Wayman Value Investing January 2024 Portfolio

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January 2024 Outlook

The S&P 500 wrapped up a robust 2023 in December, boasting a monthly gain exceeding 4%. Concluding the year with an impressive 26% total return, the index positioned itself on the verge of reaching new all-time highs.

Throughout 2023, investor apprehensions surrounding escalating interest rates, decelerating economic expansion, and elevated inflation gradually dissipated. The Nasdaq Composite basked in one of its most favorable annual total returns since 2009, propelled by enthusiasm for artificial intelligence technology. Notably, technology stocks, growth equities, and cryptocurrencies claimed the limelight as risk appetite staged a comeback.

Venturing into 2024, the trajectory of inflation appears to be on a steady descent. However, a segment of analysts and economists harbors concerns that the concluding phase of the Federal Reserve’s struggle with inflation might prove more challenging than anticipated, potentially casting the shadow of an impending U.S. recession.

The specter of rising interest rates and lingering inflation remains a focal point for Wall Street in early 2024. Despite a 3.1% year-over-year uptick in the consumer price index for November – a decline from the peak 2022 inflation levels of 9.1% – and the Federal Reserve’s efforts, uncertainties persist.

In these crucial months, the Federal Reserve faces contrasting dynamics within the economic landscape. While inflation steadily retreats, concerns persist that it might prove more resilient than market expectations. The Federal Reserve’s aggressive interest rate hikes, albeit steering clear of a recession thus far, have intensified pressure on U.S. corporations, reflected in rising corporate default rates.

Despite a robust labor market in 2023, with the U.S. economy adding 199,000 jobs in November, the New York Fed’s recession probability model projects a 51.8% chance of a U.S. recession within the next 12 months. The Federal Reserve revised down its economic growth projections for 2024, hinting at potential headwinds.

Anticipating the upcoming fourth-quarter earnings season, characterized by rising interest rates and inflation-induced challenges, analysts project modest growth. S&P 500 companies are expected to report 2.4% earnings growth and 3.1% revenue growth for Q4, with full-year 2024 earnings growth projections at 11.5%.

Investors are cautioned about potential challenges in 2024, with an eye on factors like the U.S. presidential election, rising interest rates, and global geopolitical events. Some recommend a cautious stance, emphasizing the historical outperformance of value stocks during periods of elevated interest rates. The market sentiment remains divided on the extent of potential rate cuts in 2024, with varying viewpoints on the trajectory of key technology stocks.

In summary, the intricate dance between economic indicators, monetary policy, and market expectations sets the stage for a potentially unpredictable year in the markets, where cautious optimism mingles with concerns about the path ahead.

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.

Wayman Value Investing Portfolio - January 2024

STASH

• ASO - Academy Sports and Outdoors

• APAM - Artisan Partners Asset Management

• 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

• TSN - Tyson Foods

• VCTR - Victory Capital Holdings

GATHER

• ALSN - Allison Transmission Holdings

• ARCB - ArcBest

• ATKR - Atkore

• CACI - CACI International

• CAH - Cardinal Health

• EVR - Evercore

• GL - Globe Life

• GEF - Greif

• KNSL - Kinsale Capital Group

• LAD - Lithia Motors

• DOOR - Masonite International

• PRGS - Progress Software Corporation

• SF - Stifel Financial

• TROW - T. Rowe Price Group

• ALL - The Allstate Corporation

• CI - The Cigna Group

• HIG - The Hartford Financial Services Group

• THO - Thor Industries

• TPH - Tri Pointe Homes

• TOL - Toll Brothers

• WGO - Winnebago Industries

• YELP - Yelp

STORE

• ABBV - AbbVie

• BLDR - Builders FirstSource

• CENT - Central Garden & Pet Company

• CTSH - Cognizant Technology Solutions

• CORT - Corcept Therapeutics

• EXPE - Expedia Group

• FLT - FLEETCOR Technologies

• GILD - Gilead Sciences

• HLI - Houlihan Lokey

• LEN - Lennar Corporation

• OC - Owens Corning

• PGR - The Progressive Corporation

• SAIC - Science Application International Corporation

• SFM - Sprouts Farmers Market

• UHS - Universal Health Services

• URBN - Urban Outfitters