transformation, represented by index changes like NVIDIA's inclusion in the Dow Jones Industrial Average, signals continued innovation and sector evolution. Bitcoin's ascent and household debt trends offer additional layers of complexity to our economic landscape. As always, the most successful investors will be those who maintain a disciplined approach, remain adaptable, and view market fluctuations through a lens of opportunity rather than fear.
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
The Wayman portfolio is tracked and audited by Hulbert Ratings, which has been rigorously tracking the real-world performance of investment advisory newsletters for over 40 years. You can follow our performance here.